Overall cost-cutting initiatives aim to add up to $40 million to bottom line in 2026
MONTREAL, Quebec — Dorel Industries announced on Thursday a major restructuring of its furniture division that includes ceasing operations of its Quebec mattress manufacturing operations and downsizing its administrative workforce, plus reducing its number of SKUs and its overall distribution footprint.
In addition, the company has named Troy Franks as chief executive officer of Dorel Home, replacing Norman Braunstein, who is retiring from the position after serving in the role for nearly 22 years, according to his LinkedIn profile. Franks is returning to the company after a year’s absence, having previously been at Dorel Home for 16 years, most recently as president of Cosco/DHP and also as vice president of sales at Dorel Juvenile Group, according to his LinkedIn profile.
“Dorel thanks Norman for his years of invaluable service and looks forward to Troy leading the Home segment going forward,” the company said.
Of the restructuring, the company added, “This strategic move is part of the company’s efforts to realign its business model to current and anticipated future industry dynamics and the reality that revenue expectations for the Home segment require a much smaller footprint than in the past. Given the importance of this restructuring, the update holds considerable relevance for both the upcoming fourth-quarter results, to be released on March 11, 2025, and the expectations for the 2025 fiscal year.”
Dorel Home comprises the following companies: Ameriwood Home, Cosco, DHP, Little Seeds, Notio Living, Ollie & Hutch, Signature Sleep and RealRooms.
The company is expecting to save $9 million this year with the following initiatives:
+ Ceasing production at its Montreal mattress facility before the end of its first fiscal quarter this year. It noted that it has identified alternative supply sources “to ensure a seamless fulfillment of existing customer orders and to provide a reliable source for future business needs. This change is a significant step towards achieving the overall footprint reduction for the segment.”
+ Reducing the number of SKUs to service e-commerce, which it said “has created a larger-than-necessary footprint, principally in the United States. With brick-and-mortar now playing a more important role in the Home segment’s channel of distribution, the focus in 2024 was to reduce the number of SKUs targeted for e-commerce, which is expected to reduce warehousing in the U.S. by about 1.2 million square feet by the fourth quarter of 2025.” The company said it will continue to serve its trade customers and DTC consumers from both West Coast and East Coast warehouses, “providing coverage for all U.S.-based sales.” It also will maintain a warehouse in Canada to service the Canadian market.
+ The company also expects to achieve an estimated $9 million in non-cash write-offs and accelerated depreciation of assets accounted for in 2024. It said the savings from these initiatives began last year and will continue this year. It expects to see the full benefits in 2026, with up to a $40 million improvement in anticipated earnings.
These moves follow a previously announced restructuring effort last year that involved the closure of its Tiffin, Ohio, RTA furniture plant and consolidation of those operations into its Cornwall, Ontario, plant. The company said that considerable progress has been made with that initiative, including the completion of equipment transfers and facility upgrades at Cornwall and the filling of key management positions.
“We are already benefiting from this decision and with an anticipated increase in orders, these benefits will increase as we ramp up production,” the company said, noting that the workforce reduction completed in the fourth quarter of 2024 will reduce the size of the functions by 30% and result in a one-time severance cost of about $4 million, most of which will be paid this year.
“Beyond achieving cost reductions, the Home segment is concentrating on leveraging its previous successes with traditional brick-and-mortar and omnichannel retailers,” the company noted. “Dorel’s capability to offer real-time customer service and maintain required in-stock levels for these retailers sets the segment apart from its competitors. With a leaner and more agile organization, coupled with a reduction in the number of SKUs, the Home segment is poised to benefit from enhanced manufacturing efficiency at the RTA factory in Cornwall, Ontario.”
It also said that the Home segment will “focus on selling new, innovative imported items with higher profit margins.” In addition, “prioritizing fewer but more successfully licensed brands, such as Novogratz, will enable better allocation of targeted marketing expenditures to drive sales and enhance both revenue and profitability.”
Dorel said that its management team is also working on securing new financing solutions to improve liquidity to fund the growth of Juvenile and the turnaround of Home.
Like many others, particularly in the promotional and lower-middle price points where Dorel Home does business, the company has struggled with a host of issues coming out of the pandemic.
In its commentary, the company noted that while business was good during pandemic-fueled periods of demand resulting from consumers’ renewed interest in their homes and a flow of government stimulus money, this resulted in what it described as a “flood of suppliers to the market, who had short-term success selling directly to consumers via e-commerce channels.”
It added that the industry has since “struggled with supply chain uncertainty, inflation and higher interest costs, which means consumers have de-prioritized spending on home furnishings,” which in turn has hurt traditional North American suppliers and retailers, “resulting in a number of significant industry bankruptcies.”
This has impacted the company’s bottom line, particularly in the Home segment.
According to its latest third-quarter report issued Nov. 14, it had a net loss of $21.9 million compared to a net loss of $10.4 million the same period the year before. For the full nine months ended Sept. 30, it reported a net loss of nearly $99 million, compared with a net loss of $58.6 million the same period a year earlier.
This was driven largely by losses in the Home segment, which reported an operating loss of $13.2 million during the third quarter compared with an operating loss of $3.6 million the same period a year earlier. For the full nine-month period, Dorel Home had an operating loss of $70.4 million, compared with an operating loss of $27.4 million the same period a year earlier.
By comparison, its Juvenile segment had an operating profit of $7.2 million during the third quarter, more than double the $3.2 million it achieved the same period a year earlier. For the full nine months, Juvenile reported an operating profit of $14 million, compared with an operating loss of $4.9 million for the same period a year before.
The Juvenile segment also is larger in terms of revenue, with $222.1 million reported during the third quarter and $651.2 million reported during the full nine months, compared with $132.1 million in the Home segment in the third quarter and $402.1 million for the full nine months.
The company said that it believes the Juvenile segment will achieve better earnings for the full year compared to the previous year, driven “by a robust product pipeline and evidenced by market share gains in all major markets. This is expected to continue into 2025 with more industry-leading new product launches to follow on the success of those introduced in 2024.”
But it also is optimistic that the Home division ultimately will achieve profitability as well thanks to its restructuring efforts.
“Although the market is smaller today than it was during the pandemic, the current industry dynamic presents an opportunity for Dorel to succeed by focusing on its core competencies and its long-term relationships with retailers that sell moderately priced furniture,” the company noted. “This requires adjustments to the Dorel Home business model and a reduction in overall footprint to achieve profitability.”