Natuzzi SpA Q4 FY2024 earnings call

• Transformation efforts: The company reduced headcount by 26%, reallocated production from Shanghai to Quanjiao for domestic market and moved Natuzzi Edition production for North America to Europe.
• Retail focus: Branded sales increased, directly operated stores grew, particularly in the US with new store openings. Non-performing stores were closed to requalify the network.
• Margin improvement: Gross margin improved to 36.3% in 2024 from 34.3% in 2023. Last quarter margin saw a significant increase from 30% in Q4 2023.
• Retail transformation: Developed a customer experience division, defined marketing projects, automated merchandising processes, and improved store analytics to better understand store performance.

In 2024, Natuzzi S.p.A. reported total revenue of EUR318.8 million, which was 3% lower than the previous year. Branded sales accounted for EUR289 million, representing approximately 93% of total revenue, compared to 80% in 2019. Directly operated stores generated EUR70.1 million in 2024, up 4% from 2023 and 18% from 2019. The gross margin closed at 36.3% in 2024, an improvement from 34.3% in 2023. The last quarter of 2024 had a margin of 38.1%, up from 30% in the last quarter of 2023.

Management is focused on organic growth and improving store profitability. They believe the company can be profitable at around EUR340 million in revenue. The plan is to continue protecting margins and working towards profitability through ongoing efforts in retail transformation and margin protection.

• Geopolitical and trade uncertainties, including tariffs affecting production and margin protection.
• Volatile market conditions impacting sales and consumer behavior.

Q: Can you go over the tools and system in the transition into retail and what's still needed?

A: Pasquale mentioned they have tools to analyze store performance, diagnose issues like traffic, conversion rate, and product performance. They need to improve training and merchandising.

Q: Do you have a line of sight to profitability and any U.S. retail expansion?

A: Antonio stated the company believes it can be profitable around EUR340 million in revenue. They opened 5 new Natuzzi Italia stores in the U.S. in the last 12 months and focus on growing existing stores organically.