Dorel Reports First Quarter 2022 Results
Dorel Industries Inc. (“Dorel”) released results for the first quarter ended March 31, 2022.
“First quarter challenges generally mirrored those of the previous quarter. Supply chain issues, high inflation as well as its impact on pricing and our consumers and uncertainty in Europe all contributed to lower earnings in the quarter. Sales at Dorel Home declined versus prior year as consumers made fewer purchases of home office furniture with the easing of Covid-19 and retail price points increased. At Dorel Juvenile, retail price points increased as well, but demand remained strong in most markets. We have implemented price increases in both segments that are expected to improve results through the balance of the year. Despite the current environment causing earnings to be less than prior year, we remain confident in our ability to improve earnings going forward as we are doing the things we can control, and fundamentals remain strong. Our strategic plans in both segments remain on track,” stated Dorel President & CEO, Martin Schwartz.
Revenue for the first quarter from continuing operations was US$428.0 million, down 2.4% compared to US$438.6 million a year ago. Reported net loss from continuing operations was US$27.2 million or US$0.84 per diluted share, compared to US$12.8 million or US$0.40 per diluted share last year. Adjusted net loss1 from continuing operations was US$24.8 million or US$0.76 per diluted share compared to US$3.4 million or US$0.10 per diluted share a year ago.
First quarter revenue was US$211.5 million, down US$17.2 million, or 7.5%, from US$228.7 million last year. Internet and brick & mortar sales were lower as the erratic supply chain situation persisted, reducing the availability of containers to ship product. Last year’s first quarter benefitted from the strong demand during the prolonged stay-at-home period, particularly in home office furniture. While demand is softer this year, there has been significant sales growth at DIY and other non-traditional Dorel Home retailers. Branded sales maintained their consistent increase, again improving prior year numbers by double digits. New machinery at the segment’s ready-to-assemble factories in Tiffin, Ohio and Cornwall, Ontario is providing productivity improvements and one of two new mattress lines at Dorel Home Products’ Montreal facility is also running, with the second line expected to be operational during the second quarter.
First quarter operating profit was US$5.5 million compared to US$14.8 million last year. In addition to lower sales, significantly higher ocean freight costs, increased particle board prices, higher warehousing costs from increased inventories all contributed to reduced gross margins. Demurrage and detention cost issues that lowered earnings in the prior year are resolved and savings in these categories partially offset these higher costs.
First quarter revenue increased by US$6.7 million, or 3.2%, to US$216.6 million from US$209.9 million last year. Adjusted organic revenue1, improved by approximately 8.9%, after removing the impact of varying foreign exchange rates year-over-year and prior year revenue from the Zhongshan, China manufacturing facility that was disposed of at the end of the first quarter last year. The most significant contributor to the revenue increase was the U.S. market with strong sales growth in travel systems, strollers, safety/infant health and home equipment. This more than offset lower car seat sales that were limited by component shortages stemming from supply chain issues from Asia, an issue that also constrained sales growth in Europe and Canada. Sales in Chile and Peru grew by strong double digits, as shoppers returned to retail stores.
Operating profit was negatively impacted by higher container freight and input costs, as well as increased operating costs overall. Margins were also lowered by the component shortage in the U.S. that led to lower manufacturing activity and less factory overhead absorption. In addition, product liability costs increased by US$8.5 million versus last year. Price increases are in place in all markets, although timing limited their positive impact, with greater benefit to come going forward.
As a result, first quarter operating loss was US$12.5 million, compared to US$7.6 million last year. Excluding restructuring costs, adjusted operating loss1 was US$10.0 million, compared to an adjusted operating profit1 of US$2.1 million a year ago.
“In the two months since our year end guidance, visibility remains difficult. Volatility in our earnings is expected to continue given rising inflation around the world and its direct impact on input costs and the potential of slowing consumer demand. In addition, the uncertainty around the war in Ukraine and China’s strategy on Covid containment has led to a surge in the value of the U.S. dollar against most currencies and has created new concerns around supply out of China. A positive development is that we are seeing some improvement in the supply chain situation out of Asia for now with better container availability and a stabilization of pricing,” commented Dorel President & CEO, Martin Schwartz.
“The outlook for Dorel Home remains challenging given the lower consumer demand for furniture overall. In addition, with the attitude towards the Covid-19 pandemic changing, purchases for the home have slowed. Despite these givens, we continue to focus on “near sourcing” with our newly installed machinery, the integration of our recently acquired European business and our branded furniture lines. This will put us in a leading position as demand for our products picks-up in a more stable environment.
“In Juvenile, the market most impacted by uncertainty is Europe. The devaluation of the Euro to its lowest level in over five years relative to the U.S. dollar and retailers ordering cautiously means our outlook for second quarter is less positive than previously. As in Home, we have not allowed the current challenges to detract from our long-term direction and we believe our strategy on recapturing market share remains valid. We are actively working with our retail partners on enhanced marketing, store investments and the roll-out of our new products in Europe, but the positive impact of these actions may be delayed,” concluded Mr. Schwartz.
For the full first quarter results, click here.
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 and Tiny Love, complemented by regional brands such as Safety 1st, BebeConfort, Cosco 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$1.7 billion and employs approximately 4,200 people in facilities located in twenty-two countries worldwide.
Jeffrey Schwartz – Media Contact – (514) 934-3034
Source: Dorel Industries Inc.