Dorel's 2012 sales rise, but home furnishings profit lags

Michael J. Knell -- Furniture Today, March 8, 2013

MONTREAL — Consumer goods giant Dorel Inds. reported healthy uptick in sales and earnings for both the fourth quarter and full 2012 year.

While its home furnishings segment showed improving sales in the last three months of the year, its operating profit sagged on a year-over-year basis.
Fourth quarter sales for Dorel, which reports its results in U.S. dollars, were up 10.9% to $622.6 million. Net incoming was $29.1 million or 91 cents per diluted share, up from $27.4 million or 85 cents per diluted - an increase of 6.4%.

For the full year, revenue of $2.5 billion was up 5.3% from 2011. Net income was $108.6 million or $3.39 per diluted share, up from $104.6 million or $3.21 per diluted share in 2011 - increases of 3.8% and 5.6% respectively.

"We made substantial progress through 2012, particularly in light of the lingering tough economy," Martin Schwartz, Dorel's president and CEO, said in a statement.

Fourth quarter revenues for the company's home furnishings segment - which includes ready-to-assemble specialist Ameriwood and importer Dorel Asia, Altra Furniture and Cosco Home & Office - increased by 7.5% from the same period a year earlier, to $128.6 million. The company attributed the gains to higher sales of imported furniture, particularly mattresses and futons.

"The sales growth continues to be driven by growing sales to the Internet channel," the company said.

However, operating profit in the quarter declined 14% to US$7.3 million.

Home furnishings segment revenues for the year were basically flat at $521.5 million.

"As in the prior year, sales decreases of metal folding furniture were offset by the sales growth of imported furniture, principally in the futon, mattress, bunk bed and upholstered item categories," the company said.

Operating profit in the segment decreased by 12.5% to $25.6 million as gross margins declined.

"While the segment did benefit from more stable input costs in 2012 versus 2011, this was offset by a less profitable mix of sales," Dorel said, adding that the segment was also negatively affected by the high value of the Canadian dollar vis-à-vis its U.S. counterpart. Two of the segment's plants are in Canada and ship their finished product to U.S. retailers, which puts added pressure on margins.

Dorel's growth in the fourth quarter was driven by its two other operating divisions, juvenile and recreation and leisure.

Looking at 2013, Schwartz said Dorel expects to achieve growth in revenues and net income through both market expansion and continuing investment in product development and brand support - and will continue to be driven by the juvenile and recreation segments. One of the reasons, he said, was that these two divisions are active not just in North America but in Europe and South America as well.

"In home furnishings, growth prospects are more modest as the segment is based only in North America and brand differentiation is not a competitive advantage; however we are focused on and further capitalizing upon the growth in the Internet retail channel," Schwartz said.