by Sale of various assets aims to raise funds to boost the brand’s store and manufacturing footprint
HIGH POINT — When Natuzzi announced its plans to sell its High Point showroom along with other manufacturing assets in Italy, a key goal was to raise capital necessary to fuel its planned retail expansion here and abroad.
That brand-building theme resounded clearly as part of its fourth-quarter conference call earlier this spring along with how the company has implemented various cost-cutting measures to shore up its bottom line. Top-level management views both as key to helping the company achieve success over the short and long term.
For example, the company reduced its headcount by 514 positions last year alone, bringing the total reductions to 759 since the beginning of 2021, a 17.5% decrease, according to CEO Antonio Achille.
To improve productivity among the remaining workforce, the company said it has conducted more than 100,000 hours of training to enhance skill levels, “aimed at upskilling and reskilling all our employees to meet the digital challenges we anticipate in the new future,” added Mario de Gennaro, chief human resources, organization and legal officer.
The overall reduction in headcount is expected to result in an annual savings of 22.5 million euros, or about $24.4 million, based on current exchange rates.
But the company is investing in other areas of the business, including its retail footprint. For example, Achille noted, that Natuzzi last year allocated a total of 12 million euros to various projects, including 4.6 million euros toward the opening of retail locations, along with 7.2 million euros toward manufacturing improvements.
In the U.S., the company has about 30 stores overall between its upper-priced Natuzzi Italia locations featuring made-in-Italy product and its lower-priced Natuzzi Editions stores. Its newest stores added last year include six Natuzzi Editions branded locations in the U.S. along with one new franchise location, plus seven new galleries.
“In the U.S., our focus remains firmly high,” Achille told analysts. “We consider the U.S. one of our highest priorities and a significant opportunity, given that it’s where the company is listed and where our business model has evolved.”
Whether we are talking about store locations or galleries, including 680 Natuzzi stores around the world, plus some 600 galleries, the goal is to keep the brand in the mind of consumers here and abroad. Thus, the brand appears to be resonating in key markets including the U.S. and China, another key market where the company sells under both the Editions and Natuzzi Italia banners.
Representing about half of the total global store network, or about 346 locations, many of these China stores are in large furniture malls where they compete for the consumers’ attention with other name brands being sold in the marketplace, both domestic and international.
According to Achille, more than 92% of the company’s sales were from branded goods by the end of the third quarter of 2023, including the Natuzzi Italia and Editions lines, up from 85% in early 2021. The branding initiative achieved through both stores and galleries also has helped achieve a higher ticket. For example, Achille noted that in the past, Natuzzi products were sold at an average price of $395 in the U.S. Today, he noted, the average ticket for higher-end, made-in-Italy Natuzzi Italia products is in the range of $9,000.
“This significant increase demonstrates the significant efforts required to establish and justify the brand’s premium positioning,” Achille said, adding, “This marks a significant shift, particularly for increasing the awareness of the Natuzzi brand, where as we were (previously) predominantly in the value segment.”
In addition to helping boost the brand in key markets, the stores and galleries also provide real-time data and insight into what’s happening in each market, which can be used to help guide the business, including product development efforts.
“Historically, each store was merely an account number, lacking comprehensive insights into its operations,” Achille noted. “Now we possess real-time and detailed understanding of store activities, including store traffic, conversion rates and product preferences. This capacity is invaluable for our transformation into a consumer-centric company.”
The company offered scant details on what the store footprint will look like in North America moving forward. But in answer to a question from analyst Dave Kanen of Kanen Wealth Management, Achille noted that the sale of various “nonstrategic” assets including the High Point showroom and a tannery in north Italy, will help fuel its retail growth in this part of the world.
“The board has agreed that, in line with our long-term strategy, the primary focus for potential divestments will be reinvesting in North America retail operations,” Achille said. “Additionally, supporting our long-term transformation initiatives will be another key priority. In our view, the path to creating value for our shareholders is crystal clear. … Our value creation strategy revolves around two key pillars: expanding our retail presence, particularly in North America, and streamlining the cost structure of our Italian factories. Therefore, if there are additional funds available, our sole focus will be reallocating them toward these initiatives.”
