Natuzzi 4Q sales drop 7.6%
By Janice Chamberlain -- Furniture Today, April 18, 2005
Santeramo in Colle, Italy — Unfavorable currency exchange rates and pricing pressures in the U.S. market led to a fourth-quarter sales drop of 7.6% for Natuzzi, coupled with a net loss, after currency translation, of $12.1 million.
The Italian upholstery giant reported total fourth-quarter sales of 193.6 million euros, off from 209.6 million euros in the final quarter of 2003. In the latest quarter, upholstery sales decreased 8% to 167.9 million euros, or $218.1 million, while other sales, principally living room accessories and raw materials, declined 5.2% to 25.7 million euros, or $33.4 million.
For all of 2004, Natuzzi sales were 753.4 million euros, or $937.1 million, off 2.1% from 2003 sales, as net income plummeted 50.7% to 18.4 million euros, or $22.9 million, from 37.3 million euros in 2003. Sales to the Americas represented 42% of total sales, down from 47.5% in 2003, as European sales rose to 51.1% of total sales from 46.5% a year earlier. Sales to the rest of the world accounted for 6.9% of all sales, compared with 6% in 2003.
In the fourth quarter, upholstery sales in the Americas fell 31.7% from the comparable 2003 quarter to 54.2 million euros, or $70.4 million. In the same period, European upholstery sales rose 10.8% to 101.6 million euros, or $132 million, and upholstery sales in the rest of the world rose 6.1% to 12.1 million euros, or $15.7 million.
Natuzzi Chairman and CEO Pasquale Natuzzi said, "Unfavorable currency conditions and the persistent pricing pressure affecting the U.S. market in particular generated a decrease in furniture demand for our company, which turned into lower orders and sales during the entire fourth quarter."
Leather upholstery sales in the 2004 fourth quarter were 138.5 million euros, or $179.9 million, off 7.4% from the year-earlier period. During the same period, fabric-covered upholstery sales decreased 10.9% to 29.4 million euros. or $38.2 million.
Natuzzi-branded furniture accounted for 73.4% of total upholstery sales in the latest quarter, with the balance in the more promotionally priced Italsofa line. Natuzzi-brand upholstery sales slipped 13.7% to 123.2 million euros, or $160 million, and Italsofa sofa sales increased 12.3% to 44.7 million euros, or $58.1 million.
In a conference call with analysts, Natuzzi Finance Director Nicola Dell'Edera termed the currency exchange rates "very challenging." In the final quarter of 2004, he said the euro-to-dollar rate resulted in an 8.4% decrease in the purchasing power of the U.S. greenback, as compared with the comparable 2003 period, and the year-over-year rate fell 9%.
Fred Starr, CEO and president of Natuzzi Americas, said that over the past two years, price increases have affected gallery performance in the United States. The increases amounted to 10%, not all of which were absorbed by the galleries. He said the company was under "tremendous" competitive pressure during the last months of 2004, but the galleries were starting to recover.
Starr said the initial Natuzzi investment in a 3,000-square-foot gallery was $22,000 to $25,000, with both the retailer and Natuzzi getting their returns in about six months.
At the end of 2004, Natuzzi operated 138 stores in Italy and 129 outside Italy. During the year, the company opened 176 galleries, bringing the total gallery count to 525.
| Natuzzi(a) | |||
|---|---|---|---|
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Quarter ended 12/31 | 2004 | 2003 | Change |
| (a) In European euros, except for earnings per share, which are in U.S. dollars. (b) Converted at the rate of 1 euro = U.S. $1.2991 for the 2004 quarter, 1 euro = U.S. $1.19 for the 2003 quarter, 1 euro = U.S. $1.2438 for the 2004 year and 1 euro = U.S. $1.316 for the 2003 year. | |||
| Sales | 193,600,000 | 209,600,000 | (7.6%) |
| Operating income | 2,800,000 | 10,400,000 | (73.1%) |
| Net income | (9,300,000) | 3,600,000 | — |
| Earnings per share (b) | ($0.22) | $0.08 | — |
| Year ended 12/31 | 2004 | 2003 | Change |
| Sales | 753,400,000 | 769,600,000 | (2.1%) |
| Operating income | 40,000,000 | 42,300,000 | (5.4%) |
| Net income | 18,400,000 | 37,300,000 | (50.7%) |
| Earnings per share (b) | $0.42 | $0.77 | (45.5%) |
