Dorel 3Q sales fall although home segment shows uptick
MONTREAL – Consumer giant Dorel Industries said sales and earnings for the third quarter of 2017 fell over the comparable period but thanks primarily to performance improvements from its home segment, it reversed last year’s loss for the year-to-date ending on September 30, 2017.
For the three months ending September 30, 2017, Dorel’s revenue was US$642.6 million, down 4.3% from US$671.3 million. Reported net income was US$13.3 million or 41 cents per diluted share, compared to US$15.9 million or 49 cents per diluted share for the comparable period – a drop of 16.3% on a per share basis.
For the nine months ending September 30, 2017, revenue was US$1.90 billion, a decrease of 2.8% from the US$1.95 billion last year. Reported net income year-to-date was US$33.6 million or US$1.03 per diluted share, reversing the net loss of US$6.0 million or 19 cents per diluted share for the 2016 period.
Although a Canadian company, Dorel Industries reports its sales and earnings in U.S. dollars – the currency of its largest single market.
“We are pleased with the third quarter progress at Dorel Home and Dorel Juvenile. Dorel Home’s positive revenue and earnings trend was maintained as on-line sales exceeded US$100 million for the quarter, again accounting for more than 50% of the segment’s total revenue,” Martin Schwartz, the company’s long-time president and chief executive officer said in a statement. “The segment’s focus on improving speed and efficiency of distribution continue to drive sales with major on-line retailers.
“Dorel Juvenile recorded its first quarter of organic revenue growth in several quarters. E-commerce growth is driving sales as Dorel Juvenile has adapted well to today’s consumer, and as a result is gaining market share in this channel,” he continued, adding results for Dorel Sports declined as the segment is caught in the on-going weakness in the global bicycle market and a very challenging North American brick and mortar environment, including the recent bankruptcy of retail giant Toys ‘R’ Us, one of Dorel’s largest customers.
Dorel Home – which includes Ameriwood Home, DHP Furniture, Signature Sleep, Cosco Products and Dorel Living – saw its third quarter revenue climb 1.3% to $201.4 million. For the nine months, revenue grew 5.6% to US$589.6 million from US$558.2 million in 2016.
The company noted improvements were driven by increased sales in all divisions to online retailers. In the third quarter and for the nine months, online sales represented 51% and 50% of total segment revenue respectively compared to 44% and 43% for the comparable periods in 2016. Brick and mortar sales were down due mainly to the planned reduced exposure to a major mass merchant customer.
Third quarter operating profit rose 14.1% to US$20.5 million from US$18.0 million a year ago. The uptick was driven by improved margins at several divisions from increased online sales, higher sales volumes and an overall net decrease in operating expenses. Year-to-date operating profit increased 13.1% to US$57.0 million compared to US$50.4 million for the nine months of 2016.
Sales for Dorel Juvenile climbed 6.3% for the third quarter to US$235.6 million although operating profit decline 8.5% to US$10.2 million. The segment makes car seats, strollers, monitors and other products for the baby and child market. For the nine months, revenue was off 1.5% to US$682.4 million while operating profit sank 20.9% to US$26.9 million.
Meanwhile, sales at Dorel Sports – best known for the bicycles and athletic gear it produces – were off 18% to US$205.5 million for the quarter. They were off 10.7% for the year-to-date at US$628.6 million.
Looking ahead, Schwartz said company management is expecting to see further improvement in the closing three months of 2017.
“We are expecting a very good fourth quarter with all segments delivering improved adjusted operating profit versus last year. Dorel Home’s momentum is expected to continue with both higher sales and earnings expected, driven by online sales,” he said, adding the juvenile segment will launch “significant” new products during the pre-Christmas period although revenue is anticipated to be flat on a year-over-year basis. “The benefit of our enhanced product pipeline will be seen mostly in 2018.”
Dorel Sports is expected to rebound from its disappointing third quarter although operating profit isn’t expected to exceed last year’s level.