Dorell Industries DII-BT laid off employees last quarter as it continued to suffer losses due to weak furniture demand, despite reporting its best financial results in two and a half years.
The children's products and home furnishings maker cut 40 employees in the latter division, or about 5% of its North American workforce, according to a financial report Tuesday.
“Basically, we're reorganizing by consolidating multiple sales units under one sales unit and reducing headcount,” CEO Martin Schwartz told analysts on a conference call Tuesday. I went,” he said.
Montreal-based Dorel also laid off 30 employees in its youth division, which sells car seats and strollers in dozens of countries. The reductions represented 1% of the department's headcount of 2,740 at the time.
Headcount reductions are a large part of the company's cost-cutting strategy, with the company having 3,885 employees as of Dec. 30.
According to the company, the total cost of the layoffs will be $4.6 million, mainly due to severance and severance pay. The move is expected to save US$6.5 million this year, Schwartz said.
“We expect it to come back soon,” he said.
The designer and manufacturer reported a net loss of US$3.8 million for the quarter ended December 31, a significant improvement from the US$41.4 million loss in the same period a year earlier.
Adjusted profit of $200,000 also showed Dorel avoided an adjusted loss for the first time since Q2 2021.
Revenue from the family-owned company's children's division rose 12%, offsetting an 8% decline in revenue from home furnishings, which account for 40% of sales.
“We are on track to get our juvenile division back on solid footing,” Schwartz said, adding that the division posted its best quarter since 2017.
Product development contributed to market share growth, particularly for Dorel's Maxi-Cosi brand. Schwartz said the company's high-end rotating child seats feature sliding technology that “slides your child toward you to easily get them in and out of the car.” Schwartz's father, Leo, founded the company in 1962, the year the child seat was invented.
Dorrell felt that in the household sector, which sells a wide range of products from sofas to stepladders, spending on consumer products continued to be weak after splurging due to the coronavirus pandemic.
“The current economic environment continues to constrain consumer spending on home furnishings. This was especially true in December, when the market did not recover as much as expected. As a result, Dorel home sales also did not increase. “I did,” Schwartz said.
Citing Census Bureau data, he said industry-wide furniture sales in the U.S. fell 7.5% last year. In Canada, spending on furniture fell by nearly 8%, even though overall retail spending increased by less than 1%, according to a report from JC Williams Group.
When asked when the home furnishings division would be profitable, Mr. Schwartz said he would like to answer, but was unable to give an answer.
“But it's difficult. If domestic interest rates come down and overall sales in the U.S. pick up, I think all of that will have a positive impact on the industry and, by extension, on us.”
One bright spot, he added, was an increase in in-store sales as replenishment orders from retailers increased due to lower inventories.
Dorel stock fell 25 cents, or 4.2 per cent, to close at $5.70 on the Toronto Stock Exchange.
The company sold its bicycle division to Dutch company Pon Holdings for US$810 million in January 2022, at a time when the stock price exceeded $27.
Dorel announced that its fourth quarter sales increased 3.1% to US$350.7 million from US$340.3 million in the same period last year.
On an adjusted basis, net income from continuing operations amounted to 1 cent per diluted share, compared with a loss of $1.22 per diluted share in the prior year period. The results beat analysts' expectations for an adjusted loss of 7 cents per diluted share, according to financial markets data firm Refinitiv.
For the full year, net loss improved by 48% to US$62.4 million from a loss of US$118.9 million in 2022. Revenues in 2023 decreased 12% to US$1.39 billion from US$1.57 billion in the previous year.
