Natuzzi's 2024Q4 Earnings Call: Contradictions in Retail Strategy, Breakeven Insights, and Supply Chain Challenges

Retail expansion strategy, breakeven point, supply chain flexibility and tariff impact are the key contradictions discussed in Natuzzi's latest 2024Q4 earnings call.



Revenue and Financial Performance:
- Natuzzi S.p.A. reported total sales of EUR 318.8 million for the fiscal year 2024, which is a 3% decrease compared to the previous year.
- Despite the challenging market conditions, the company's branded sales represented EUR 289 million, 93% of total sales, reflecting a significant increase from 80% in 2019.
- The decline in overall sales was due to a volatile market and the ongoing softness in various geographical regions.

Margin Improvement and Production Strategy:
- The company's gross margin improved to 36.3% in 2024, an increase of 2 percentage points from 2023, and 7 percentage points higher than in 2019.
- To navigate market volatility, Natuzzi relocated production from Shanghai to Quanjiao in China and moved production of certain collections to Europe, enhancing flexibility and cost efficiency.
- These strategic shifts were aimed at reducing production capacity and better aligning with market demands and tariff conditions.

Retail Strategy and Store Network:
- Directly operated stores reported EUR 70.1 million in sales, up 4% from 2023 and 18% from 2019.
- Growth was driven by expansion in the U.S., including the opening of a new store in Denver, and a strategic focus on remodeling and location changes to better align with the evolving brand image.
- Closures of nonperforming stores in Spain, Switzerland, and the U.S. were part of the strategy to optimize the store network.

Challenges and Future Outlook:
- The company faced various challenges, including geopolitical instability and tariff uncertainties, which impacted the ability to forecast and plan for future growth.
- To overcome these challenges, Natuzzi emphasized cost control and continued investment in brand and retail systems, focusing on improving store performance and product offerings.
- The company remains committed to increasing organic growth and profitability through better store management and enhanced marketing strategies.