Mr. Martin Schwartz reports

DOREL REPORTS SECOND QUARTER 2023 RESULTS

Dorel Industries Inc. has released results for the second quarter and six months ended June 30, 2023.

Second quarter revenue was $345.2-million (U.S.), compared with $427.8-million (U.S.), down 19.3 per cent from the same period a year ago. Reported and adjusted net loss from continuing operations was $16.7-million (U.S.) or 51 U.S. cents per diluted share, compared with $13.6-million (U.S.) or 42 U.S. cents per diluted share last year. Adjusted net loss from continuing operations last year was $11.6-million (U.S.) or 36 U.S. cents per diluted share last year.

Revenue for the six months was $678.4-million (U.S.), compared with $855.9-million (U.S.), down 20.7 per cent from the prior year. Reported and adjusted net loss from continuing operations was $48.2-million (U.S.) or $1.48 (U.S.) per diluted share, compared with $40.8-million (U.S.) or $1.25 (U.S.) per diluted share a year ago. Adjusted net loss from continuing operations for the six months in 2022 was $36.5-million (U.S.) or $1.12 (U.S.) per diluted share last year.

"Dorel Juvenile and Dorel Home's second quarter performances both showed encouraging signs of improvement, with combined adjusted operating losses improving by approximately $13-million (U.S.) compared with the first quarter of the year. Despite a slow start, our Juvenile business posted its first profitable quarter since the third quarter of 2021. This was led by Europe where new product launches, in particular the 360 Pro Family, drove a strong recovery. Despite some challenges in the U.S., we are gaining share in that market. While reporting an operating loss, Dorel Home recorded sequential improvement for the third consecutive quarter. There are clear indications that sales volumes are beginning to improve. The trend is positive as retailers' glut of high-cost inventory is steadily being depleted. A general softness in the demand for furniture muted Dorel Home's second quarter. However, July orders were 30 per cent higher than the first-half average, evidence that we are seeing light at the end of the tunnel," commented Dorel president and chief executive officer Martin Schwartz.

Dorel Juvenile

Second quarter revenue was $211.8-million (U.S.), a decrease of $6.2-million (U.S.), or 2.9 per cent, from last year's strong comparative of $218-million (U.S.). Organic revenue decreased by 3.5 per cent, after removing the impact of varying foreign exchange rates year-over-year. Europe had a strong quarter which is seen as a significant turning point for the division. The successful launch of the 360 Pro Family, with SlideTech technology, built solid momentum, gaining higher demand and delivering better margins. Stable growth was also recorded in most Dorel Juvenile international divisions. In addition to the improved sales in Europe, Brazil and Canada also did well. This was offset by weakness with some U.S. retailers, which continued to limit orders to drive their inventories lower. Year-to-date revenue was $411.8-million (U.S.), a decrease of $22.8-million (U.S.), or 5.2 per cent, from $434.6-million (U.S.) in 2022.

Reported and adjusted operating profit for the quarter was $800,000 (U.S.) compared with a reported and adjusted operating loss last year of $4.7-million (U.S.) and $2.6-million (U.S.), respectively. This was the first profitable period since the third quarter of 2021. Gross profit improved compared with the prior year, driven by a combination of Europe's turnaround, lower input costs and favourable foreign exchange rates. Since the start of the year, all divisions were successful in lowering inventory levels generating cash flow of approximately $24-million (U.S.). For the six months, reported and adjusted operating loss was $8.1-million (U.S.) compared with $17.2-million (U.S.) and $12.6-million (U.S.), respectively, a year ago.

Dorel Home

Second quarter revenue was $133.4-million (U.S.), a decrease of $76.4-million (U.S.), or 36.4 per cent, from $209.8-million (U.S.) last year. Suppliers and retailers continued to focus on decreasing their high-cost inventories and were not yet reordering, thus impacting revenue. The excess levels of inventory that were created in 2022 with the sudden improvement in supply from Asia, combined with lessening demand, is now finally easing as retailers are near the end of moving this excess stock as they rightsize inventory levels. This is evidenced by the fact that retailers are now planning pro-active merchandising campaigns. The segment experienced its best months of the year in May and June and July will be even better. Six-month revenue was $266.6-million (U.S.), a decrease of $154.7-million (U.S.), or 36.7 per cent, from $421.3-million (U.S.) last year.

Second quarter operating loss was $10-million (U.S.) compared with an operating profit of $2.2-million (U.S.) last year. Lower sales volumes from the general softness in the demand for furniture, residual higher-cost inventory and promotional pricing to clear merchandise contributed to the operating loss. However, the recent trend of sequential reduced losses continued as conditions improved steadily through the quarter. Freight, warehouse and distribution costs were lower. As well, inventories were down $73.3-million (U.S.) from last year and were reduced from the fourth quarter of last year by approximately $30-million (U.S.). For the six months, the operating loss was $23.9-million (U.S.) compared with an operating profit of $7.8-million (U.S.) in 2022.

Other

Cash provided by operations was positive in the quarter and year to date totalled $49.5-million (U.S.) with inventory reductions being the biggest contributor. A portion of this cash was used to reduce debt. In addition, Dorel is in active discussions with prospective lenders on providing additional funding to further improve liquidity and fund future growth.

Outlook

"As of today, we fully expect the quarter-over-quarter earnings improvement that started in the first quarter to continue into the back half of the year. As evidenced by our second quarter results and as we indicated in our last outlook in May, Dorel Juvenile is ahead of Dorel Home on that path and will improve its profitability across the quarters, but we are also confident Home will also return to an operating profit in the second half," commented Dorel president and chief executive officer Martin Schwartz.

"In both of our segments, the key to success will be continued growth in e-commerce, but just as importantly at brick-and-mortar where we are in a position to fully leverage our excellent, long-standing relationships around the globe. It is not a secret that these are difficult times for consumers, but we are working with the winners in the market and our heritage of retailer support and collaboration will enable us to win with our customers. This, combined with a stable cost environment, will allow us to overcome the challenges in the market and should allow us to return to growth and profitability going forward," concluded Mr. Schwartz.

Conference call

Dorel Industries will hold a conference call to discuss these results on Friday, Aug. 11, 2023, at 1 p.m. Eastern Time. Interested parties can join the call by dialling 1-800-319-4610. The conference call can also be accessed via 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 1-800-319-6413 and entering the passcode 0274 on your phone. This recording will be available on Friday, Aug. 11, 2023, as of 4:30 p.m. until 11:59 p.m. on Friday, Aug. 18, 2023.

Condensed consolidated interim financial statements as at June 30, 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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