Dorel Reports Second Quarter 2024 Results

Dorel Juvenile continues its growth and earnings improvement momentum

Dorel Home earnings continue to be pressured by challenging market conditions; records a US$45.3 million non-cash impairment charge

Dorel Industries Inc., announced results for the second quarter and six months ended June 30, 2024.

Second quarter revenue was US$348.1 million, compared to US$345.2 million, up 0.8% from the same period a year ago. Reported net loss was US$59.5 million or US$1.83 per diluted share, compared to US$16.7 million or US$0.51 per diluted share last year. Adjusted net loss¹ was US$13.6 million or US$0.42 per diluted share compared to US$16.7 million or US$0.51 per diluted share last year.

Revenue for the six months was US$699.1 million, compared to US$678.4 million, up 3.1% from the prior year. Reported net loss was US$77.0 million or US$2.37 per diluted share, compared to US$48.2 million or US$1.48 per diluted share a year ago. Adjusted net loss¹ for the six months was US$30.5 million or US$0.94 per diluted share, compared to US$48.2 million or US$1.48 per diluted share last year.

“Dorel Juvenile has continued its trajectory of growth and improvement. Our profit turnaround is on-going, particularly driven by strong results in North America where our market share has grown for several consecutive quarters. This is also true in our other major market of Europe, where our innovative new product launches are leading the way with our retail partners and consumers. This positive outcome is a testament to our commitment to excellence and innovation. Our Home segment continues to operate in a difficult environment with the ongoing high inflation and interest rates affecting our consumers and the demand for new furniture. As a result, reduced earnings and cash flow projections forced us to record a non-cash impairment loss on goodwill of US$45.3 million in the quarter. Excluding this, our adjusted operating loss¹ was similar to prior year second quarter. On a positive note, the Cosco product line of folding indoor furniture, step stools and utility products is growing year-over-year and sales to our brick-and-mortar retailers increased overall. We have also significantly reduced our operating expenses and it remains a focus. We’re excited about our new product listings and we remain committed to improving our operations, focusing on new product development and expanding our market presence,” stated Dorel President & CEO, Martin Schwartz.

Dorel Juvenile

Second quarter revenue was US$216.4 million, an increase of US$4.7 million, or 2.2% versus last year. Organic revenue¹ increased by 3.7%, after removing the impact of varying foreign exchange rates year-over-year. The growth in the second quarter mainly came from North America and the majority of export markets. Year-to-date revenue was US$429.1 million, an increase of US$17.3 million, or 4.2% from US$411.8 million in 2023. Year-to-date, the sales increase versus prior year are being driven by continued success on Maxi-Cosi and a strong performance by Safety 1st. Car seats continue to drive revenues at approximately half of sales, but importantly sales of travel systems and strollers are increasing. This is an identified strategic priority in most markets where Dorel is underrepresented within these categories.

Reported operating profit for the quarter was US$6.3 million compared to US$0.8 million last year. Adjusted operating profit¹ for the quarter was US$6.9 million which was an increase of US$6.0 million versus last year’s results. This increase was driven by revenue increases in North America and improving gross margins in the majority of markets. While Europe was not a contributor to improved earnings, new product launches in the quarter were very successful, but less favourable currency and some supply chain challenges limited their impact with substantial shipping occurring expected in the second half. For the six months, reported operating profit was US$6.8 million and adjusted operating profit¹ was US$8.0 million compared to an adjusted operating loss¹ of US$8.1 million last year, an improvement of US$16.1 million.

Dorel Home

Second quarter revenue was US$131.6 million, a decrease of US$1.8 million, or 1.4%, from US$133.4 million last year. Dorel Home continues to operate in a challenging economic environment, and this is reflected in sales being flat year-over-year. E-commerce sales continued to trend downwards, compensated by improved brick-and-mortar performance. Contrary to the segment overall, Cosco Home & Office sales and earnings continue to grow. Six-month revenue was US$270.0 million, an increase of US$3.4 million, or 1.3%, from US$266.6 million last year. 

Second quarter operating loss was US$53.6 million, which includes an impairment loss on goodwill of US$45.3 million. This impairment loss on goodwill is due to reduced earnings and cash flow projections, and a higher assumed risk adjusted discount rate, in light of the general economic and financial conditions globally. Excluding the impairment loss on goodwill, adjusted operating loss¹ was US$8.3 million, an improvement from an operating loss of US$10.0 million last year. This was due to lower operating costs which were reduced by 15.9% or US$2.4 million versus prior year. The company’s gross margin was impacted by increased promotional pricing and lower volume efficiency and production levels at its ready-to-assemble (RTA) plants. Inventories were down US$32.1 million from the second quarter of 2023 by reducing new purchases and depleting inventory on-hand through the increase in promotional pricing in the quarter. For the six months, the operating loss was US$57.2 million and adjusted operating loss¹ was US$11.7 million. This compares to US$23.9 million in 2023. This improvement was due not only to lower operating costs but an increase in revenue and gross margins.

To match its operations to the reality of current demand, the Home segment continued its path to streamline operations and on July 8th, 2024, it was announced the closure of the RTA manufacturing facility, located in Tiffin, Ohio. This location will be repurposed into a distribution center and production of all RTA furniture will be assumed at facilities in Cornwall, Ontario in late third quarter of 2024. Equipment and customer orders will be transferred to Cornwall with the goal of having one highly efficient and profitable facility for domestic RTA furniture production.

Outlook

“The Dorel Juvenile segment is on track and we still expect our second half results to improve versus the first half. The new product launches thus far this year will drive higher revenues in the back half of the year, with the fourth quarter expected to be the strongest. While there is the risk of a slowing economy and we are facing higher supply chain costs, we believe we have the levers to offset these challenges and are confident that our strategic initiatives and focus on operational efficiency will continue to drive growth and deliver value for our stakeholders,” commented Dorel President & CEO, Martin Schwartz.

“Despite not seeing an industry improvement, we are cautiously optimistic that we will deliver increased sales for Dorel Home in the second half. This is based on our new product pipeline and the success we are seeing at brick and mortar. With our focus on cost reduction, we anticipate improving gross margins and a much improved second half versus both first half results and last year’s comparative quarter. We continue to monitor the macro-environment and will make additional operational improvements and remain committed to delivering quality products and value to our customers,” concluded Mr. Schwartz.

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About Dorel Industries Inc.

Dorel Industries Inc. (TSX: DII.B, DII.A) is a global organization, operating two distinct businesses in juvenile products and home products. Dorel’s strength lies in the diversity, innovation and quality of its products as well as the superiority of its brands. Dorel Juvenile’s powerfully branded products include global brands Maxi-Cosi, Safety 1st and Tiny Love, complemented by regional brands such as BebeConfort, Cosco, Mother’s Choice and Infanti. Dorel Home, with its comprehensive e-commerce platform, markets a wide assortment of domestically produced and imported furniture. Dorel has annual sales of US$1.4 billion and employs approximately 3,900 people in facilities located in twenty-two countries worldwide.

Contact:

Jeffrey Schwartz – Media Contact – (514) 934-3034

Source: Dorel Industries Inc.