Dorel Reports Fourth Quarter and 2022 Year-End Results
Dorel Industries Inc. (TSX: DII.B, DII.A) announced results for the fourth quarter and year ended December 30, 2022.
Fourth quarter revenue from continuing operations was US$340.3 million, down 21.8%, from US$435.3 million a year ago. Reported net loss from continuing operations for the quarter was US$41.4 million or US$1.27 per diluted share compared to US$29.6?million or US$0.91 per diluted share a year ago. Adjusted net loss1 from continuing operations was US$39.8 million or US$1.22 per diluted share compared to US$12.0 million or US$0.37 per diluted share in the fourth quarter a year ago.
Revenue for the full year from continuing operations was US$1.57 billion, down 10.7%, from US$1.76 billion the previous year. Reported net loss from continuing operations was US$118.9 million or US$3.65 per diluted share, compared to US$111.8 million or US$3.44 per diluted share the previous year. Adjusted net loss1 from continuing operations for the year was US$111.0 million or US$3.41 per diluted share, compared to US$82.7 million or US$2.54 per diluted share in 2021.?
“Fourth quarter performance was disappointing. Dorel Home sales volumes decreased markedly as our major retail partners continued to reduce ordering overall. In addition, excess inventory across the industry means we, as well as our competition, are discounting prices to move higher cost inventory, further pressuring profitability. This combination of less favourable pricing and significantly reduced overhead absorption at our facilities due to the lower sales, severely reduced earnings. Substantial cost cutting and inventory reductions have been implemented which will start to help earnings going forward. The picture is brighter at Dorel Juvenile where things are moving in the right direction. However, major U.S. retail customers continued to curtail orders, and therefore segment sales declined despite a generally positive point-of-sale performance. While the quarter was soft, Juvenile is in a recovery mode with positive signs, particularly in Europe. Several new products were launched during the quarter, and we have gained market share in a number of key juvenile categories. Inflation and potential recession pressures continue to weigh on the economy, however Dorel’s opening price point products have traditionally proved popular with consumers during these periods,” stated Dorel CEO & President, Martin Schwartz.
Revenue for the fourth quarter was US$151.3 million, down US$79.4 million, or 34.4%, from US$230.7 million last year. Consumer demand remained soft, compounded by major retail customers reducing orders to bring down their own in-stock inventory levels. This situation affected both retail store and on-line sales. For the full year, revenue was US$760.1 million, down US$154.3?million, or 16.9%.?
Fourth quarter operating loss was US$18.3 million compared to an operating profit of US$4.3 million last year.?Adjusted operating loss1 for the quarter was also US$18.3 million versus an adjusted operating profit1 of US$4.6 million for the fourth quarter a year ago. The primary reason for the operating profit decline was the lower sales causing poor overhead absorption rates. Margins were further reduced by higher board and freight costs, as well as by industry-wide promotional pricing, designed to reduce inventories by stimulating sales. Inventory at Dorel Home has been reduced by 19% since its peak in May. The inventory transition process is continuing as less expensive supply replaces the previous high cost landed merchandise. Also, lower inventories significantly decreased demurrage and detention fees. Operational improvements at the segment’s distribution centers also reduced overall warehouse and distribution costs. For the full year, the operating loss was US$18.5 million, compared to an operating profit of US$40.3 million a year ago. Adjusted operating loss1 for the full year was also US$18.5 million, compared to an adjusted operating profit1 of US$40.6 million last year.??
Fourth quarter revenue was US$188.9 million, down US$15.6 million, or 7.6%, from US$204.5 million last year. Organic revenue1 decreased 3.2% year-over-year after removing the impact of varying foreign exchange rates. While point-of-sale of Dorel’s product categories remained generally positive, as in the third quarter, retailers in the U.S. continued to reduce orders in the attempt to lower their overall inventories. This accounted for the organic sales decline versus last year, partially offset by increases in other markets. Europe in particular showed strong revenue growth versus prior year in almost all markets. Canada, Brazil and Mexico also improved from last year. Several new products were shipped in the quarter, with the U.S. launching new Maxi-Cosi and Safety 1st car seats as well as a new MonBebe wagon stroller. Full year revenue decreased to US$810.2 million, down US$34.2 million, or 4.0%, from US$844.4 million the prior year, but organically actually increased slightly.?
Fourth quarter operating loss was US$23.5 million, compared to US$26.7 million a year ago. Excluding restructuring costs, adjusted operating loss1 was US$21.9 million, compared to US$8.9 million a year ago. The U.S. accounted for the majority of the segment’s adjusted earnings decline due to lower sales, the significant impact of higher input and distribution costs, as well as high-cost inventory adjustments. Despite the sales improvements, Europe incurred losses slightly higher than prior year as higher product costs and less favourable exchange rates versus prior year impacted earnings, though the weakening U.S. dollar in the fourth quarter did ease the negative foreign exchange impact experienced through the first three quarters. Full year operating loss was US$59.1 million compared to US$29.7 million in 2021. The year-to-date adjusted operating loss1 was US$50.7 million, compared to breakeven a year ago. Foreign exchange losses were one of the most important components of the loss for the year.
“The retail environment remained challenging through the fourth quarter, particularly in the U.S., as we expected and disclosed in our third quarter outlook. Orders from our retail partners have not picked up as they remain very cautious in the current soft consumer environment and are focusing on carefully managing their inventories and cash flow”, commented Dorel President & CEO, Martin Schwartz.
“This is even more pronounced at Dorel Home due to lower overall demand for many of their product categories. As the Home segment strives to rebuild sales volumes, efforts continue to further reduce inventories and move out existing high-cost items as aggressively as financially possible while also implementing additional cost cutting initiatives. The transition to new lower cost inventory will take time, so the timing of improved earnings in the segment in the short-term is difficult to predict.
“Despite Dorel Juvenile’s poor results in the fourth quarter, we are upbeat about our ability to return to profitability. Point-of-sale for our product categories is strong and we are seeing market share gains as we start the year. Juvenile is also facing the issue of transitioning out of higher cost inventory in an aggressive marketplace, but consumer demand for our products coupled with a lower cost environment and a more favourable foreign exchange environment should translate into positive earnings by the second quarter.
“Dorel has always fared well against the competition with our wide diversity of opening price point products when consumers trade down in difficult economic times. Coupled with a lower cost environment we expect Dorel to be on the path to recovery through 2023,” concluded Mr. Schwartz.
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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.