Dorel Reports Second Quarter 2023 Results

Dorel Industries Inc. (TSX: DII.B, DII.A) today announced results for the second quarter and six months ended June 30, 2023.

Second quarter revenue was US$345.2 million, compared to US$427.8 million, down 19.3% from the same period a year ago. Reported and adjusted net loss1 from continuing operations was US$16.7?million or US$0.51 per diluted share, compared to US$13.6?million or US$0.42 per diluted share last year.?Adjusted net loss1 from continuing operations last year was US$11.6 million or US$0.36 per diluted share last year.??

Revenue for the six months was US$678.4 million, compared to US$855.9 million, down 20.7% from the prior year. Reported and adjusted net loss1 from continuing operations was US$48.2 million or US$1.48 per diluted share, compared to US$40.8 million or US$1.25 per diluted share a year ago. Adjusted net loss1 from continuing operations for the six months in 2022 was US$36.5?million or US$1.12 per diluted share last year.??

“Dorel Juvenile and Dorel Home’s second quarter performances both showed encouraging signs of improvement, with combined adjusted operating losses improving by approximately US$13.0 million compared to the first quarter of the year. Despite a slow start, our Juvenile business posted its first profitable quarter since the third quarter of 2021. This was led by Europe where new product launches, in particular the 360 Pro Family, drove a strong recovery. Despite some challenges in the U.S., we are gaining share in that market. While reporting an operating loss, Dorel Home recorded sequential improvement for the third consecutive quarter. There are clear indications that sales volumes are beginning to improve. The trend is positive as retailers’ glut of high-cost inventory is steadily being depleted. A general softness in the demand for furniture muted Dorel Home’s second quarter. However, July orders were 30% higher than the first half average, evidence that we are seeing light at the end of the tunnel,” commented Dorel President & CEO, Martin Schwartz.

Dorel Juvenile

Second quarter revenue was US$211.8 million, a decrease of US$6.2 million, or 2.9%, from last year’s strong comparative of US$218.0 million. Organic revenue1 decreased by 3.5%, after removing the impact of varying foreign exchange rates yearover-year. Europe had a strong quarter which is seen as a significant turning point for the division. The successful launch of the 360 Pro Family, with SlideTech technology, built solid momentum, gaining higher demand, and delivering better margins. Stable growth was also recorded in most Dorel Juvenile international divisions. In addition to the improved sales in Europe, Brazil and Canada also did well. This was offset by weakness with some U.S. retailers, who continued to limit orders to drive their inventories lower. Year-to-date revenue was US$411.8 million, a decrease of US$22.8 million, or 5.2% from US$434.6 million in 2022.

Reported and adjusted operating profit1 for the quarter was US$0.8 million compared to a reported and adjusted operating loss1 last year of US$4.7 million and US$2.6 million, respectively. This was the first profitable period since the third quarter of 2021. Gross profit improved compared to the prior year, driven by a combination of Europe’s turnaround, lower input costs and favourable foreign exchange rates. Since the start of the year, all divisions were successful in lowering inventory levels generating cash flow of approximately US$24.0 million. For the six months, reported and adjusted operating loss1 was US$8.1 million compared to US$17.2 million and US$12.6 million, respectively, a year ago.

Dorel Home

Second quarter revenue was US$133.4 million, a decrease of US$76.4 million, or 36.4%, from US$209.8 million last year. Suppliers and retailers continued to focus on decreasing their high-cost inventories and were not yet re-ordering, thus impacting revenue. The excess levels of inventory that were created in 2022 with the sudden improvement in supply from Asia combined with lessening demand, is now finally easing as retailers are near the end of moving this excess stock as they right-size inventory levels. This is evidenced by the fact that retailers are now planning proactive merchandising campaigns. The segment experienced its best months of the year in May and June and July will be even better. Six-month revenue was US$266.6 million, a decrease of US$154.7 million, or 36.7%, from US$421.3 million last year.

Second quarter operating loss was US$10.0 million, compared to an operating profit of US$2.2 million last year. Lower sales volumes from the general softness in the demand for furniture, residual higher-cost inventory, and promotional pricing to clear merchandise contributed to the operating loss. However, the recent trend of sequential reduced losses continued as conditions improved steadily through the quarter. Freight, warehouse, and distribution costs were lower. As well, inventories were down US$73.3 million from last year and were reduced from the fourth quarter of last year by approximately US$30.0 million. For the six months, the operating loss was US$23.9 million compared to an operating profit of US$7.8 million in 2022.

Other

Cash provided by operations was positive in the quarter and year-to-date totalled US$49.5 million with inventory reductions being the biggest contributor. A portion of this cash was used to reduce debt. In addition, Dorel is in active discussions with prospective lenders on providing additional funding to further improve liquidity and fund future growth.

Outlook

“As of today, we fully expect the quarter over quarter earnings improvement that started in the first quarter to continue into the back half of the year. As evidenced by our second quarter results and as we indicated in our last outlook in May, Dorel Juvenile is ahead of Dorel Home on that path and will improve its profitability across the quarters, but we are also confident Home will also return to an operating profit in the second half”, commented Dorel President & CEO, Martin Schwartz.

“In both of our segments, the key to success will be continued growth in e-commerce, but just as importantly at brick and mortar where we are in a position to fully leverage our excellent, long-standing relationships around the globe. It is not a secret that these are difficult times for consumers, but we are working with the winners in the market and our heritage of retailer support and collaboration will enable us to win with our customers. This combined with a stable cost environment will allow us to overcome the challenges in the market and should allow us to return to growth and profitability going forward,” concluded Mr. Schwartz.

For the complete press release, click here.

About Dorel

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$1.6 billion and employs approximately 4,000 people in facilities located in twenty-two countries worldwide.

Contact:

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

Source: Dorel Industries Inc.