Dorel lays off workers as losses drag on, despite revenue boost

Dorel Industries Inc. DII-B-T laid off workers last quarter as part of a cost-reduction strategy amid continuing losses, even as it reported its best financial results in two and a half years.

The maker of children’s products and home furniture cut its employee tally in the latter segment by about five per cent, according to financial filings Tuesday.

“We basically restructured in a way where we've combined a couple of our operating units under one operating unit and reduced staff,” CEO Martin Schwartz told analysts on a conference call Tuesday.

Montreal-based Dorel also “initiated headcount reductions” at its juvenile segment, which sells car seats and strollers in scores of countries.

The total cost of the layoffs amounts to US$4.6 million, mainly in severance and termination benefits, the company said. The move will likely yield US$6.5 million in savings this year, said Schwartz.

“We’re expecting a return on that right away,” he said.

The company reported a net loss of US$3.8 million for the quarter ended Dec. 31, a big improvement from its US$41.4-million loss in the same period last year.

Adjusted earnings of US$200,000 also marked the first time Dorel avoided an adjusted loss since the second quarter of 2021.

A 12 per cent boost in revenue from the family-run company’s juvenile segment helped offset an eight per cent drop in revenue from home furnishings, which account for 40 per cent of sales.

“We are well on our way to getting juvenile back on a solid footing,” said Schwartz, adding that the segment notched its best quarter since 2017.

Product development helped drive market share gains, particularly at Dorel’s Maxi-Cosi brand. Its higher-end rotating car seats now boast a sliding technology to “slide your child towards you, getting them easily in and out of the car,” said Schwartz, whose father founded the firm in 1962 – the year the car seat was invented.

At the home segment, which sells items ranging from sofas to step ladders, Dorel felt the ongoing slump in spending on consumer products that followed the COVID-19 splurge.

“The current economic environment continues to constrain consumer spending on home furnishing. This was particularly the case in December and the market did not rebound as expected. As a result, neither did Dorel home sales,” Schwartz said.

In the United States, furniture sales across the industry fell 7.5 per cent last year, he said, citing Census Bureau data. In Canada, spending on furniture dropped by nearly eight per cent, even as overall retail spending nudged up by less than one per cent, according to a J.C. Williams Group report.

Asked when its home furniture segment would turn a profit, Schwartz replied, “I'd like to answer that,” but struggled to.

“It’s just difficult. If interest rates would drop at home, if sales across the U.S. were to pick up, I think that would all have a positive impact on the industry and therefore on us.”

In its fourth quarter, Dorel said revenues rose 3.1 per cent to US$350.7 million from US$340.3 million a year earlier.

On an adjusted basis, net income from continuing operations reached one cent per diluted share versus a loss of US$1.22 per diluted share the year before. The result beat analysts’ expectations of an adjusted loss of seven cents per diluted share, according to financial markets data firm Refinitiv.