Canadian furniture and juvenile product resource Dorel Industries saw both sales and earnings fall for the fourth consecutive quarter, as a post-pandemic decline in e-commerce purchases of furniture was only partially offset by an uptick in the U.S. market for car seats.
Total revenue for the three months ended June 30, 2022, was US$427.8 million compared to US$447.6 million, down 4.4% from the same period a year ago.
Reported net loss from continuing operations was US$13.6 million or US$0.42 per diluted share, considerably deeper than the loss of US$1.4 million or four cents per diluted share last year.
Revenue for the six months also ended June 30, 2022, was US$855.9 million, compared to US$886.2 million – down 3.4% from the prior year.
Reported net loss from continuing operations was US$40.8 million or US$1.25 per diluted share, compared to US$14.2 million or 44 cents per diluted share a year ago.
“Both of our segments had challenges, but for reasons unique to each,” Dorel president and chief executive officer Martin Schwartz said in his report to shareholders. “Dorel Juvenile second quarter revenue was the strongest since 2019 with gains in market share in its major markets. Excellent performance in the Americas more than offset declines in Europe where consumer spending is being impacted by high inflation and concerns related to the war in Ukraine. We are pleased that we are either holding or growing market share and are receiving positive reaction to newly launched juvenile products. The most significant issue in juvenile was the surging U.S. dollar which significantly reduced earnings.
“At Dorel Home the supply chain backlog cleared, thus we received a significant amount of inventory in the quarter,” he continued, adding, “At the same time there was a drop in consumer demand and orders as our retail partners also dealt with higher in-stock levels. This impacted earnings not only because of lower sales, but also higher operating costs.”
Schwartz noted both segments are carrying excess inventory due to the easing of the supply chain backlog and will focus on “right-sizing” inventory levels across the rest of the year.
Dorel Home’s second quarter revenue was US$209.8 million, an 11.4% decrease from the same period last year.
“Sales were down both on-line and in-store as demand for Dorel Home’s various products did not keep pace with the record levels achieved during the height of the COVID-19 pandemic,” the company said, adding, “This is due to a combination of a change in consumer purchasing habits away from items for the home, plus consumers are being cautious with their spending given inflationary concerns.
“While sales decreased at certain major accounts both in-store and online, there were significant increases in historically smaller accounts. In addition, branded sales continue to grow and are becoming an increasingly important part of the segment’s sales and growth strategy.”
Six-month revenue was US$421.3 million, down 9.5% from US$465.5 million last year.
Dorel Home’s operating profit for the second quarter was reduced by the lower sales, higher operating costs due to elevated inventories, increased warehousing plus higher input costs, the most significant being greater ocean freight costs.
“Despite raising prices to offset these costs, they were insufficient to materially compensate for the increases as promotional activity was introduced to drive sales and reduce inventory levels going forward,” the company said, adding as a result, operating profit plummeted 84.4% to US$2.2 million compared to US$14.3 million a year ago.
For the six months, operating profit decreased to US$7.8 million from US$29.1 million a year ago.
Dorel Home brands include Ameriwood Home, Signature Sleep and Cosco Home & Office among others. Even though it is a Canadian company traded on the Toronto Stock Exchange, Dorel Industries reports its fiscal performance in U.S. dollars.