Dorel Reports Third Quarter 2024 Results

Dorel Juvenile reports strong results with significant revenue growth

Dorel Home underperforms as the furniture industry remains difficult

Dorel Industries Inc. announced its financial results for the third quarter and nine months ended September 30, 2024.

Third quarter revenue was US$354.2 million, compared to US$359.7 million, down 1.5% from the same period a year ago. Reported net loss was US$21.9 million or US$0.67 per diluted share, compared to US$10.4 million or US$0.32 per diluted share last year. Adjusted net loss¹ for 2024 was US$20.2 million or US$0.62 per diluted share as compared to US$10.4 million or US$0.32 per diluted share last year.

Revenue for the nine months was US$1,053.4 million, compared to US$1,038.1 million, up 1.5% from the prior year. Reported net loss was US$99.0 million or US$3.04 per diluted share, compared to US$58.6 million or US$1.80 per diluted share a year ago. Adjusted net loss¹ for the first nine months of 2024 was US$50.7 million or US$1.56 per diluted share as compared to US$58.6 million or US$1.80 per diluted share a year ago.

“Dorel Juvenile earnings again exceeded last year’s comparative quarter, driven by an organic revenue¹ increase of over 9%. Impressively, this revenue growth was in all three of our regions; North America, Europe and International. We had several significant customers events in the quarter and the reception to our new product launches in all regions has been very strong, with key deliveries beginning in the quarter. Conversely, Dorel Home faced significant challenges, resulting in a 14% decline in revenue compared to the same period last year. Within our categories, positive momentum in indoor seating, TV stands and step stools were not enough to offset declines in other categories. We continue to drive sales with promotional pricing, which coupled with lower production efficiency meant our gross margins were lower than expected. We initiated substantial cost reduction initiatives in the quarter as we continue to right-size the business to current realities,” stated Dorel President & CEO, Martin Schwartz.

Dorel Juvenile

For the third quarter of 2024, Dorel Juvenile reported revenue of US$222.1 million, marking a 7.8% increase compared to the same period last year. Excluding the impact of foreign exchange rate fluctuations year over year, organic revenue¹ growth was 9.2%. This growth was driven by strong performances in the key markets of Brazil, the United States and Europe. The trends of the first half continued in terms of brand and product mix, but from a channel perspective e-commerce was the principal driver of the increase after a lower-than-expected start to the year.

Reported operating profit for the quarter was US$7.2 million compared to US$3.2 million the prior year and adjusted operating profit¹ for the quarter was US$7.9 million, a US$4.7 million improvement over 2023. Gross margins were helped by a slightly weaker U.S. dollar and lower input costs versus the prior year, which more than offset higher supply chain costs in 2024. This resulted in a 160 basis point increase in gross margins. As anticipated, contrary to the first half of the year, Europe was the principal contributor to the earnings improvement as its new products began to ship in more meaningful quantities, a trend that is expected to continue for the balance of the year.

Dorel Home

In the third quarter of 2024, Dorel Home recorded a 14.0% decrease in revenue compared to the same period last year. This decline was primarily due to lower sales in several categories, including fireplaces, futons, dressers, indoor tables, and utility storage. However, the Company saw strong sales in indoor seating, TV stands, and step stools, which helped to partially offset the overall revenue decline. On a sequential basis, brick-and-mortar sales increased slightly from second quarter and Cosco Home & Office continues to deliver increased sales and strong profitability, both significant positives for the segment.

Gross margin for the quarter decreased by 500 basis points compared to the prior year, mainly due to increased promotional pricing and lower volume efficiency due to decreased production levels at the Company’s ready-to-assemble (RTA) plants. Additionally, margins were negatively impacted by costs related to the closure of the Tiffin, Ohio RTA plant initiated in the third quarter. Inventories are down US$32.3 million from the third quarter of 2023 as the Company reduced new purchases and depleted inventory on-hand through increased promotional pricing. Operating expenses increased due to an impairment charge related to a customer bankruptcy filing, partially offset by lower selling expenses. Consequently, the operating loss increased by 269.9%, or US$9.6 million, from the prior year quarter.

During the quarter, the closure of the RTA manufacturing facility, located in Tiffin, Ohio and the transfer of production to Cornwall, Ontario was initiated and thus far successfully executed. This resulted in one-time charges of US$2.6 million in cost of sales and restructuring charges of US$1.1 million. Of this amount, US$3.3 million was non-cash and relate to accelerated depreciation of machinery and equipment and inventory write-downs. This transition to one efficient and profitable facility for domestic RTA furniture production will provide improved earnings going forward and is a key part of the segment’s right-sizing activities.

Outlook

“As we look ahead, Dorel Juvenile remains committed to driving sustainable growth through strategic investments in product innovation, continued market share gains and operational efficiency. We anticipate continued strong performance in our key markets, supported by our robust e-commerce channels and successful partnerships with key suppliers and retailers. Despite potential challenges from currency fluctuations and container costs, we are confident in our ability to navigate these headwinds and deliver sequential earnings improvement for the fourth quarter,” commented Dorel President & CEO, Martin Schwartz.

“Dorel Home is on a path to reduce its costs and match its footprint to current revenue expectations, which are substantially lower than our peak years of 2020 and 2021. We have expanded our restructuring plan announced at the end of 2023 with the consolidation of our RTA facilities in the third quarter and will be initiating other aggressive actions by the end of the year to right-size the business. We acknowledge that we are operating within a challenging industry, but we believe we can operate profitably with our dual sourcing business model of efficient domestic production coupled with overseas imports. With our recent success at major brick-and-mortar retailers and traditional leadership in e-commerce, we will focus on key profitable categories and targeted promotional activities. We remain confident in our ability to adapt to market conditions and deliver value to our shareholders,” 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.