HispanicBusiness

Transition to Successful Global Branded Furniture Company Continued

Commenting on these results, Tawny Lam, president of Nova LifeStyle, stated, "In the 2012 first quarter, we added another exciting chapter to the Nova growth story. Our key goal is to build shareholder value, which will come mainly from continued rapid growth. Our key strategy for achieving this is aggressive expansion of our branded sales, which was a key achievement in the quarter. Our U.S. sales grew more than 300% year over year to $5.2 million, almost half of total sales in the quarter, up from about $1.3 million a year earlier. Our acquisition of Diamond Sofa in the U.S. has thus far proved very successful, as we increasingly are recognized by buyers and owners at the top 100 furniture stores throughout the country for our exciting, high quality line of urban contemporary furniture. Our coordinated collections clearly strike a chord with customers looking to enhance their hectic lifestyles, as the country slowly emerges from difficult economic times."

Ms. Lam continued, "In China, we also have seen a strong growth opportunity with the rise of a new middle class, and our sales there were second only to the U.S. in the quarter. In line with our strategy, the most important development in China for us was the continued expansion of our franchises which, in the quarter, accounted for 26% of all our sales in China. Our ongoing shift from sales to private label retailers to direct branded sales -- through our franchises and the planned second quarter startup of Internet sales -- provides us with much greater pricing flexibility that enhances our profit outlook."

"Of course," Ms. Lam added, "we are focused on bottom line growth as well as growth in sales. Our goal is to improve gross margins to about the 30% level by sticking to our strategy of broadening our product mix to include higher margin items in our direct sales and to pass on costs that seem to continue to climb in the U.S. and China especially."

Capacity Expansion Underway

During the quarter, the Company continued to focus on expanding its production capacity with ongoing construction of its more than $6 million Phase II factory expansion that it expects will add 20% to existing capacity by year end and reduce its reliance on third party manufacturers. The Company said it is studying other capacity expansion plans but it is too soon to disclose details.

Strong Growth Outlook

The Company's growth strategy is focused on maintaining strong relationships and a continuing presence in the European economy, while accelerating efforts to grow sales in the U.S. and China. In these countries, consumer spending on refurbishing their homes appears to be growing, and with it, so is demand for the Company's well priced, high quality furniture designed for urban contemporary living.

Ms. Lam added, "In this early stage of executing our growth strategy, we believe our near term optimism is well grounded, barring any dramatic economic reversals, although we believe we are diversified enough to withstand possible setbacks in any one geographical location. We also believe we are in a strong financial position that supports our future growth plans."

"Longer term," Ms. Lam concluded, "we also see significant opportunity, particularly from the anticipated consolidation in the furniture industry worldwide, and remain alert to opportunities that may be appropriate for us."