by Recent financials show depth of challenges and opportunities the company has now and in the future in its residential furniture segment
CORNWALL, Ontario — When Dorel recently announced plans to close its last North American plant later this year, it came with scant details about its plans to shift the sourcing of its residential furniture line to other countries.
Efforts to reach the company have been unsuccessful, including an email Home News Now sent with questions about the consolidation.
Further details likely will emerge with the company’s second-quarter financial report due later next month. For customers seeking this clarity, these details will matter, particularly in an environment where tariffs will continue to impact the cost of pricing of product produced in Asia and possibly other parts of the world.
Such insights also will help customers understand how certain product lines will be affected, which is important given its diverse selection of mid- to lower-middle-priced bedroom, dining and occasional furniture, along with upholstery in brands such as Cosco Living, Ameriwood, Alphason Studio and Novogratz, to name several.
The residential furniture segment contributed some $516.2 million in revenues to the company’s balance sheet in 2024, or 37.4% of the company’s $1.4 billion in total revenues, with Dorel Juvenile representing the balance, or $864.1 million.
Many know by now that the juvenile segment also is the profit center. For its most recent full year ended Dec. 30, 2024, it reported $235.2 million in gross profit, up 7.4% from a year earlier, and $15.6 million in operating profit, up nearly 144% from the same period.
This compares with the Home segment, which reported gross profit of $10.8 million, down 56.2% from a year earlier and an operating loss of $95.3 million, up nearly 137% from a year earlier.
The woes in the residential segment continued in the first quarter ended March 31 as the company reported an operating loss of $11.5 million, up 223.2% from $3.6 million the same period a year earlier. Gross profit totaled $1.3 million, down 89.1% from $11.8 million the year before.
The segment also reported a 24.4% decline in Q1 revenues, which totaled $104.6 million compared with $138.4 million the year before. A key factor in the drop in sales was a decline in e-commerce business and flat brick-and-mortar sales. The decline in sales and gross margins, it said, contributed to its overall operating losses.
But there also were some silver linings, which included a 24% sequential increase in brick-and-mortar sales compared with the fourth quarter of 2024. By comparison, e-commerce sales declined 38% compared with the first quarter.
This is telling because many e-commerce sales are for low-cost items that are relatively easy to ship. But the lower-middle price points, where much of Dorel’s product is sold, also are an extremely vulnerable part of the business right now particularly given the volatility of tariffs along with freight rates.
By closing the Ontario plant, the company anticipates returning the Home segment to profitability. But the question is, how many quarters will it take to reverse the operating losses, particularly with lower-priced product at the core of its mix? And, just as important, what will be the strategy to make it all work?
Here are a few thoughts on that subject:
+ As it shifts production, one solution could be to sell even more of this lower-priced product at even more sharpened price points. This could help boost volume and thus help improve profitability and operating profits. The big challenge? Selling in a highly competitive market where so many other lower-cost producers also are fighting for floor space.
+ Another solution could be to further set itself apart in the marketplace with even more innovative features that boost the product’s appeal to consumers, whether it’s case goods or upholstery.
+ Or it can take an elevated design approach with higher-grade materials, fabrics and finishes as it has done in its licensed Novogratz line. This might raise its price points, but it also would, in turn, raise the ticket price and even margin for its retail partners.
The improving brick-and-mortar sales thus provide an opportunity for any of these strategies. But marketing also will be an important ingredient, particularly in telling consumers — including younger shoppers just buying homes and starting families — the Dorel story and why it matters.
The company has obviously had some marketing and sales success with this through its well-known juvenile products division. As previously announced, the company is consolidating some of the furniture segment’s back-office functions with its Juvenile North American operations headquartered in Columbus, Indiana, which the company said “will provide further synergies for Dorel overall.”
How all this plays out will be worth watching as it will determine the company’s success over the short and long term in the months, quarters and years ahead.
