Shares of Nova LifeStyle, Inc. NVFY have lost 15.5% since the company reported its earnings for the year ended Dec. 31, 2024. This compares to the S&P 500 Index’s 8.9% decline over the same time frame. Over the past month, the stock gained 19.8% against the S&P 500’s 9.7% decline.

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Revenue Growth and Profitability Metrics

For the full year 2024, Nova LifeStyle reported net sales of $9.7 million, representing a 12.6% decline from $11.1 million in 2023. The decrease was primarily due to a 39% drop in sales volume, though partially offset by a 43% increase in average selling price.

Despite the top-line contraction, NVFY’s gross profit inched up 1.8% to $4.25 million from $4.17 million a year ago. This translated into a gross margin of 44%, an improvement from the 38% reported in 2023, primarily due to the absence of low-margin liquidation sales seen in the prior year. Net loss narrowed to $5.6 million from $7.7 million in 2023, marking a 28% reduction in losses year over year.

Geographically, sales in the United States increased 7.6% to $9.4 million from $8.8 million, while sales in Other countries plunged 23.9% to $0.25 million from $0.33 million. NVFY did not generate any revenues from Asia.

Other Key Business Metrics

In terms of profitability, Nova LifeStyle achieved a notable expansion in its gross margin to 44% from 38%, despite the contraction in overall sales. This was primarily driven by a shift in the product mix, moving away from lower-margin liquidation sales toward higher-value offerings. The increase in average selling price, up 43% year over year, suggests that the company has successfully repositioned its product range toward more premium segments. Although total sales volume fell sharply, the strategic emphasis on quality over quantity helped mitigate the negative impact on gross profit.

Management Commentary

Tawny Lam, Chairperson and CEO, emphasized NVFY’s transformation efforts over recent years. She highlighted the operational improvements designed to build resilience against external challenges, such as tariffs, macroeconomic headwinds, and real estate market uncertainty. Lam acknowledged the significant work undertaken to revamp the product line and expand the portfolio with complementary products. She credited the dedication of employees for embracing these changes and expressed confidence in the company’s strategic positioning for future success.

Factors Influencing the Headline Numbers

The decline in revenue primarily stemmed from a 39% drop in sales volume, which overshadowed the positive effect of a higher average selling price. Nova LifeStyle’s pivot away from low-margin liquidation sales in Malaysia — specifically jade mats — positively influenced both gross profit and margin expansion. However, despite these improvements, operating challenges persisted, culminating in a significant but narrowed net loss for the year. The overall economic environment, coupled with uncertainties in the real estate sector, likely played a role in suppressing consumer demand for the company’s lifestyle furniture offerings.

Guidance

Nova LifeStyle did not issue quantitative guidance for fiscal 2025. However, management hinted at ongoing efforts to capitalize on market opportunities, including product revamps and potential acquisitions, as part of its strategic growth plan. Management’s commentary suggests a cautious but determined outlook, focusing on structural realignment and margin preservation over immediate revenue growth.

Other Developments

There were no mentions of acquisitions, divestitures, or major business restructuring initiatives during the reported period.

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This article originally published on Zacks Investment Research (zacks.com).

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