Dorel Home reports declining revenue and operating loss
MONTREAL – Furniture and juvenile products resource Dorel Industries recently reported a decline in overall revenue and deepening net losses for the second quarter and the first six months of 2023. However, senior management assured investments the company’s prospects for the last half of the year appear significantly brighter.
For the three months ending June 30, 2023, total company revenue was US$345.2 million, down 19.3% when compared to US$427.8 million for the same period a year ago.
The net loss from continuing operations was US$16.7 million or 51 cents per diluted share, compared to US$13.6 million or 42 cents per diluted share last year – a 21.4% decline on a per share basis.
For the six months also ending June 30, 2023, total revenue was US$678.4 million, compared to US$855.9 million – down 20.7% year-over-year.
The net loss from continuing operations deepened to US$48.2 million or US$1.48 per diluted share from the comparable period’s US$40.8 million or US$1.25 per diluted share – an 18.4% contraction on a per share basis.
In his report to shareholders, Dorel president and chief executive officer Martin Schwartz noted both operating segments – Dorel Juvenile and Dorel Home – showed signs of improvement when compared to the opening quarter of the year.
“While reporting an operating loss, Dorel Home recorded sequential improvement for the third consecutive quarter. There are clear indications that sales volumes are beginning to improve. The trend is positive as retailers’ glut of high-cost inventory is steadily being depleted. A general softness in the demand for furniture muted Dorel Home’s second quarter. However, July orders were 30% higher than the first half average, evidence that we are seeing light at the end of the tunnel,” he said.
“Despite a slow start, our Juvenile business posted its first profitable quarter since the third quarter of 2021. This was led by Europe where new product launches, in particular the 360 Pro Family, drove a strong recovery. Despite some challenges in the U.S., we are gaining share in that market,” he added.
Dorel Home – which includes ready-to-assemble specialist Ameriwood, mattress maker Signature Sleep and DHP Furniture – saw its second quarter revenue fall 36.4% to US$133.4 million from US$209.8 million last year.
The company attributed the decline the ongoing effort by both suppliers and retailers to focus on decreasing their high-cost inventories, which in turn meant they have yet to begin replenishing their shelves.
“The excess levels of inventory that were created in 2022 with the sudden improvement in supply from Asia combined with lessening demand, is now finally easing as retailers are near the end of moving this excess stock as they right-size inventory levels,” the company said. “This is evidenced by the fact that retailers are now planning proactive merchandising campaigns.”
Management noted Dorel Home experienced its best months of the year in May and June while July was shaping up to be even better.
Second quarter operating loss was US$10.0 million, compared to an operating profit of US$2.2 million last year.
“Lower sales volumes from the general softness in the demand for furniture, residual higher-cost inventory, and promotional pricing to clear merchandise contributed to the operating loss,” the company said. “However, the recent trend of sequential reduced losses continued as conditions improved steadily through the quarter. Freight, warehouse, and distribution costs were lower.”
The segment’s six-month revenue was US$266.6 million, a decrease of 36.7% from US$421.3 million last year while the operating loss was US$23.9 million compared to an operating profit of US$7.8 million in 2022.
Looking ahead, Schwartz said management expects the quarter-over-quarter improvements seen so far will continue into the back half of the year and is confident Dorel Home will return an operating profit in the second half of the year.
“In both of our segments, the key to success will be continued growth in e-commerce, but just as importantly at brick and mortar where we are in a position to fully leverage our excellent, long-standing relationships around the globe,” he said.
“It is not a secret that these are difficult times for consumers, but we are working with the winners in the market and our heritage of retailer support and collaboration will enable us to win with our customers,” he continued, adding, “This combined with a stable cost environment will allow us to overcome the challenges in the market and should allow us to return to growth and profitability going forward.”
Although a Canadian company headquartered here with manufacturing facilities in Cornwall, Ontario, Dorel Industries reports sales and earnings in U.S. dollars.
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