"Ciao" in Italian is one of those words like "pozhaluysto" in Russian or "aloha" in Hawaiian -- it means what you think it means, and also the opposite. Tomorrow, when we hear the Q4 and full-year 2005 numbers from Italian furniture company Natuzzi (NYSE:NTZ), will Mr. Market greet them with a warm hello or a cold goodbye? Either way, it'll sound like ciao.

Wall Street Wisdom:

  • General consensus. There is none. No U.S. analysts follow Natuzzi.
  • Revenues. Lacking analysts, we also lack revenue estimates.
  • Earnings. Same story with profits, although I have confirmed from Capital IQ that one European analyst tracks the company; he projects $1.64 per share in profits for the year.

Margin watch:
If you follow the furniture industry at all, you're aware that things haven't been good for quite some time. With the exception of a very few firms, including Stanley Furniture (NASDAQ:STLY) and Ethan Allen (NYSE:ETH), furniture companies' sales have slowed, and their stock prices have lagged. As it turns out, things aren't much better on the other side of the Atlantic for Natuzzi. Sales are slumping, gross margins are down 320 basis points over the past 18 months, and the company has lost money in each of the past four quarters.

Margins %

6/04

9/04

12/04

3/05

6/05

9/05

Gross

35.9

35.9

35.7

35.2

30.8

32.7

Op.

6.6

6.2

5.3

3.4

(2.3)

(1)

Net

4.3

4.2

2.5

0.8

(2.2)

(3.4)
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

Foolish forensics:
The chart above shows operating and net margins turning negative only in the past two quarters, of course. But remember -- we give you the trailing-12-month results to help smooth out the short-term bumps caused by unusual items and seasonality of sales. As a result, it took six months of quarterly losses to drag the rolling results down into the red. Even if Natuzzi's business turns around tomorrow, it will take some time to pull the rolling results out of the hole.

Speaking of which: Don't expect Natuzzi to turn around right away. The company announced earlier this month that it will be closing eight U.K. stores. Although Natuzzi characterizes this move as a "relocation," it's worth pointing out that all of the closings will take place this month -- but "reopening" the "relocated" stores will proceed over the course of the next two years. Oh, and there will be only six of them. And, um, they're going to be smaller than the stores that are being closed. None of that sounds optimistic.

Competitors:
In addition to the companies already named, Natuzzi's closest competitors are probably America's La-Z-Boy (NYSE:LZB) and Furniture Brands (NYSE:FBN).

La-Z-Boy is aMotley Fool Income Investorrecommendation, and Stanley Furniture is aMotley Fool Hidden Gemspick. Take your favorite Fool investing newsletter out for a free, 30-day spin.

Fool contributorRich Smithdoes not own shares of any company named above.