Dorel 4Q loss deepens

22 March 2021 HGO Staff

MONTREAL – Increases in the top line didn’t save consumer goods giant Dorel Industries from a deeper net loss for the fourth quarter even though its home segment experienced higher sales and a strengthened e-commerce business.

Revenue for the three months ending 30 December 2020 was US$704.4 mullion, up 7.8% from US$653.4 million for the same three months of 2019.

The reported net loss for the quarter deepened from US$22.9 million or 70 cents per diluted share from last year’s US$600,000 or two cents per diluted share. The adjusted net loss was US$18.0 million or 55 cents per diluted share, a reversal of the comparable period’s adjusted net earnings of US$2.3 million or seven cents per diluted share.

Revenue for the full year also ending 30 December 2020 was US$2.76 billion, up 4.9% from US$2.63 billion the previous year.

Reported net loss was US$43.4 million or US$1.34 per diluted share, 315% deeper than the US$10.5 million or US$0.32 per diluted share the previous year. Adjusted net income for the year was US$12.8 million or 38cents per diluted share, compared to US$16.8 million or 51 cents per diluted share – a 25% decline on a per share basis.

Although it is a Canadian company, traded on the Toronto Stock Exchange, Dorel Industries reports its quarterly and annual results in U.S. dollars.

In his report to shareholders, long-time president and chief executive officer Martin Schwartz, noted overall company performance continued to be hampered by the fallout from the COVID-19 pandemic, particularly when it came to issues surrounding the supply chain.

Lack of product availability meant lost sales opportunities, particularly for Dorel Home’s growing e-commerce business.

Schwartz also noted the loss in the fourth quarter was also driven in part by costs of roughly US$7.5 million incurred with the company’s privatization process that was terminated last month.

“Its rejection by a majority of our independent shareholders sent a clear message of their belief in the long-term potential for the company as a public entity. As a management team, we are committed to rewarding our shareholders for their confidence in Dorel,” Schwartz said.

Fourth quarter revenue for Dorel Home – which includes ready-to-assemble specialist Ameriwood Home, Cosco Home & Office and Signature Sleep, among others – was US$234.1 million, up 10.7% from the comparable period’s US$211.4 million.

“Demand for Dorel Home products remained high, with a double-digit increase in brick-and-mortar sales in the majority of categories at major mass merchants,” the company reported to shareholders. “Due to lack of product availability online created by disruptions to the supply chain of imported product, this was partially offset by lower e-commerce sales. As a result, e-commerce sales as a proportion of total revenue were 57.5% of the segment’s total gross sales, lower than the 70% in the prior year’s fourth quarter.”

For the full year, Dorel Home revenue was US$934.4 million, an 11.0% gain from US$842.1 million in 2019.

Fourth quarter operating profit was US$17.8 million, a 49.8% increase from an operating profit of US$11.9 million last year. Adjusted operating profit was US$17.7 million, up 48.7% when compared to US$11.9 million for the 2019 period.

“The increase in sales, combined with better gross margins from improved domestic production as well as lower inventory levels and warehouse costs, were the major contributors to the increase,” the company said.

For the full year, operating profit was US$67.6 million, up 20.5% from US$56.1 million a year ago. Adjusted operating profit was US$70.2 million compared to US$14.2 million – an uptick of 25.2%.

“As we enter a new fiscal year, the conditions of 2020 are continuing into 2021 in many respects. COVID-19 continues to have an impact on consumer behaviour and while our Sports and Home segments are benefitting from higher demand, container availability and cost, increasing commodity costs, and a stronger Chinese Yuan (RMB) are combining to disrupt our supply chain and increase the costs of our products,” Schwartz said.

“Dorel Home continues to benefit from the heightened demand for products for the home, with branded sales such as Little Seeds, Cosmo and Novogratz expected to continue to grow in popularity through 2021,” he continued, noting, “supply is challenged by a lack of container availability and a spike in cost. Overall, we expect the home segment to continue to deliver revenue growth, but with some volatility in operating earnings.”