Natuzzi, S.p.A.

Good day, ladies and gentlemen, thank you for standing by. Welcome to the Natucci Conference Call for 2024 Second Quarter Conference Call Financial Results. As a reminder, anyone interested in joining this call live can join via telephone by dialing plus 1-412-717-9633, then pass code 3925-2103-POUND. in addition to the link already provided to join via video. Once again, if you'd like to join via telephone, please dial plus one four one two seven one seven nine six three three, then passcode three nine two five two one zero three pound. At this time, all participants are in listen only mode. Following the introduction, we'll conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. Joining us on today's call are Mr. Antonio Achille, Natuzzi's Chief Executive Officer, Mr. Pasquale Natuzzi, Founder and Executive Chairman, Mr. Carlos Silvestri, Chief Financial Officer, and Piero Di Renzo, Investor Relations. As a reminder, today's call is being recorded. I now would like to turn the conference over to Piero. Please go ahead.

Thank you, Kevin, and good day to everyone. Thank you for joining the Natuzzi's conference call for the 2024 second quarter financial results. After a brief introduction, we will give room for the Q&A session. Before proceeding, we would like to advise our listeners that our discussion today could contain certain statements that constitute forward-looking statements under the United States securities law. Obviously, actual results might differ materially from those in the forward-looking statements because of risks and uncertainties that can affect our results of operations in financial conditions. Please refer to our most recent annual report on Form 20-F filed with the United States Securities and Exchange Commission for a complete review of those risks. The company assumes no obligation to update or revise any forward-looking matters discussed during this call. And now I would like to turn the call over to the company's chief executive officer. Please, Antonio.

Thank you, Kevin, and thank you, Piero. Good afternoon for the listener joining from Europe, and good morning from the one joining from the U.S., where our chairman is. um i would like to start with a brief introduction to what has been the second quarter in terms of sales as we have seen reported sales slightly increasing versus the same period 2023 which is not something we are particularly excited about but definitely need to be put in a contest where Not only our sector has been very soft, and to our knowledge, most of our direct competitors actually are reporting negative comps. But in general, the durable and consumer spending are very much depressed. I believe that one of you is following what's happening to another interesting industry, the automotive, where there is a serious double-digit decrease in orders. So we interpret the fact that we have been able to defend our top line. Then if we look at the brand, the sales actually has been 3% above last year, as a sign of resilience of our company, and also as a testament that our brand journey is very much appreciated and understood by our partner and increasingly by new partners like real estate developers. I would like to highlight a few elements of our strategy, which has been very much consistent through the cycle. The first element is our effort to continue improving the way we reach our consumer. As you know, you know, Natuzzi has taken these titanic, you know, gigantic task of turning from a manufacturer to a brand retailer. And one key element is improving the quality of the relationship that we have with our final customers, which can only happen in an environment where we can control the customer experience. Here, retail, which is of course the channel where this customer experience can be better controlled, uh is now becoming very important roughly 70 percent of total sales are happening through retail being the os of os up to 45 percent in 2019 which still is a good year to come compare before the pandemic so it's a an increase of 23 percentage percentage point which i believe is very significant which not only speaks about the fact we are a better way to reaching our customers, but also speaks about the very, very intense and deep work we have been doing to transform our competencies, because clearly it's a very different job to be a producer than to be a retailer. So there's been a lot of effort over the last few months that Pasquale, myself, and the whole organization has been doing to equip Natuzzi with competencies in the area of retail, retail design, merchandising, customer experience, which are totally new competencies for the group just four or five years ago. As part of the retail, I would like me to... Wait, you can see me? Yes, yes, you can see me. I would like to... highlighted the performance of our directly operated stores, which have been growing 6% versus last year. And in particular, the performance of our directly operated stores in the US, which have been growing roughly 33% versus last year. Again, this is a clear confirmation of what we have been repeating in this conference call, which the U.S. is central to our strategy and retail in the U.S. is central to our strategy. As part of that, I'm pleased to announce that we eventually opened a new DOS in Denver. It's a location which has been very carefully scouted for. It's in downtown First Avenue, very close to other furniture brands that we consider important. Right affinity for Natus Italia, which includes Roche-Loire, Restoration Hour, West End, Creighton Barber, Room & Go. Again, because our experience tells us it's very important to be part of a district populated with a brand with a similar position. uh with this new opening we now have 23 stores uh of which 18 are directly operated and four are in franchising in us and again this remain a priority for us both in term of organic growth and in term of potential new opening let me switch to another geography which is central to our strategy, which is China. As you know, more than half of the total store we have are in franchising in China. We don't consolidate line by line because we are in a minority JV with KUKA. But we've been over the last few months increasingly supporting our partner in China on an operational level. So we're really teaming up with a different department to support the GV team to take the right choices at merchandising, retail, marketing level. Personally, I've been more than five times since the last few months, every time really being very much immersed in the retail reality. Last visit was in August, and I was very pleased to witness the christening of a new project, the Hangzhou Store. As you know, Hangzhou is a city one hour north of Shanghai, a very beautiful city. We wanted to make sure that Enzo Store became a flagship, fully controlled in terms of design by our team, which is a total newness because despite being in partnership, our partner has been somehow changed. quite autonomous in some choices when it came to retail. In the spirit now to create a very high consistency of the representation of Aptuz Italia globally, we agreed with our partner that a significant opening like ANZO needs to be integrated in our way of working. What does it mean that the full layout, the merchandising, the design of the store, and actually being done by our newly created retail excellence division? The Anzho opening event has been a success. There's been some 40 dealers joining, more than 100 architects. Now it's still very early, but it's encouraging to see that after nine weeks from operation, the Anzho stores is pacing at a double speed of the other remaining directly operated stores in China. which encourage us to say we now have learned the job we've done a lot of investment in term of codifying what should be and we call it internally the brain retail religion which means very strict guidelines in terms of execution of brand merchandising retail and we feel the legitimacy to guide more strictly the choice of our partners, because we believe that is not a sign of authority, but is a sign of business legitimacy. Because as I'm so sure, when you do the right things, then you have a very good payoff. So on closing on retail, franchising and direct operator store, we now have 681 stores. We believe that this is a very solid platform to regain growth as market conditions are stabilized. This being, I don't see any more Pasquale. Pasquale is with us. Okay, sorry. You just disappeared for one second. Okay. So in parallel to retail, there's been another significant effort in the direction of improving the quality of our gallery. We call it the Remaging Gallery because it's been really recreated the concept from its fundamentals. As you remember, gallery is a shop in a shop experience. They go anywhere from 1,000 to 3,000, 4,000 square feet. in some geography in Europe even larger, but they are a shop in the shop experience. Again, in the search of delivering a brand experience which is immersive, uh there's been a dedicated team that has been redesigned the layout the merchandising so that it can convey the experience of the brand at the same time being very modular and very cost effective for our partners they need to co-invest in this format this is the format for instance which is uh as you know now there is high point markets which is one of the opportunity we offer to our partners they want to invest in a tradition or in some location for natus italia where the potential does not sustain a full-scale store this new concept has been extremely well received we open some 43 new galleries, 25 is being re-engineered, and this is an effort we're going to be progressively rolling out to the 600 galleries we have globally.