Dorel reports revenue climb
MONTREAL – In what may be its final report to shareholders, consumer goods giant Dorel Industries said sales and earnings showed year-over-year gains for both the third quarter and the first nine months of 2020 with all three of its business segments contributing.
Last week, Dorel announced that an agreement-in-principle had been reached to begin negotiations to take the company private. The ‘family shareholders’ – led by president and chief executive officer Martin Schwartz – struck a deal with a U.S. investment firm that would provide them with the funds to acquire all of the outstanding shares in the company they don’t already control.
Revenue for the three months ending 30 September 2020 was US$753.4 million, up 9.9% from US$685.7 million for the same period last year.
Adjusted net income for the quarter was US$28.7 million or 87 cents per diluted share, compared to US$2.4 million or seven cents per diluted share – an 1,143% improvement on a per share basis.
Although a Canadian company that’s traded on the Toronto Stock Exchange, Dorel reports its financial performance in U.S. dollars.
For the nine months also ending 30 September 2020, revenue was US$2.06 billion, an increase of 3.9% compared to US$1.98 billion last year.
The adjusted net income for the year-to-date was US$30.8 million or 94 cents per diluted share, compared to US$14.5 million or 44 cents per diluted share a year ago – an uptick of 113% on a per share basis.
“All three of our business segments contributed to an excellent quarter for Dorel,” Martin Schwartz said in a statement. “In Sports, the second quarter trend of increased demand for bicycles continued and outpaced product availability. In spite of this, the segment was still able to achieve the highest earnings in its history. Similarly, Dorel Home had an excellent quarter despite sales being limited by a lack of supply in some of its product categories. Dorel Juvenile improved its earnings and recovered from a first half adjusted operating loss that was due to the negative impact of the COVID-19 pandemic.”
Revenue for Dorel Home – which includes ready-to-assemble specialist Ameriwood Home, furniture resource Dorel Living and mattress provider Signature Sleep – increased 14% to US$242.2 as its operating profit advanced 33.3% to US$20.9 million.
“Both e-commerce and traditional brick-and-mortar sales increased versus last year,” the company reported, adding, “strong sales at brick and mortar customers in most categories meant e-commerce sales were 58% of total segment gross sales compared to 61% a year ago.
“Dorel Home’s branded sales strategy had continued success with sales under the Little Seeds, Cosmo Living and Novogratz brands maintaining their upward trend.”
Nine-month revenue was US$700.3 million, up 11.0% year-over-year. Excluding restructuring costs, adjusted operating profit was US$52.5 million, up 18.9% over last year.
The company noted both warehouse and distribution costs improved from last year, both in dollars and as a percentage of sales, due to the overall sales level and efficiencies gained from inventory reductions.
Dorel Sport reported gains in both revenue and operating profit for both the third quarter and the year-to-date. This segment is best known for bicycles produced under the Cannondale and Schwinn brand names.
Dorel Juvenile saw a decline in both, although its operating profit for the third quarter saw some improvement. This segment makes a variety of products for infants and toddlers under brands names such as Safety 1st, Tiny Love and Cosco.
“The third quarter was in line with our expectations as consumers continued to choose Dorel products in Sports and Home and our Juvenile segment rebounded from the impact of the first wave of COVID-19,” Schwartz said.
“However, as we enter the fourth quarter, the visibility on earnings is more difficult and the expected second wave of the pandemic is beginning to have a significant impact, particularly in Europe,” he continued, adding, “While thus far, government subsidies have softened the impact on consumers in most markets, it is unknown if this will continue going forward. In fact, government restrictions, similar to those put in place earlier in the year, are back in certain markets, which will almost certainly impact our sales.”
He also noted Dorel businesses are dealing with a number of challenges, including lack of supply, cost increases, and upward swings in the currency exchange markets.
“While we remain confident in the long-term, the fourth quarter maybe challenging,” Schwartz said. “While overall adjusted operating profit is forecasted to be similar to last year, there is downward risk to our projections. We believe that the challenges faced in the fourth quarter could be overcome and that 2021 is anticipated to be a good year leveraging the strengths of our three business segments.”