Dorel furniture reports another quarterly loss, lowers outlook

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MONTREAL – Canadian home furniture manufacturer Dorel Inds. has reported first quarter revenue of $211.5 million, down $17.2 million, or 7.5%, from the same period last year, marking the company’s third consecutive quarterly loss.

“Supply chain issues, high inflation, as well as its impact on pricing and our consumers and uncertainty in Europe all contributed to lower earnings in the quarter,” said President and CEO Martin Schwartz. “Sales at Dorel Home declined vs. prior year as consumers made fewer purchases of home office furniture with the easing of COVID-19 and retail price points increased.

“At Dorel Juvenile, retail price points increased as well, but demand remained strong in most markets,” Schwartz said. “We have implemented price increases in both segments that are expected to improve results through the balance of the year. Despite the current environment causing earnings to be less than prior year, we remain confident in our ability to improve earnings going forward as we are doing the things we can control, and fundamentals remain strong.”

In its earnings report, the company said that internet and brick-and-mortar sales were lower as the erratic supply chain situation persisted, reducing the availability of containers to ship product. Schwartz cited higher ocean freight costs, increased particleboard prices, higher warehousing costs, and increased inventories.

Outlook

“Volatility in our earnings is expected to continue given rising inflation around the world and its direct impact on input costs and the potential of slowing consumer demand,” said Schwartz. “In addition, the uncertainty around the war in Ukraine and China’s strategy on COVID containment has led to a surge in the value of the U.S. dollar against most currencies and has created new concerns around supply out of China. A positive development is that we are seeing some improvement in the supply chain situation out of Asia for now with better container availability and a stabilization of pricing.”

For both its Home and Juvenile divisions, the company said its outlook is challenged.

“The outlook for Dorel Home remains challenging given the lower consumer demand for furniture overall. In addition, with the attitude towards the COVID-19 pandemic changing, purchases for the home have slowed. Despite these givens, we continue to focus on ‘near sourcing’ with our newly installed machinery, the integration of our recently acquired European business and our branded furniture lines. This will put us in a leading position as demand for our products picks-up in a more stable environment.

“In Juvenile, the market most impacted by uncertainty is Europe. The devaluation of the euro to its lowest level in more than five years relative to the U.S. dollar and retailers ordering cautiously means our outlook for second quarter is less positive than previously,” said Schwartz.

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