Natuzzi (NYSE:NTZ) executives on the company’s third-quarter 2025 results call described a difficult demand backdrop marked by weak consumer confidence and soft store traffic, while outlining ongoing efforts to improve profitability through a shift toward higher-margin branded sales and a restructuring plan aimed at reducing fixed costs.
Demand remains pressured as store traffic lags
Executive Chairman and Interim CEO Pasquale Natuzzi said the broader geopolitical environment has not improved and, in some respects, is worsening. He said consumer confidence remains weak, and despite increased marketing investment, foot traffic in the company’s stores—particularly in the U.S. and Europe—continues to lag. Natuzzi noted that conversion rates have improved in some cases, but said those gains have not been enough to offset the decline in traffic.
Gross margin improves on mix shift toward Natuzzi Italia
Natuzzi said the company improved gross margin in the third quarter, surpassing levels recorded in the first two quarters of the year. He attributed the improvement primarily to a more favorable sales mix.
According to his remarks, sales of Natuzzi Italia—described as higher margin than other product lines—rose 18% compared with the third quarter of last year. At the same time, sales of unbranded products, which Natuzzi said are not core to the business, declined 20%.
Management said it intends to continue emphasizing branded sales given their higher-margin profile.
Cost actions: China savings, Italy labor costs, and SG&A pressure
Natuzzi said the closure of the Shanghai factory last year enabled cost savings on industrial operations in China. However, he said the company’s margin improvements are still constrained by labor costs in Italy following the reshoring of Natuzzi Editions production for the North America market from China to Italy, a process he said was completed in the second half of 2024.
He also discussed selling, general and administrative expenses, noting that wages and transportation expenses decreased during the quarter but that overall SG&A remains high relative to the company’s current revenue base. Natuzzi said he and the management team remain committed to supporting sales while reducing fixed costs at the group level.
Restructuring plan centers on Italy footprint and workforce reductions
In response to a question about an upcoming meeting with the Italian government, Natuzzi described a restructuring plan focused on rationalizing the company’s Italian manufacturing footprint. He said the company currently has six factories and one logistics center in Italy and plans to reduce production to three factories instead of six. Doing so would require moving employees between facilities within the same region, which he said would require agreements with the government and unions.
Natuzzi also said the company has about 1,350 workers in Italy but needs approximately 750 to 800 people. He and CFO Carlo Silvestri discussed the need for measures involving government support, including what they described as a form of furlough (referencing “Cassa Integrazione” in Italian) as part of a two-layer approach: near-term workforce measures and a more strategic, medium-term plan.
Silvestri said the company’s profitability and cash flow objectives include multiple levers, including workforce actions, margin initiatives such as reviewing price lists when strategic positioning allows, and further rationalization of the retail network. He said the company’s target to reach financial sustainability is tied to achieving approximately €28 million to €29 million per month in turnover, and indicated that at those levels, the company expects to stop burning cash and generate positive cash flow.
Natuzzi said he planned to travel to Rome the following Monday to meet with relevant ministry officials. He said the company continues discussions with the Italian government, which he said has recognized Natuzzi as an enterprise of strategic relevance. Natuzzi said he would seek “major aid” aimed at improving quality, reducing transformation costs at the Italian factory, and increasing production efficiency.
Contract and trade business positioned as a long-term growth lever
Management also discussed efforts to expand its contract and trade business, including “Natuzzi Harmony Residences” projects. Natuzzi said the first Natuzzi Harmony Residences project launched in Dubai in November 2024, featuring a building with 50 apartments. He said the company designed the building and interiors, including furniture, and that customers are purchasing Natuzzi apartments in Dubai.
He added that the company is in the process of signing a second contract with the same dealer and developer in Dubai and has signed another contract in Jerusalem, where it also designed the building, apartments, and common areas.
Natuzzi said these projects demonstrate the value of the brand and stated that developers are paying royalties of $1.2 million to $1.3 million to use the Natuzzi name, in addition to furniture costs.
He also cited participation in multiple trade events and roadshows to build the pipeline, including exhibitions in Riyadh and Dubai, two events in Mumbai, Miami Design Week, and a recent roadshow in China meeting with architectural firms.
Silvestri characterized the contract trade division as a startup and said the company is still in an early phase, with substantial bidding activity but not enough history to quantify success rates. For 2026, he said the company is taking a conservative approach and views the business as “a cherry on the cake,” forecasting between €5 million and €10 million in revenue from the segment, while describing the longer-term opportunity as potentially exponential as projects scale.
On leadership, Natuzzi said the company is continuing its CEO search and that he has been interviewing candidates on weekends due to scheduling constraints. He did not provide a shortlist count but said the company hopes to share “good news” in a short period of time.
About Natuzzi (NYSE:NTZ)
Natuzzi S.p.A. is a global design and manufacturing company specializing in high-quality upholstered furniture. The company’s product portfolio includes leather and fabric sofas, armchairs, recliners, sectional systems and complementary home furnishings such as coffee tables, beds and accessories. Natuzzi markets its offerings under two primary brands—Natuzzi Italia, which focuses on contemporary Italian design, and Natuzzi Editions, which provides a broader range of styles at accessible price points.
Founded in 1959 by Pasquale Natuzzi in Santeramo in Colle, Italy, the company began as a small artisan workshop and has grown into the world’s largest producer of leather upholstered furniture.
