• Michael J. Knell

Dorel home furnishings segment ends 2011 on a strong note

MONTREAL — Dorel Inds.' home furnishings unit turned in an unexpectedly strong performance to end 2011, but profits for the consumer goods giant sagged dramatically as the economies remained challenged in its two largest markets, the United States and Europe.

Fourth-quarter revenue for the company, which reports in U.S. dollars, were up 4.1% from the same period a year earlier to $561.6 million. Net earnings were $27.4 million or 85 cents per share were up 5.5% from $25.9 million or 79 cents per share in the 2010 quarter.

For the year, revenue inched up 2.2% to $2.36 billion, but net earnings declined 18.1% to $104.6 million or $3.22 per share, from $127.7 million or $3.89 per share in 2010.

Revenue for Dorel's home furnishings segment jumped markedly in the four quarter, increasing 22.8% to $119.7 million. The company noted that in the comparable quarter the previous year, retail slowed significantly, particularly in the U.S., resulting in reduced replenishment orders from customers including most of the big box discounters.

"With the improved retail furniture environment in the U.S., customers once again gravitated toward Dorel's home furnishings product lines," the company said in a statement. "The period's increase was driven by higher sales of imported furniture items and particularly strong sales to the Internet retail channel."

The segment's operating profit climbed 52.5%, driven by higher gross margin dollars on increased sales, lower freight rates, reduced warehousing costs made possible by significant inventory level reductions, and greater overhead absorption.

Now the smallest of Dorel's three operating segments, home furnishings includes the Cosco Home & Office, Ameriwood, Dorel Home Products, Altra Furniture and Dorel Asia brand names.

For the full year, home furnishings revenues rose 2.9% to $522.3 million.

"Within the segment, the mix of sales did vary from the prior year," the company said, noting sales at Cosco were down after the division decided to discontinue several unprofitable SKUs. "More than offsetting this was strong sales growth of imported furniture items in principally the categories of futons, mattresses, bunk beds and upholstered items," the company reported.

Full year operating profit for the home furnishings segment fell 15.4% to US$29.3 million, which Dorel attributed to higher input costs and less favourable exchange rates.

Dorel's larger segments are juvenile - including car seats, baby monitors and related products - and recreational and leisure, mainly bicycles under the Schwinn and Cannondale brands.

"By most measures 2011 was not an acceptable year for Dorel," CEO Martin Schwartz told analysts. However, he said the company continued to focus on its long-term objectives improving its products and supporting its brands.

"In home furnishings, we are cautiously optimistic," he said. "The year ended on a strong note and 2012 has started well. Sales and POS levels at major customers for the first two months were up from prior year."


Michael KnellMichael J. Knell | Contributing Editor

Michael covers home furnishings news in Canada.

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