by Softness in consumer demand for furniture, lingering inventory issues, created challenges in the Home segment
MONTREAL — Dorel Industries reported a decline in revenues and a net loss from continuing operations for its first quarter ended March 31.
Revenues for the quarter totaled $333.2 million, down 22.2% from the $428 million reported the same period last year.
The company’s reported and adjusted net loss from continuing operations for the quarter was $31.5 million, or 97 cents per share, compared to a reported net loss from continuing operations of $27.2 million, or 84 cents per share last year. Its adjusted net loss from continuing operations during the first quarter last year was $24.8 million, or 76 cents per share.
The Dorel Juvenile segment reported revenues of $200 million, down 7.6% from the $216.6 million reported last year. It had an adjusted operating loss of $8.9 million, compared to $10.05 million a year ago.
The company said that organic revenue in this segment declined 5.6% year over year after removing the impact of various foreign exchange rates.
The most significant decline was in the U.S. market, and the company said one-half of this decrease was due to a reduction in revenue from a previously reported network security incident that delayed the shipping of some goods. It added that the balance of the decline in the U.S. was due to lower brick-and-mortar sales.
Despite the lower sales, the company said its Juvenile segment gained market share in key categories in North America and Europe. It noted that several new products also will begin shipping in the second quarter and that it has received strong initial feedback from retailers and consumers on these items.
In the segment, it also reported an operating loss for the quarter — both reported and adjusted — of $8.9 million, down from an operating loss of $12.5 million and an operating loss of $10 million for the same period last year. It attributed this to lower revenues, the sell-off of higher-cost inventory from last year and the aforementioned network security incident.
In the Dorel Home segment that includes residential furniture, the company reported revenues of $133.2 million, down from the $211.5 million reported a year ago, a 37% decrease. The decline was related to what the company said was a “downward trend in several product categories, both in-store and online.”
“A general softness in the demand for furniture, increased competition and ongoing inventory reductions by suppliers and retailers created a very challenging climate throughout the quarter,” the company noted. “Reduced consumer purchasing power due to inflation and lower tax refunds as well as a lack of merchandise displayed in store further impacted the sell through.”
The company said that the operating loss in the segment for the quarter was $13.9 million, compared to a reported operating profit of $5.5 million last year.
“Retail customers continued to reduce on-hand inventory leading to lower sales,” the company noted. “This, combined with higher-cost inventory being moved as well as some promotional pricing depressed margins, resulting in the poor results.”
Dorel added that while freight and raw material costs have been lower, “moving out the high-cost 2022 inventory negated these benefits. On the positive side, warehouse and distribution costs decreased from prior year. Continued headcount reductions and expense controls reduced operating costs by approximately $2 million.”
“The environment in which our segments operate remains challenging as retailers are very cautious on inventory and replenishment ordering,” said President and CEO Martin Schwartz. “In the Home segment, this is compounded by consumers remaining reluctant to spend their disposable income on furniture.”
He added that the security incident resulted in a reduction in sales and net income of $13 million and $4 million, respectively.
“We were unable to ship in certain locations, from several days up to two weeks, but we are now fully operational and have shipped most of the delayed orders,” he said. “Looking forward, we expect a positive turnaround in Juvenile as soon as the second quarter as we have introduced some of our best new products in years with several more to come. The path to recovery for Home is longer, but we expect our retail partners to begin ordering on a more regular cadence in the mid- to near future.”
