Dorel Reports First Quarter 2023 Results
Dorel Industries Inc. announced results for the first quarter ended March 31, 2023.
Revenue from the first quarter from continuing operations was US$333.2 million, down 22.2%, from US$428.0 million a year ago. Reported and adjusted net loss1 from continuing operations was US$31.5 million or US$0.97 per diluted share compared to the reported net loss from continuing operations of US$27.2 million or US$0.84 per diluted share a year ago. Adjusted net loss1 from continuing operations for the first quarter in 2022 was US$24.8 million or US$0.76 per diluted share.
“The environment in which our segments operate remains challenging as retailers are very cautious on inventory and replenishment ordering. In the Home segment, this is compounded by consumers remaining reluctant to spend their disposable income on furniture. We also saw some market weakness in Juvenile in North America which masked the fact that we gained market share in many of our categories. Major retailers also struggled to keep proper in-stock levels on shelves which limited sales opportunities. As previously disclosed, both Dorel Home and Dorel Juvenile were affected by a late-quarter network security incident which prevented shipping. This resulted in a reduction in sales and net income of US$13.0 million and US$4.0 million respectively. We were unable to ship in certain locations, from several days up to two weeks, but we are now fully operational and have shipped most of the delayed orders. Looking forward, we expect a positive turnaround in Juvenile as soon as the second quarter as we have introduced some of our best new products in years with several more to come. The path to recovery for Home is longer, but we expect our retail partners to begin ordering on a more regular cadence in the mid-to-near future,” stated Dorel CEO & President, Martin Schwartz.
First quarter revenue was US$200.0 million, down US$16.5 million or 7.6%, from US$216.6 million a year ago. Organic revenue1 decreased by 5.6% year-over-year, after removing the impact of varying foreign exchange rates, with the most significant decline being in the U.S. market, one-half of which was due to the reduction in revenue from the network security incident. The balance of the U.S. decline was due to lower brick and mortar sales. In Europe, the revenue improvement was in most markets and all key channels, despite a reduction in revenue from the network security incident. In both Europe and the U.S, e-commerce sales continue to grow significantly year-over-year.
Despite the lower sales, the segment gained market share in key categories in both North American and Europe. In addition, several new products were launched and will begin shipping in the second quarter, including Maxi-Cosi’s 360 Pro Family in Europe, featuring 360 rotation and Slidetech, Dorel Juvenile’s revolutionary sliding car seat technology. Initial reaction from retailers and consumers has been outstanding. Shipments also began in the U.S. of the new Safety 1st Turn and Go which allows the car seat to swivel for easy placement of the child.
Reported and adjusted operating loss1 for the quarter was US$8.9 million, compared to an operating loss of US$12.5 million last year. Last year’s adjusted operating loss1 was US$10.0 million. Revenues below prior year, the sell-off of higher cost inventory from last year and the network security incident all combined to the adjusted operating loss1 in the quarter.
Revenue for the first quarter was US$133.2 million, down US$78.3 million, or 37.0% from US$211.5 million a year ago. Sales continued the downward trend in several product categories, both in-store and on-line. A general softness in the demand for furniture, increased competition and ongoing inventory reductions by suppliers and retailers created a very challenging climate throughout the quarter. Reduced consumer purchasing power due to inflation and lower tax refunds as well as a lack of merchandise displayed in store further impacted sell through.
Reported operating loss for the quarter was US$13.9 million, compared to a reported operating profit of US$5.5 million last year. Retail customers continued to reduce on-hand inventory leading to lower sales. This combined with higher-cost inventory being moved as well some promotional pricing depressed margins, resulting in the poor results. While freight and raw material costs are now significantly reduced, moving out the high-cost 2022 inventory negated these benefits. On the positive side, warehouse and distribution costs decreased from prior year. Continued headcount reductions and expense controls reduced operating costs by approximately US$2.0 million.
“The outlook we provided in March when we released our year-end results remains the same. The retail environment in the U.S. has not changed as of now and orders from our retail partners have not picked up. As expected, this is most pronounced at Dorel Home. Dorel Juvenile slightly underperformed, but our market share gains and recent new product announcements lead us to be optimistic about a quick turnaround at Juvenile”, commented Dorel President & CEO, Martin Schwartz.
“Early April Juvenile sales were dampened by the network outage, but May and June currently look strong. We expect this strength to continue for the balance of the year based on our latest product portfolio and a stable cost environment, translating into profits beginning in May. At Dorel Home, we are encouraged by the latest order levels and our inventory average cost was lower as we started the quarter. Unfortunately, we do not see a return to operating profit until at least the third quarter for this segment.
“Both our segments did a good job bringing down inventory levels in the first quarter, generating over US$50.0 million in cash. This had the double benefit of moving out higher cost inventory and strengthening our balance sheet. Going forward, we have newer, lower cost inventory and our gross margins are expected to improve. The positive currency and cost environment that we have seen in the first quarter is expected to remain unchanged and will also contribute to better earnings. I want to thank our entire organization for their genuine efforts on turning around our business and look forward to better results ahead,” concluded Mr. Schwartz.
|1||This is a non-GAAP financial ratio or measure with no standardized meaning prescribed by IFRS and therefore is unlikely to be comparable to similar measures presented by other issuers. Refer to the section “Definition and reconciliation of non-GAAP financial ratios and measures” in this press release.|
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, 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.
Jeffrey Schwartz – Media Contact – (514) 934-3034
Source: Dorel Industries Inc.