A strong Euro and rough weather in the U.S. market had a dampening impact on Italian leather upholstery producer Natuzzi Group’s 2018 first quarter, which ended March 31.

Still, net sales increased 1.6% to $134.9 million for the year’s first three months compared with 2017’s first quarter. Natuzzi recorded a first-quarter 2018 loss of $5.7 million, an improvement over the $12.3 million lost in the comparable prior-year period.

First-quarter revenues from core business (sofas, beds and furnishings) were up 1% to $127.1 million. Total upholstery net sales declined 1.2% quarter-over-quarter but were more than offset by the 29.3% increase in total furnishings net sales, which Natuzzi attributed to its new retail and merchandising format.

Retail division sales, which include Natuzzi-operated stores and concessions, were up 26.1% to $17.5 million, with positive results in the U.S. (up 97.2%), China (up 1.%), Spain (up 17.8%), Italy (up 11.5%) and Switzerland (up 13.3%). The strength in the United States was primarily due to the opening of new stores.

Retail sales represented 13.8% of core business, increasing from 11.1% in the first quarter of 2017.

During the first quarter of 2018, Natuzzi Italia retail net sales increased by 39.6% to €11.53 million, Natuzzi Editions by 1% to $1.6 million, and Divani&Divani by Natuzzi by 9% to $4.4 million.

In the first quarter, the company opened three Natuzzi Italia directly operated stores, one in Chicago, one in Los Angeles-Costa Mesa and one in Paris. In addition, one Natuzzi Edition DOS was opened in China.

Currently, there are 64 directly operated stores, of which 37 operate under the Natuzzi Italia name, 16 Divani&Divani by Natuzzi and 11 Natuzzi Edition. In addition, Natuzzi Group directly operates 20 Natuzzi Italia concessions.

The Group confirms the opening of additional nine directly operated stores by the end of the year: two in the United States, two in China, two in the United Kingdom, two in Italy and one in France. This will bring Natuzzi Group’s worldwide DOS total to 73 and 20 concessions. The opening of an additional DOS in the United States, initially planned by the end of this year, has been postponed to the beginning of 2019.

Chairman and CEO Pasquale Natuzzi said in a release that while the overall environment for wholesale business remains challenging, its new collection should encourage franchised business growth.

“As more of our franchisee partners adopt more of our approach, we expect their business, and as such ours, to improve,” he said.

“I believe it is important to point out that thanks to the very positive results coming from our DOS, we will continue to pursue our retail-based strategy. The final goal is to have a more balance distribution mix between retail and wholesale business.

He added that a joint venture agreement in China with Kuka should be operational soon, pending local authorities’ approval.

“This will essentially drive our retail business in China, a very important growth market for us,” Natuzzi said of the joint venture.

“In summary, while I am personally disappointed of our results, I remain committed to and optimistic about our strategy and our future.”

(Source: Furniture Today)