Sale of U.S. Luxury Mattresses in China Underway
"While it is an initiative we have focused on for some time," Ms. Lam added, "after the end of the second quarter, we announced in July what we believe could result in a further significant boost to our sales in China, namely, our first shipment of Ultra Premium 'Made in the USA' organic latex mattresses to our franchise network in China."
The Company said the significant growth potential it sees for these products lies not just in their comfort or the fact that they are made with the highest quality natural latex foam. Of special significance to China's upscale consumers, they are custom manufactured in the U.S. to size standards in China and are generating a strong initial response.
30% Gross Margin Target
During the second quarter and first half of 2012, the Company said that strong demand for its products necessitated increased utilization of third party manufacturers under the Company's supervision. This factor, in combination with increasing raw material prices, especially in China, had an impact on gross profit margins, which in the first half of 2012 were 25% compared with 28% a year earlier. Going forward, management believes gross profit margins will stabilize at approximately 30% as the Company's product mix broadens and more raw material costs are passed along to customers.
Additionally, the Company said construction was proceeding on the Phase II expansion of its manufacturing plant in Dongguan. It continues to anticipate completion before the end of the year, which will allow for increased self manufacturing during the course of 2013 in conjunction with its supply agreement with IKEA.
Strong Growth Outlook
Looking ahead, Mr. Wong stated, "We have charted a very aggressive growth course with our primary focus currently on the U.S. and China given the somewhat slower economic recovery we see in Europe. While consumers in the U.S. and China also are exhibiting caution, there nevertheless has been continuing growth in spending on refurbishing their homes to reflect their lifestyles. We believe this will continue to support the growth of our popular lifestyle conscious products, and lead to another year of substantial record growth in 2012 in line with our earlier forecasts."
About Nova LifeStyle, Inc.
Nova LifeStyle, Inc., a U.S. company headquartered in California, is a fast growing, innovative designer and manufacturer of modern LifeStyle furniture, primarily sofas, dining rooms, cabinets and bedrooms in matching collections. Nova's products are made in the U.S., Asia and its state of the art factory completed in 2011 in Dongguan, China and marketed worldwide. Nova's collections of LifeStyle furniture brands include Diamond Sofa (www.diamondsofa.com), Colorful World, Giorgio Mobili and others. Nova's products feature urban contemporary styles with comfort and functionality and upscale luxury designs appealing to LifeStyle-conscious middle and upper middle-income consumers in the U.S., China, Europe and elsewhere in the world. To learn more about Nova LifeStyle, Inc., please visit www.novaLifeStyle.com.
Safe Harbor Statement
All statements in this press release that are not historical are forward-looking statements made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. There can be no assurance that actual results will not differ from the company's expectations. You are cautioned not to place undue reliance on any forward-looking statements in this press release as they reflect Nova's current expectations with respect to future events and are subject to risks and uncertainties that may cause actual results to differ materially from those contemplated. Potential risks and uncertainties include, but are not limited to, the risks described in Nova's filings with the Securities and Exchange Commission.
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