MONTREAL – Canadian furniture supplier Dorel Inds. reported $348.1 million in second quarter revenue, a 0.8% gain over the same time last year. Still, the company reported a $59.5 million loss for the period, with the majority due to a $45.3 million impairment loss on goodwill.
Dorel has now reported consecutive quarterly losses for more than two years. Excluding the past two quarters, the company’s trajectory appeared to be positive, with losses shrinking each quarter.
The company is continuing to make gains in revenue, however. For the first six months of the year, revenue was $699.1 million, a 3.1% increase over last year.
“Dorel Juvenile has continued its trajectory of growth and improvement. Our profit turnaround is on-going, particularly driven by strong results in North America where our market share has grown for several consecutive quarters,” said CEO Martin Schwartz. “This is also true in our other major market of Europe, where our innovative new product launches are leading the way with our retail partners and consumers. This positive outcome is a testament to our commitment to excellence and innovation.
“Our Home segment continues to operate in a difficult environment with the ongoing high inflation and interest rates affecting our consumers and the demand for new furniture,” he continued. “As a result, reduced earnings and cash flow projections forced us to record a non-cash impairment loss on goodwill of $45.3 million in the quarter. Excluding this, our adjusted operating loss was similar to prior year second quarter.
“On a positive note, the Cosco product line of folding indoor furniture, step stools and utility products is growing year-over-year, and sales to our brick-and-mortar retailers increased overall. We also have significantly reduced our operating expenses, and it remains a focus.”
In Juvenile, the company’s primary segment, revenue was $216.4 million, a 2.2% increase over last year. Year to date, revenue for the segment is up 4.2%. The company was profitable in the segment by $6.3 million, with most gains coming from North America. Notably, Schwartz said that car seats continue to drive half of sales. Sales of travel systems and strollers are also increasing.
In the Home segment, revenue was $131.6 million, a 1.4% decline. The segment saw a loss of $53.6 million, with $45.3 million of that due to the mentioned impairment loss.
“This impairment loss on goodwill is due to reduced earnings and cash flow projections, and a higher assumed risk adjusted discount rate, in light of the general economic and financial conditions globally,” Schwartz said.
The segment continues to operate in a challenging economic environment, Schwartz said, with e-commerce sales trending downward but compensated for by an improved brick-and-mortar performance. Gross margin was hurt by increased promotional pricing and lower volume efficiency.
The company also cited its decision in July to convert its Ameriwood manufacturing plant in Ohio into a warehouse, laying off 130.
Schwartz gave his overall outlook:
“The Juvenile segment is on track and we still expect our second half results to improve versus the first half. The new product launches thus far this year will drive higher revenues in the back half of the year, with the fourth quarter expected to be the strongest. While there is the risk of a slowing economy and we are facing higher supply chain costs, we believe we have the levers to offset these challenges and are confident that our strategic initiatives and focus on operational efficiency will continue to drive growth and deliver value for our stakeholders.
“Despite not seeing an industry improvement, we are cautiously optimistic that we will deliver increased sales for Dorel Home in the second half. This is based on our new product pipeline and the success we are seeing at brick and mortar. With our focus on cost reduction, we anticipate improving gross margins and a much improved second half versus both first half results and last year’s comparative quarter.”