MONTREAL – Juvenile and adult furnishings resource Dorel Inc. reported an increase in revenue and net income for for the second quarter ended June 30.
Combined revenues during the quarter totaled $724 million, up 8.1% from the $670 million reported the same period last year. Net income totaled $11 million, or 34 cents per diluted share, compared with $2.8 million, or 9 cents per diluted share last year.
Revenue for the six months was flat at $1.3 billion, and the company reported a net loss of $46.7 million or $1.44 per diluted share compared with $5.5 million, or $.17 per diluted share in the first half of 2019.
“Dorel’s overall revenues have recovered sharply from the initial negative effects of COVID-19 with strong performances in two of our three segments,” said Martin Schwartz, president and CEO. “Dorel Sports and Dorel Home benefitted from increased demand for their products as consumers sought bicycles and home furnishing products during the prolonged lockdown periods. Increased sales of in-stock items allowed both segments to reduce inventory to record low levels.”
He noted that Dorel Juvenile remained challenged through the first half of the quarter, due to continuing store closures in many of its markets. This began to reverse as more stores re-opened during the latter part of the quarter.
“Our divisions did an excellent job of reducing costs and holding discretionary spending, and as a result, selling expenses were down considerably,” Schwartz said. “Our balance sheet has improved significantly from year-end with significant reductions in inventories and overall debt. I am extremely grateful to our employees worldwide who demonstrated their clear commitment to Dorel by directly contributing to our lower costs in the second quarter and who continued working at our facilities under enhanced safety protocols.”
The company said that Dorel Home posted its best quarter ever with record revenues and adjusted operating profits. Revenue in the second quarter rose 25.7%, to $260.7 million, from $207.5 million in the same period last year. This was largely fueled by e-commerce sales, which represented 68% of gross sales in the segment, compared to 60% in the prior year second quarter.
The company also noted that the quarter began strongly as consumers who were subject to stay at home mandates and who were working from home began to shop for items to improve their homes. For Dorel, this initially translated into sales of home office and home entertainment furniture. Later in the quarter sales for most of the segment’s value-priced categories also increased, namely in beds and futons.
The company also noted that inventory levels also were “drastically reduced,” which resulted in supply issues limiting the sales of some items.
Six-month revenue for the home segment totaled $458.1 million, a 9.5% increase from the $418.2 million reported in the prior year’s first half. Operating profit was $18.6 million compared with $14.1 million last year.
Excluding restructuring costs, adjusted operating profit was $21.4 million, up $7.3 million or 52% during the quarter. Warehouse and distribution costs improved year-over-year, which resulted from record sales and efficiencies the company said were due to inventory reductions.
Operating profit for the six months was flat at $28.9 million, compared to last year’s $28.5 million. Excluding restructuring costs, six-month adjusted operating profit was $31.7 million, up by $3.1 million, or 11%, from last year.
In the Dorel Juvenile segment, second quarter revenue was $177.6 million, a 19.8% decrease from the $221.5 million reported last year. Excluding the impact of varying foreign exchange rates, organic revenue decreased by about 16.8%.
The company said that COVID-19 began affecting the segment’s earnings in February, with the most severe impact in April. It added that with the exception of the U.S., where major customers remained open throughout the pandemic, most markets were negatively impacted by retail store closures. In those markets as stores re-opened in May, sales began recovering, which continued into June.
An exception was in Chile and Peru, where Dorel-owned retail stores were closed for most of the quarter and many remain closed. “Sales were good in Brazil considering the negative impact the COVID-19 pandemic is currently having on the economy in South America, with more than 80% of sales in the quarter made online.”
Six-month revenue was $372.8 million, down 17.5% from the $451.8 million reported in the first half of 2019. The reported operating loss for the quarter was $1.2 million compared to an operating profit of $2.4 million last year.
The company added that excluding restructuring costs, adjusted operating profit was $1 million, down from the $5.6 million reported in the prior year.
As business slowed, “significant effort was made to reduce expenses in people costs and discretionary spending across the segment, partially mitigating the substantial sales reduction in the quarter,” the company said.
The six-month operating loss in the segment was $47.4 million compared to $4.8 million a year ago.
Dorel Sports reported its fifth consecutive quarter of growth and record profitability. Revenues totaled $285.6 million, up 18.5% from the $241 million reported last year.
This was driven by sales activity in the Cycling Sports Group and Pacific Cycle divisions, offset by declines at Caloi as revenue decreased primarily due to prolonged COVID-19 imposed store closures in Brazil.
Six-month revenue was $473.8 million, up 11.3% from the $425.5 million reported in the first six months of 2019.
Operating profit was $26.8 million compared with $10.1 million last year. Excluding restructuring costs, adjusted operating profit was $27.1 million, up 168.9% from the $10 million reported last year.