Dorel Lays Off Workers as Net Losses Continue to Mount

Canadian consumer goods giant Dorel Industries laid-off as many as 40 workers in its home segment plus another 30 in its juvenile segment at the end of 2023.

The move was part of a restructuring program launched in the wake of an uncertain economic environment suffering from both high interest rates and inflation.

The publicly held manufacturer reported revenue from continuing operations for the final quarter of 2023 was $350.7 million US, up 3.1 per cent from $340.3 million US for the same period a year earlier.

Yet net loss from continuing operations for Q4 was $3.8 million US or 12 cents US per diluted share. While an improvement from the comparable period’s net loss of $41.4 million US or $1.27 US per diluted share in 2022, this marked the tenth consecutive quarterly loss recorded by the company.

Revenue for the full year from continuing operations was $1.39 billion US, down 11.6 per cent from $1.57 billion US in 2022. Reported net loss from continuing operations was $62.4 million US or $1.92 US per diluted share, an improvement from the prior year’s net loss of $118.9 million US or $3.65 US per diluted share. But it still marked the second consecutive year of annual losses.

Of the company’s two operating segments, long-time president and CEO Martin Schwartz noted Dorel Juvenile — a producer of car seats and related products for children — continued to show quarter-over-quarter earnings improvement in 2023.

“We are gaining market share in our major markets. For the year, revenues grew 2.4 per cent versus the prior year with an adjusted earnings turnaround of almost $59 million US,” he said. “We are well on our way to getting juvenile back on solid footing.”

However, Schwartz went on to describe Dorel Home’s fourth quarter as “disappointing as the furniture market did not rebound as anticipated. Online sales decreased considerably from last year’s levels but on the bright side, in-store sales were up.”

Dorel Home, which has four operating divisions — Ameriwood Home, Cosco Home & Office, DHP Furniture and Dorel Home Europe (which runs the Notio Living e-commerce site) — saw its fourth quarter revenue decline 8.4 per cent to $138.6 million US from $151.3 million US the previous year.

The company mainly attributes the Q4 decline in revenue to reduced online sales from overall lower online consumer demand that has persisted over the last several quarters, partially offset by increased sales in the brick-and-mortar channel. Higher sales at physical stores were due to increased order replenishment as POS sales have far exceeded replenishment orders in the last several months.

“Although U.S. inflation is at levels slightly higher than in June, which was the lowest level in over two years, prices for everyday consumer goods remain quite high and this continues to affect consumers’ spending habits related to furniture items,” Dorel told shareholders in its report.

The segment’s revenue for the full year fell 26.5 per cent to $559 million US from $760.1 million US in 2022. The year-to-date decline is mainly explained by the same factors that contributed to the dip in revenue in the fourth quarter of 2023.

Gross profit for Q4 increased by $8.5 million US or 416.3 per cent compared to the same period in 2022, which the company attributed to lower product costs from reduced raw material costs and freight, as well as to slightly better domestic manufacturing activity leading to higher factory overhead absorption.

Management also admitted the difficulties suffered by Dorel Home were the main drivers of the restructuring plan and cost reduction program, which saw the segment lose approximately five per cent of its North American workforce. This will cost the company around $4.5 million US, with officials expecting annual savings of around $6.5 million US.

Just prior to year-end, Dorel entered into an $88 million US term-loan credit facility, which management described as “covenant-lite” with a repayment schedule of about $2.5 million per quarter.

Although a Canadian company headquartered in Montreal, Dorel reports its quarterly and annual financial results in U.S. dollars as it operates in 22 countries with a workforce of approximately 3,900 people.

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