3 reasons for Dorel Furniture’s fourth consecutive quarterly decline

Dorel Inds. manufactures furniture in North America and Europe.

MONTREAL – Canadian home furniture manufacturer Dorel Inds. reported second-quarter revenue of $427.8 million, down 4.4% from $447.6 million in the same period last year. For the first half of the year, revenue was $855.9 million, down 3.4% from a year ago. This is the company’s fourth consecutive quarterly loss.

Chief Executive Martin Schwartz said both segments of the company – Dorel Home and Dorel Juvenile – have experienced challenges, with Dorel Home faring less well.

“At Dorel Home, the supply chain backlog has been eliminated, so we received a significant amount of inventory during the quarter,” he said in an earnings report. “At the same time, there has been a drop in consumer demand and orders, as our retail partners have also faced higher inventory levels. This impacted profits not only due to lower sales, but also higher operating costs. Both segments have excess inventory due to relief from the supply chain backlog, and now we are focused on getting our inventory levels right through the year.

Sales were down both online and in-store.

“This is due to a combination of a shift in consumer buying habits away from home goods, and consumers being cautious with their spending given inflationary concerns. But while sales have declined at some large both in-store and online accounts, there have been significant increases in historically smaller accounts.

Schwartz also cited Europe as a major issue, as the region accounts for a significant portion of the company’s business.

“Europe remains our primary concern as consumers appear to be delaying purchases due to the challenging environment, although we know this cannot continue long term given the essential nature of our product categories,” said Schwartz.

On a positive note, the company’s Juvenile segment performed better.

“Dorel Juvenile’s second quarter sales were the highest since 2019 with market share gains in its core markets,” Schwarts said. “An excellent performance in the Americas more than offset declines in Europe where consumer spending is being impacted by high inflation and concerns about the war in ukraine. … The biggest issue in Juvenile was the soaring US dollar which significantly reduced profits.

Schwartz said prices may need to rise.

“As economies begin to slow in our markets, we are seeing a decline in the cost of key raw materials, particularly in China. This could help mitigate the very high cost environment in which we operate. However, if current currency levels hold over the long term, market prices will need to adjust higher,” he said.

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