Mr. Martin Schwartz reports

DOREL REPORTS FIRST QUARTER 2023 RESULTS

Dorel Industries Inc. has released results for the first quarter ended March 31, 2023.

Revenue from the first quarter from continuing operations was $333.2-million (U.S.), down 22.2 per cent, from $428-million (U.S.) a year ago. Reported and adjusted net loss from continuing operations was $31.5-million (U.S.) or 97 U.S. cents per diluted share compared with the reported net loss from continuing operations of $27.2-million (U.S.) or 84 U.S. cents per diluted share a year ago. Adjusted net loss from continuing operations for the first quarter in 2022 was $24.8-million (U.S.) or 76 U.S. cents per diluted share.

"The environment in which our segments operate remains challenging as retailers are very cautious on inventory and replenishment ordering. In the home segment, this is compounded by consumers remaining reluctant to spend their disposable income on furniture. We also saw some market weakness in Juvenile in North America which masked the fact that we gained market share in many of our categories. Major retailers also struggled to keep proper in-stock levels on shelves which limited sales opportunities. As previously disclosed, both Dorel Home and Dorel Juvenile were affected by a late-quarter network security incident which prevented shipping. This resulted in a reduction in sales and net income of $13-million (U.S.) and $4-million (U.S.), respectively. We were unable to ship in certain locations, from several days up to two weeks, but we are now fully operational and have shipped most of the delayed orders. Looking forward, we expect a positive turnaround in Juvenile as soon as the second quarter as we have introduced some of our best new products in years with several more to come. The path to recovery for Home is longer, but we expect our retail partners to begin ordering on a more regular cadence in the mid- to near future," stated Dorel chief executive officer and president Martin Schwartz.

Dorel Juvenile

First quarter revenue was $200-million (U.S.), down $16.5-million (U.S.) or 7.6 per cent, from $216.6-million (U.S.) a year ago. Organic revenue decreased by 5.6 per cent year-over-year, after removing the impact of varying foreign exchange rates, with the most significant decline being in the U.S. market, one-half of which was due to the reduction in revenue from the network security incident. The balance of the U.S. decline was due to lower brick-and-mortar sales. In Europe, the revenue improvement was in most markets and all key channels, despite a reduction in revenue from the network security incident. In both Europe and the United States, e-commerce sales continue to grow significantly year-over-year.

Despite the lower sales, the segment gained market share in key categories in both North American and Europe. In addition, several new products were launched and will begin shipping in the second quarter, including Maxi-Cosi's 360 Pro Family in Europe, featuring 360 rotation and Slidetech, Dorel Juvenile's revolutionary sliding car seat technology. Initial reaction from retailers and consumers has been outstanding. Shipments also began in the U.S. of the new Safety 1st Turn and Go which allows the car seat to swivel for easy placement of the child.

Reported and adjusted operating loss for the quarter was $8.9-million (U.S.), compared with an operating loss of $12.5-million (U.S.) last year. Last year's adjusted operating loss was $10-million (U.S.). Revenues below prior year, the sell-off of higher-cost inventory from last year and the network security incident all combined to the adjusted operating loss in the quarter.

Dorel Home

Revenue for the first quarter was $133.2-million (U.S.), down $78.3-million (U.S.), or 37 per cent from $211.5-million (U.S.) a year ago. Sales continued the downward trend in several product categories, both in-store and on-line. A general softness in the demand for furniture, increased competition, and continuing inventory reductions by suppliers and retailers created a very challenging climate throughout the quarter. Reduced consumer purchasing power due to inflation and lower tax refunds as well as a lack of merchandise displayed in-store further impacted sell-through.

Reported operating loss for the quarter was $13.9-million (U.S.), compared with a reported operating profit of $5.5-million (U.S.) last year. Retail customers continued to reduce on-hand inventory, leading to lower sales. This combined with higher-cost inventory being moved as well some promotional pricing depressed margins, resulting in the poor results. While freight and raw material costs are now significantly reduced, moving out the high-cost 2022 inventory negated these benefits. On the positive side, warehouse and distribution costs decreased from prior year. Continued head count reductions and expense controls reduced operating costs by approximately $2-million (U.S.).

Outlook

"The outlook we provided in March when we released our year-end results remains the same. The retail environment in the U.S. has not changed as of now and orders from our retail partners have not picked up. As expected, this is most pronounced at Dorel Home. Dorel Juvenile slightly underperformed, but our market share gains and recent new product announcements lead us to be optimistic about a quick turnaround at Juvenile," commented Mr. Schwartz.

"Early April Juvenile sales were dampened by the network outage, but May and June currently look strong. We expect this strength to continue for the balance of the year based on our latest product portfolio and a stable cost environment, translating into profits beginning in May. At Dorel Home, we are encouraged by the latest order levels and our inventory average cost was lower as we started the quarter. Unfortunately, we do not see a return to operating profit until at least the third quarter for this segment.

"Both our segments did a good job bringing down inventory levels in the first quarter, generating over $50-million (U.S.) in cash. This had the double benefit of moving out higher-cost inventory and strengthening our balance sheet. Going forward, we have newer, lower-cost inventory and our gross margins are expected to improve. The positive currency and cost environment that we have seen in the first quarter is expected to remain unchanged and will also contribute to better earnings. I want to thank our entire organization for their genuine efforts on turning around our business and look forward to better results ahead," concluded Mr. Schwartz.

Conference call

Dorel Industries will hold a conference call to discuss these results on Monday, May 15, 2023, at 11 a.m. Eastern Time. Interested parties can join the call by dialling 1-888-396-8049. The conference call can also be accessed through live webcast on Dorel's website. If you are unable to call in at this time, you may access a recording of the meeting by calling 1-877-674-7070 and entering the passcode 608196 on your phone. This recording will be available on Monday, May 15, 2023, as of 2:30 p.m. until 11:59 p.m. on Monday, May 22, 2023.

Condensed consolidated interim financial statements as at March 31, 2023, will be available on the company's website, and will be available through the SEDAR website.

About Dorel Industries Inc.

Dorel Industries is a global organization, operating two distinct businesses in juvenile products and home products. Dorel's strength lies in the diversity, innovation and quality of its products as well as the superiority of its brands. Dorel Juvenile's powerfully branded products include global brands Maxi-Cosi, Safety 1st and Tiny Love, complemented by regional brands such as BebeConfort, Cosco, Mother's Choice and Infanti. Dorel Home, with its comprehensive e-commerce platform, markets a wide assortment of domestically produced and imported furniture. Dorel has annual sales of $1.6-billion (U.S.) and employs approximately 4,000 people in facilities located in 22 countries worldwide.

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