Natuzzi S.p.A: First Quarter 2023 Financial Results and Shareholder Letter
First Quarter 2023 Highlights
-
1Q 2023 Invoiced Sales Amounted to
€86.1 Million , a Decrease of27.4% Versus the 1Q 2022, Confirming the Headwinds of the Last Part of 2022. 1Q 2022, Which Reported Double Digit Growth vs 1Q 2021, Was the Last Quarter of the 18-Month Expansionary Phase That Started in the Aftermath of the COVID-19 Pandemic. -
Branded Sales Amounted to
€77.5 Million ,21.6% Below 1Q 2022. Branded Sales Were92.3% on Total Sales In 1Q 2023, Compared to86.8% in 1Q 2022. -
Gross Margin of
35.6% , Compared to34.3% in 1Q 2022. Net of the One-Off (€0.9) Million Accrual to Reduce Workforce Gross Margin Would Have Been Equal To36.6% . 1Q 2023 Gross Margin Compares to30.1% in the Pre-Pandemic 1Q 2019. -
1Q 2023 Operating Loss of (
€0.9) Million Due to a Lower Operating Leverage Partially Offset By a€7.6 Million Reduction in the Operating Expenses. Net of the One-Off (€0.9) Million Accrual to Reduce Workforce, Operations Would Break Even. -
Retail Expansion Continued in 1Q 2023 With 2 DOS Opened in the
U.S. , 1 DOS in JV in theU.S. and 1 DOS in JV inChina as Well as 5 Additional FOS, of Which 3 inChina , 1 in theU.S. and 1 inAustralia . -
Cash of
€43.8 Million as of March 31, 2023, Compared to€54.5 Million as of December 31, 2022. - Headwinds From Challenging Business Conditions Continue to Affect Store Traffic and Written Sales; This Might Adversely Impact Our Operations in the Short-Term, While the Group Confirms Its Long-Term Plans. We Are Focusing on Supporting Our Commercial Teams to Regain Growth, While Working to Adapt Our Fix Cost Structure.
SANTERAMO IN COLLE,
Pasquale Natuzzi, Chairman of the Group, commented: “Our sales results are not at the level we aspire to as we continue to face challenging market conditions and a more prudent approach by our customers, resulting in a weaker store traffic and reduced orders from large distributors. Globally our industry is transitioning from the expansionary phase, started in 2021, which created growth for the sector but also led to unprecedented over-stocking at the different level of the distribution value chain. The perduring of this economic scenario confirms the importance of the work that our team is doing to ensure a tight control on discretionary costs together with a more effective capital allocation. We are confirming those investments which are pivotal for the execution of our mid-term plan, chiefly to support retail new openings and our factory modernization.”
Antonio Achille, CEO of the Group, commented: “The context in which we are operating continues being challenging not only for the global economy but specifically for our industry. Indeed, perduring effects of the ongoing war in
In a context of softer demand, our attention to protect the marginality of our business is very high.
Notwithstanding the lower delivered sales, we were able to improve gross margin over last year first quarter and the operations would have broken-even excluding the one-off (
The sales of the first quarter confirm a slow-down in two of our main markets, the
In North American, which is fundamental for the execution of our long-term plan, we have implemented a profound reorganization of our commercial structure by strengthening our wholesale team, with the introduction of a new seasoned manager, Scott Kruger, and increasing our commercial reach also with the activation of independent agencies. At the same time, we have been empowering our retail team with enhanced approaches and tools, developed by our newly established Global Retail Division, so to improve the like-for-like performance of the existing stores and create the conditions for the planned retail expansion.
We are also putting an extra focus on the Chinese market, which is a strategic region for our long-term growth plan. Our JV in
Across geographies we are taking a series of commercial actions with the aim of creating a short-term impact. These actions include: a global merchandise strategy, aiming at having a product assortment in line with the potential and profile of each store; a more comprehensive price architecture so to widen the price range covered by our product collection and attract new potential customers; a new and more impactful in-store communication so to better engage the customer.
We are also accelerating the development of our contract business with a dedicated organization so to leverage the strength of our brands and our collections, as well as our R&D and production. Natuzzi Italia is the primary focus for this global opportunity. The newly established contract team has reported encouraging initial wins both in residential and commercial opportunities.
Despite the negative economics context, we remain focused on our transformative journey to become a branded company, selling its products mainly through retail. While year-to-date order flow is below our expectation, it is worth highlighting that the branded portion of the business is above the level of 2019. Furthermore, year-to-date written sales generated by our brands continue to increase their share on the overall business,
We keep on expanding our retail network to accelerate growth, improve profitability and have a better control of the brand. Today we can rely on 710 Natuzzi stores, of which 382 are located in
We are progressing in actively seeking opportunities to sell those assets, mainly in the
Our long-term plan remains the same; however, we need to recognize that for the industry the change of pace has been quite evident, and therefore we remain extremely vigilant to ensure a tight cost control and high financial discipline to navigate through the current headwinds.”
**********
1Q 2023 CONSOLIDATED REVENUE
1Q 2023 consolidated revenue amounted to
Excluding “other sales” of
Revenue from upholstered and other home furnishings products are hereafter described according to the main dimensions of the Group’s business:
- A: Branded/Unbranded Business
- B: Key Markets
- C: Distribution
A. BRANDED/UNBRANDED BUSINESS
The Group operates in the branded business (with the Natuzzi Italia, Natuzzi Editions and Divani&Divani by Natuzzi) and the unbranded business, the latter with collections dedicated to large-scale distribution.
A1. Branded business. Within the branded business, Natuzzi is pursuing a dual-brand strategy:
i) Natuzzi Italia, our luxury furniture brand, offers products entirely designed and manufactured in
ii) Natuzzi Editions, our contemporary collection, offers products entirely designed in
In 1Q 2023, Natuzzi’s branded invoiced sales amounted to
The following is the contribution of each Brand to 1Q 2023 invoiced sales:
-
Natuzzi Italia invoiced sales amounted to
€31.6 million , from€43.5 million in 1Q 2022 and€35.1 million in 1Q 2019, mainly as a result of the impact of the overstock inChina . -
Natuzzi Editions invoiced sales (including invoiced sales from Divani&Divani by Natuzzi) amounted to
€45.9 million , from€55.4 million in 1Q 2022, mainly due to the de-stocking process, especially inNorth America andChina . 1Q 2023 invoiced sales increased from€42.4 million in 1Q 2019.
A2. Unbranded business. Invoiced sales from our unbranded business amounted to
B. KEY MARKETS
Here below a breakdown of 1Q 2023 upholstery and home-furnishings invoiced sales compared to 1Q 2022, according to the following geographic areas.
|
1Q 2023 |
1Q 2022 |
Delta € |
Delta % |
||||||
|
23.3 |
|
35.0 |
|
(11.7 |
) |
(33.4 |
%) |
||
|
4.4 |
|
14.7 |
|
(10.3 |
) |
(69.9 |
%) |
||
West & |
32.4 |
|
36.8 |
|
(4.4 |
) |
(12.1 |
%) |
||
Emerging Markets |
13.2 |
|
13.1 |
|
0.1 |
|
0.5 |
% |
||
Rest of the World* |
10.7 |
|
14.2 |
|
(3.5 |
) |
(24.7 |
%) |
||
Total |
84.0 |
|
113.8 |
|
(29.9 |
) |
(26.2 |
%) |
||
Figures in €/million, except percentage
*Include South and
The performance of invoiced sales in the
As for the Chinese market, the level of sales reflects a more focus of our joint venture in selling stocked products accumulated in 2022 as a result of the low traffic in our points of sales caused by the perduring level of contagions in the region for most of last year.
C. DISTRIBUTION
During the first three months of 2023, the Group distributed its branded collections in 91 countries, according to the following table.
|
Direct Retail |
FOS |
Galleries |
Total as of
|
||
|
18(1) |
7 |
151 |
|
176 |
|
West & |
33 |
|
102 |
127 |
|
262 |
|
25(2) |
357 |
─ |
382 |
||
Emerging Markets |
─ |
76 |
131 |
|
207 |
|
Rest of the World |
4 |
|
88 |
88(3) |
180 |
|
Total |
80 |
|
630 |
497 |
|
1,207 |
(1) Included 3 DOS managed in joint venture with a local partner. As the Natuzzi Group does not exert full control in each of these DOS, we consolidate only the sell-in from such DOS.
(2) All directly operated by our joint venture in
(3) It includes 11 Natuzzi galleries (store-in-store points of sale) directly managed by the Mexican subsidiary of the Group.
FOS = Franchise stores managed by independent partners.
During 1Q 2023, Group’s invoiced sales from direct retail, DOS and Concessions directly managed by the Group, amounted to
In 1Q 2023, invoiced sales from franchise stores amounted to
We continue executing our strategy to become a Brand Retailer and improve the quality of our distribution network. The weight of the invoiced sales generated by the retail network (Direct retail and Franchise Operated Stores, or FOS) on total upholstered and home furnishings business in 1Q 2023 was
The Group also sells its products through the wholesale channel, consisting primarily of Natuzzi-branded galleries in multi-brand stores, as well as mass distributors selling unbranded products. During 1Q 2022, invoiced sales from the wholesale channel amounted to
1Q 2023 GROSS MARGIN
In 1Q 2023, we had a gross margin of
During the first quarter of 2023, the Company accrued (
1Q 2023 OPERATING EXPENSES
During 1Q 2023, operating expenses (which include selling expenses, administrative expenses, other operating income/expenses, and the impairment of trade receivables) were (
The
1Q 2023 NET FINANCE INCOME/(COSTS)
During 1Q 2023, the Company accounted for (
Rising interest rates continue to adversely impact our results principally in terms of increased interest expense of rental contracts as well as third-party financing, notwithstanding the average bank debt outstanding in the quarter significantly decreased compared to 1Q 2022. As a consequence, during the quarter, the Company reported Finance costs of (
In addition, the strengthening of the Euro occurred during the quarter toward major currencies has resulted in a net exchange rate loss of (
BALANCE SHEET AND CASH FLOW
During 1Q 2023, (
-
A loss for the period of (
€3.3) million ; -
adjustments for non-monetary items of
€6.3 million , of which depreciation and amortization of€5.5 million ; -
a (
€5.6) contribution from working capital change, mainly as a result of the decrease in trade and other payables for (€10.4) million , (€1.2) for payments connected to the reduction of workforce, partially offset by lower inventories for€2.1 million and lower trade receivables and other assets for€4.5 million ; -
interest and taxes paid of (
€2.4) million .
During the first three months of 2023, (
In the same period, (
As a result, as of March 31, 2023, cash and cash equivalents was
As of March 31, 2023, we had a net financial position before lease liabilities (cash and cash equivalents minus long-term borrowings minus bank overdraft and short-term borrowings minus current portion of long-term borrowings) of (
*******
CONFERENCE CALL
The Company will host a conference call to discuss financial information on Monday, June 5, 2023, at 10:00 a.m.
To join the live conference call, interested persons will need to either:
-
dial-in the following number:
Toll/International: +1-412-717-9633, then passcode 39252103#;
or -
click on the following link:
https://www.c-meeting.com/web3/join/3PQUFXRW48XTKQ to join via video. Participants also have option to listen via phone after registering to the link.
*******
| Natuzzi S.p.A. and Subsidiaries | |||||||||||
| Unaudited consolidated statement of profit or loss for the first quarter of 2023 and 2022 | |||||||||||
| on the basis of IFRS-IAS (expressed in millions Euro, except as otherwise indicated) | |||||||||||
| First quarter ended on | Change | Percentage of revenue |
|||||||||
31-Mar-23 |
31-Mar-22 |
% | 31-Mar-23 |
31-Mar-22 |
|||||||
| Revenue | 86.1 |
|
118.5 |
|
-27.4 |
% |
100.0 |
% |
100.0 |
% |
|
| Cost of Sales | (55.4 |
) |
(77.9 |
) |
-28.8 |
% |
-64.4 |
% |
-65.7 |
% |
|
| Gross profit | 30.6 |
|
40.6 |
|
-24.6 |
% |
35.6 |
% |
34.3 |
% |
|
| Other income | 1.3 |
|
1.0 |
|
1.5 |
% |
0.9 |
% |
|||
| Selling expenses | (23.8 |
) |
(31.5 |
) |
-24.5 |
% |
-27.7 |
% |
-26.6 |
% |
|
| Administrative expenses | (8.9 |
) |
(8.3 |
) |
7.1 |
% |
-10.3 |
% |
-7.0 |
% |
|
| Impairment on trade receivables | (0.0 |
) |
(0.3 |
) |
-0.1 |
% |
-0.3 |
% |
|||
| Other expenses | (0.1 |
) |
(0.1 |
) |
-0.1 |
% |
-0.1 |
% |
|||
| Operating profit/(loss) | (0.9 |
) |
1.5 |
|
-1.0 |
% |
1.2 |
% |
|||
| Finance income | 0.1 |
|
0.0 |
|
0.1 |
% |
0.0 |
% |
|||
| Finance costs | (2.1 |
) |
(1.8 |
) |
-2.4 |
% |
-1.5 |
% |
|||
| Net exchange rate gains/(losses) | (1.4 |
) |
1.1 |
|
-1.7 |
% |
0.9 |
% |
|||
| Gain from disposal and loss of control of a subsidiary | — |
|
— |
|
0.0 |
% |
0.0 |
% |
|||
| Net finance income/(costs) | (3.4 |
) |
(0.7 |
) |
-4.0 |
% |
-0.6 |
% |
|||
| Share of profit/(loss) of equity-method investees | 1.1 |
|
1.0 |
|
1.3 |
% |
0.8 |
% |
|||
| Profit/(Loss) before tax | (3.2 |
) |
1.8 |
|
-3.7 |
% |
1.5 |
% |
|||
| Income tax expense | (0.1 |
) |
(0.5 |
) |
-0.1 |
% |
-0.4 |
% |
|||
| Profit/(Loss) for the period | (3.3 |
) |
1.3 |
|
-3.9 |
% |
1.1 |
% |
|||
| Profit/(Loss) attributable to: | |||||||||||
| Owners of the Company | (3.2 |
) |
1.0 |
|
|||||||
| Non-controlling interests | (0.1 |
) |
0.3 |
|
|||||||
| Natuzzi S.p.A. and Subsidiaries | ||
| Unaudited consolidated statements of financial position (condensed) on the basis of IFRS-IAS (Expressed in millions of Euro) |
||
31-Mar-23 |
31-Dec-22 |
|
| ASSETS | ||
| Non-current assets | 180.0 |
177.6 |
| Current assets | 171.3 |
191.0 |
| TOTAL ASSETS | 351.3 |
368.6 |
| EQUITY AND LIABILITIES | ||
| Equity attributable to Owners of the Company | 83.4 |
87.9 |
| Non-controlling interests | 4.6 |
4.7 |
| Non-current liabilities | 99.6 |
95.3 |
| Current liabilities | 163.6 |
180.8 |
| TOTAL EQUITY AND LIABILITIES | 351.3 |
368.6 |
| Natuzzi S.p.A. and Subsidiaries | ||
| Unaudited consolidated statements of cash flows (condensed) | ||
| (Expressed in millions of Euro) | 31-Mar-23 |
31-Dec-22 |
| Net cash provided by (used in) operating activities | (5.0) |
18.7 |
| Net cash provided by (used in) investing activities | (0.2) |
(4.6) |
| Net cash provided by (used in) financing activities | (4.3) |
(13.5) |
| Increase (decrease) in cash and cash equivalents | (9.4) |
0.5 |
| Cash and cash equivalents, beginning of the year | 52.7 |
52.2 |
| Effect of movements in exchange rates on cash held | (0.6) |
(0.1) |
| Cash and cash equivalents, end of the period | 42.7 |
52.7 |
| For the purpose of the statements of cash flow, cash and cash equivalents comprise the following: | ||
| (Expressed in millions of Euro) | 31-Mar-23 |
31-Dec-22 |
| Cash and cash equivalents in the statement of financial position | 43.8 |
54.5 |
| Bank overdrafts repayable on demand | (1.1) |
(1.8) |
| Cash and cash equivalents in the statement of cash flows | 42.7 |
52.7 |
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements included in this press release constitute forward-looking statements within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. These statements may be expressed in a variety of ways, including the use of future or present tense language. Words such as “estimate,” “forecast,” “project,” “anticipate,” “likely,” “target,” “expect,” “intend,” “continue,” “seek,” “believe,” “plan,” “goal,” “could,” “should,” “would,” “may,” “might,” “will,” “strategy,” “synergies,” “opportunities,” “trends,” “ambition,” “objective,” “aim,” “future,” “potentially,” “outlook” and words of similar meaning may signify forward-looking statements. These statements involve risks and uncertainties that could cause the Company’s actual results to differ materially from those stated or implied by such forward-looking statements including, but not limited to, potential risks and uncertainties described at page 3 of this document relating to the supply-chain, the cost and availability of raw material, production and shipping and the modernization of our Italian manufacturing and those relating to the duration, severity and geographic spread of the COVID-19 pandemic, actions that may be taken by governmental authorities to contain the COVID-19 pandemic or to mitigate its impact, the potential negative impact of COVID-19 on the global economy, consumer demand and our supply chain, and the impact of COVID-19 on the Company's financial condition, business operations and liquidity, as well as the geopolitical tensions and market uncertainties resulting from the Russian invasion of
About Natuzzi S.p.A.
Founded in 1959 by Pasquale Natuzzi, Natuzzi S.p.A. is one of the most renowned brands in the production and distribution of design and luxury furniture. With a global retail network of 710 mono-brand stores and 497 galleries as of March 31, 2023, Natuzzi distributes its collections worldwide. Natuzzi products embed the finest spirit of Italian design and the unique craftmanship details of the “Made in Italy”, where a predominant part of its production takes place. Natuzzi has been listed on the New York Stock Exchange since May 13, 1993. Always committed to social responsibility and environmental sustainability, Natuzzi S.p.A. is ISO 9001 and 14001 certified (Quality and Environment), ISO 45001 certified (Safety on the Workplace) and FSC® Chain of Custody, CoC (FSC-C131540).
View source version on businesswire.com: https://www.businesswire.com/news/home/20230602005283/en/
Natuzzi Investor Relations
Piero Direnzo | tel. +39 080-8820-812 | pdirenzo@natuzzi.com
Natuzzi Corporate Communication
Giacomo Ventolone (Press Office) | tel. +39.335.7276939 | gventolone@natuzzi.com
Source: Natuzzi S.p.A.
