Dorel Industries Inc. reported fourth quarter revenue in its Dorel Sports segment declined 1.7 percent, to $232.7 million from $236.8 million last year but grew by approximately 2.6 percent after excluding the negative impact of varying foreign exchange rates year-over-year and the divestments of the Sugoi and Sombrio brands in the second quarter of 2018.
Figures are in U.S. dollars.
Cycling Sports Group (CSG) posted double-digit organic revenue growth and significant operating profit improvement, mainly from growth in Europe and in the U.S. sporting goods channel due to innovation in model-year 2019 products. In Brazil, Caloi also delivered double-digit sales and operating profit growth in Brazilian Reals, driven by a stronger mix of products, success with their 29-inch mountain bikes as well as with the Cannondale line. However, at Pacific Cycle, revenue and gross profit both dropped due to weaker than expected mass channel holiday POS on bikes and interactive battery powered ride-ons, as well as by retailer inventory reductions.
For the year, Dorel Sports’ revenue increased by $17.6 million, or 2.0 percent, to $883.0 million and by approximately 3.4 percent, after excluding foreign exchange rate fluctuations year-over-year, as well as the divestments of Sugoi and Sombrio.
Fourth quarter operating loss was $232.1 million compared with an operating profit of $6.5 million in 2017. Adjusted operating profit decreased $1.1 million, or 17.0 percent, to $5.1 million from $6.2 million when excluding impairment losses on goodwill, intangible assets and property, plant and equipment, restructuring and other costs. Removing the impact of the 2017 fourth quarter impairment loss on trade accounts receivable from Toys“R”Us U.S. of $3.1 million, the comparative fourth quarter adjusted operating profit was $9.3 million a year ago. The miss in the quarter was primarily due to the slowdown in bicycle sales across the board at Pacific Cycle as well as by the unexpected fourth quarter impairment loss on trade accounts receivable of $2.1 million as Evans Cycles entered administration in the UK.
For the year, the operating loss was $229.1 million compared to an operating profit of $21.8 million in 2017. Excluding impairment losses on goodwill, intangible assets and property, plant and equipment, restructuring and other costs, adjusted operating profit decreased by $2.0 million, or 9.3 percent, to $19.9 million. When excluding the impairment loss on trade accounts receivable from Toys“R”Us U.S. of $6.6 million in the first quarter of 2018 and of $3.1 million in the fourth quarter of 2017, year-to-date adjusted operating profit improved to $26.5 million from $25.0 million last year.
Dorel Sports includes Cannondale Schwinn Caloi GT Mongoose KidTrax. Dorel also operates a Home segment that includes Dorel Home Products, Cosco Home & Office, Ameriwood, Dorel Living, Signature Sleep and Little Seeds. The company’s Juvenile segment includes Maxi-Cosi, Quinny. Tiny Love. Safety 1st. Bébé Confort. Cosco and Infanti.
Companywide, revenue for the fourth quarter was $683.5 million, up 1.0 percent from $677.1 million a year ago. Reported net loss for the quarter was $443.9 million or $13.68 per diluted share compared to $6.1 million or $0.19 per diluted share a year ago. Adjusted net income was $10.3 million or $0.31 per diluted share compared to $17.3 million or $0.53 per diluted share in the fourth quarter of 2017. Removing the impact of the 2017 fourth quarter impairment loss on trade accounts receivable from Toys“R”Us U.S. of $2.8 million after tax, the comparative fourth quarter adjusted net income was $20.1 million or $0.62 per diluted share a year ago.
Revenue for 2018 was $2.62 billion, compared to $2.58 billion the previous year. Reported net loss was $444.3 million or $13.70 per diluted share, compared to a reported net income of $27.4 million or $0.84 per diluted share the previous year. Adjusted net income for the year declined to $39.5 million or $1.21 per diluted share, compared to $67.0 million or $2.05 per diluted share in 2017. Removing the impact of the 2018 first quarter and 2017 fourth quarter impairment losses on trade accounts receivable from Toys“R”Us U.S. of $9.4 million after tax in the first quarter of 2018 and $2.8 million after tax in the fourth quarter of 2017 as noted above, the adjusted net income for the year was $48.9 million or $1.50 per diluted share, compared to $69.8 million or $2.14 per diluted share a year ago.
“Dorel Home has again performed well and continues to benefit from our market-leading innovations in e-commerce. At the same time, we were disappointed by fourth quarter earnings at Dorel Juvenile and Dorel Sports. Both segments were affected by lower than expected industry-wide consumer demand over the holiday season and the on-going changes in the consumer products industry. We are in the process of actively addressing these realities,” stated Dorel president and CEO, Martin Schwartz.
“Despite the challenges facing the retail sector as a whole, we are committed to continuing to take action to build value for Dorel shareholders, including making some tough but necessary decisions. We have been acting on the recognition that the way our industry does business and the expectations and behaviors of customers and consumers are all changing. Dorel is in the process of initiating a restructuring program to evaluate our global footprint and to optimize our Company to meet these new realities. We’re confident that this program will help us be more efficient, improve performance, and maximize long-term value for our
shareholders.”
Image courtesy Cannondale
