Whenever the housing market slumps, there's speculation that people will put more time, effort, and, money into their current homes, causing certain home repair and even furniture companies to prosper. But that theory hasn't worked lately for Lowe's
For Lowe's, the result was a decline in first-quarter net income, perhaps also spurred by a more general consumer pullback. But at least it did generate earnings. At Italy-based Natuzzi, the world's leader in leather-upholstered residential furniture, a more than 18% drop in revenue led to a loss of 4.7 million euro in the most recent quarter, compared to earnings of 6.8 million euro a year ago.
The Americas led the slide; sales fell here by 27.3%, versus 14.4% in Europe and 5.6% in the rest of the world. The company will need to hustle to meet the estimates it offered just more than six weeks ago, when it said "it expects to report approximately same revenues year over year and almost breakeven at net results level."
Indeed, the malady that is affecting housing, Lowe's, and Natuzzi also is plaguing the furniture industry in general. Two weeks ago, SpendingPulse, a retail data service, reported that U.S. furnishing sales slipped 0.7% in April, a less severe drop than the 1.3% decline in March. The sluggishness has been widespread enough that it's also hurt the likes of Furniture Brands International
But as my capable Foolish colleague Seth Jayson wrote about Natuzzi last month, the time to buy cyclical companies, like furniture manufacturers, is not when things are going great guns.
Clearly, he's correct. And beyond that, whether or not the furniture companies become decoupled from housing, I'd urge Fools to keep in mind that Natuzzi is the leader in its sector of the furniture business, that its bad news probably is baked into the stock, and that the company sports an incredibly solid balance sheet. As such, it seems like a good one to watch closely. Capisce?
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