Shares of Italian sofa magnate Natuzzi
Despite management's efforts to realign its business to deal with a deteriorating sales environment, things have gotten progressively worse. Unit sales that were down 18.9% for the first half of the year fell 20.6% in Q2 2007 alone. Profits-wise -- or loss-wise for this firm, Natuzzi posted a loss of about $0.11 per share in each of Q2 and Q1.
Where the money isn't
While overall business conditions are "challenging," the real challenge, according to CEO Ernesto Greco, is "particularly in the U.S., where aggressive pricing competition and lower consumer confidence are still dominant factors." No news there. CEOs at rivals La-Z-Boy
With recent earnings reports from Home Depot
Where the money is
Not in the U.S., at least. Fortunately for Natuzzi, it's a big world. If sales stagnate and fall in one hemisphere, the company can always follow the money elsewhere. And last week, the firm announced that it opened three new stores during the quarter -- one in the U.K., one in Finland, and one in Russia. However, keep in mind that at the same time, six were closed in Greece and China.
Sales for the company were certainly weak this quarter in all corners of the world, including Europe. Unfavorable economic conditions are taking a toll on Natuzzi now, but once things get turned around and the housing market begins to recover, the company should be in good condition to revive sales. For now though, expanding its presence in the places where sales trends are less weak is the right move to make. And the expansion in ruble-rich Russia seems a particularly savvy call.
Fool contributor Rich Smith does not own shares of any company named above. La-Z-Boy is an Income Investor recommendation and Home Depot is an Inside Value pick. The Motley Fool has a disclosure policy.
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