Dorel Home segment remained challenged because of softness in consumer demand and high retail inventory levels
MONTRÉAL — Dorel Industries reported declines in fourth-quarter revenues and net income as well as declines in full-year revenues and income for the quarter and year ended Dec. 30, 2022.
The company’s fourth-quarter revenues from continuing operations totaled $340.3 million, a 21.8% decrease from the $435.3 million reported a year ago. The net loss from continuing operations for the year was $41.4 million, or $1.27 per share, compared to a loss of $29.6 million, or $.91 per share the same period in 2021.
For the full year, the company reported revenues from continuing operations of $1.57 billion, a 10.7% decrease from the $1.76 billion reported in 2021. The net loss from continuing operations was $118.9 million, or $3.65 per share, compared to a loss of $111.8 million, or $3.44 per share in 2021.
Dorel Home reported fourth-quarter revenues of $151.3 million, down 34.4% from the $230.7 million reported the same period last year. The segment had an operating loss of $18.3 million, compared to an operating profit of $4.3 million the same period in 2021.
For the full year, Dorel Home reported revenues of $760.1 million, down 16.9% from the $914.3 million reported the previous year. It had an operating loss of $18.5 million, compared to profits of $40.3 million in 2021.
The company said that the quarterly drop in revenues resulted from continued softness in consumer demand, which was further compounded by retailers reducing orders to reduce their own in-stock inventory levels. This, the company said, affected both retail store and online sales.
The operating loss for the quarter was due to lower sales causing poor overhead absorption rates. It added that margins were further impacted by higher board and freight costs along with industrywide promotional pricing aimed at reducing inventories.
The company said that its inventory has been reduced by 19% since its peak in May 2022. It said this process is continuing as less expensive supply replaces merchandise previously landed at higher costs.
“The retail environment remained challenging through the fourth quarter, particularly in the U.S., as we expected and disclosed in our third-quarter outlook,” said Dorel President and CEO Martin Schwartz. “Orders from our retail partners have not picked up as they remain very cautious in the current soft consumer environment and are focusing on carefully managing their inventories and cash flow.”
“This is even more pronounced at Dorel Home due to lower overall demand for many of their product categories,” he added. “As the Home segment strives to rebuild sales volumes, efforts continue to further reduce inventories and move out existing high-cost items as aggressively as financially possible while also implementing additional cost-cutting initiatives. The transition to new lower-cost inventory will take time, so the timing of improved earnings in the segment in the short term is difficult to predict.”
The Dorel Juvenile segment reported fourth-quarter revenues of $188.9 million, down 7.6% from the $204.5 million reported the same period last year. The segment reported an operating loss of $23.5 million, compared to a loss of $26.7 million during the same period the prior year.
For the full year, the segment reported revenues of $810.2 million, down 4% from the $844.4 million reported in 2021. It had an operating loss of $59.1 million, compared to a loss of $29.7 million last year.
“Despite Dorel Juvenile’s poor results in the fourth quarter, we are upbeat about our ability to return to profitability,” Schwartz said. “Point-of-sale for our product categories is strong and we are seeing market-share gains as we start the year. Juvenile is also facing the issue of transitioning out of higher cost inventory in an aggressive marketplace, but consumer demand for our products coupled with a lower cost environment and a more favorable foreign exchange environment should translate into positive earnings by the second quarter.”
“Dorel has always fared well against the competition with our wide diversity of opening price point products when consumers trade down in difficult economic times,” he added. “Coupled with a lower cost environment we expect Dorel to be on the path to recovery through 2023.”