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Nova Lifestyle Business Grows 26%

Los Angeles, USA: Nova LifeStyle, Inc., a U.S.-based fast-growing, innovative designer, manufacturer and distributor of modern LifeStyle furniture, announced growth of 26% for financial results for the year ended December 31, 2014.

Nova LifeStyle’s largest market is North America, contributing $64.39 million in sales in 2014, or 65% of revenues. North American sales increased 46% yearover- year as a result of the Company’s marketing efforts in the United States and the integration of the operations of Bright Swallow in Canada.

Nova LifeStyle increased sales of its Diamond Sofa brand through partnerships with major U.S. retailers; in particular, the Company formed a partnership with Nebraska Furniture Mart, a Berkshire Hathaway Company and the largest home furnishings store in North America, which has recently resulted in repeat purchase orders to supply furniture to Grandscape in Dallas, Texas. The Company also commenced sales of its latest Apricot collection at the grand opening of the El Dorado furniture store, a top 50 U.S. furniture store.

Nova LifeStyle has also experienced an increase in online sales in the U.S. via the third-party shopping portal Wayfair.com.

In China, overall sales increased by 6% to $17.0 million for the year 2014, as compared to $16.0 million in 2013. Throughout 2014, Nova LifeStyle implemented strategic initiatives to expand sales and distribution in China, a key growth market. Higher sales were generated by the opening of seven new franchise stores and through agreements, such as the one to furnish Ping An Insurance Group’s expansive offices.

The Company achieved significant milestones in its efforts to increase distribution by increasing online sales via Alibaba’s B2C sites, TMall and JD.com. Nova LifeStyle also signed a franchise partnership contract with the Ablejoy Company of China, to provide Nova products to their network of over 200 retail stores. Nova LifeStyle initiated shipping to Ablejoy in the third quarter of 2014 and will continue to supply current and future franchise stores. Furthermore, the Company successfully began manufacturing and shipping to IKEA China, in accordance with IKEA’s strict partnership standards.

The Company’s sales to other parts of Asia Pacific, including Hong Kong, Australia, and other countries, increased 46% to $5.89 million in 2014, compared to $4.05 million in 2013.

European sales decreased yearover- year as a slower-than-expected recovery impacted growth in the region. In 2014, the Company made its entrance into Dubai, U.A.E., as it entered into a continuous supply agreement with Home Center LLC, a leading furniture and home furnishings retailer. The Company expects the China and U.S. markets to contribute to top-line growth and generate higher margins as manufacturing ramps up to meet increasing demand. The Company expects to focus on increasing the sales volume of collections already developed during 2014 in both the U.S. and international markets, rather than developing new collections.

The process of developing and marketing products for international markets has enabled Nova LifeStyle to develop the scale, logistics, marketing, manufacturing efficiencies and design expertise that will permit the Company to expand aggressively into the highly attractive U.S., Canadian and Chinese markets. In Europe, the Company anticipates an increase in sales and marketing as the region’s economic outlook improves.

“We are very pleased by these improved results as the positive impact from our strategic growth initiatives takes hold,” commented Jeffrey Wong, CEO of Nova LifeStyle. “The U.S. remains our largest market and we remain committed to increasing brand recognition and building relationships with major reputable distributors across the country. This year we achieved some major accomplishments in that area and we look forward to building on these foundations and generating more momentum as we grow.

“Sales in Asia also increased significantly and we view the supply agreement with IKEA China as a testament to the quality of our products and manufacturing capabilities. We are witnessing the expansion of the retail furniture market in China as the growing middle class, increasing urbanization and increased consumer spending fuel higher demand for household goods and furniture. Due to our efforts in 2014, we believe that Nova LifeStyle is well positioned to take full advantage of any upturns in the global economy, both in Asia and in the domestic market,” concluded Jeffrey Wong, CEO.

Net sales for the year ended December 31, 2014, were $98.71 million, an increase of 26% from $78.36 million in 2013; this increase in net sales resulted primarily from a 32% increase in sales volume due to a 6% decrease in average selling price.

Gross profit increased by 26.2% to $19.39 million for the year ended December 31, 2014, compared to $15.37 million in 2013. The increase in gross profit resulted primarily from an increase in net sales. Gross profit margin remained flat at 20% for the year ended December 31, 2014, compared with the prior year.

Operating income was $5.25 million, compared to $6.06 million in the prior year period. Net income was $8.55 million in the year ended December 31, 2014, an increase of 76% from $4.87 million for 2013. Net profit margin was 9% in the year ended December 31, 2014, an increase of 3% above the 6% net profit margin for 2013. The increase in profit margin resulted primarily from income resulting from the change in fair value of warrant liability, which is a noncash and non-taxable income.