Industries Inc. reported revenues in its Recreational/Leisure division rose
14.9% to $161.4 million from $140.5 milion a year ago. Operating earnings
declined 32.6% to $10.0 million from
$14.8 million a year ago.
Dorel
said organic revenue in the segment experienced a decline, but was concentrated
at mass merchant customers which were slower to replenish their inventory
levels in bikes as compared to the other segments. Sales through the IBD
channel and SUGOI experienced organic growth of 8% and 9% respectively. Gross
margins decreased by 170 basis points due principally to a less profitable
product mix as consumers shifted to lower price point product. Expenses
increased considerably as the segment continued to invest in its infrastructure
and in product innovation, however given the environment we are keenly aware of
the importance of cutting costs wherever possible and are actively reducing
spending as needed.
As part
of that program, last month, Dorel announced a multi-faceted Worldwide Centres
of Excellence program in a continuation of its strategy to become the global
innovation leader in the recreation and leisure markets. A major component of
the plan is the expansion of the
innovation center. All North American product development, marketing and
business management for the Cannondale, Schwinn, GT and Mongoose brands sold to
the IBD channel is being consolidated at
The centre for the development of bicycles for the mass market remains in
Overall, Dorel's
revenues for the first quarter slipped 5.5% to $525 million from $556 million. Earnings
fell 20.2%to $28.0 million, or 84 cents a share, down from $35.1 million, or
$1.05, a year earlier. Revenue from the company's juvenile division, which
makes car seats and strollers, totaled $254 million this quarter, down almost
18%, while revenue from its recreational/leisure and home-furnishing segments
contributed $161.4 million and $110 million to total revenue, respectively, up
15% and 3%.
Dorel CEO
and President Martin Schwartz stated that Dorel put in a solid first quarter
performance considering the economic environment.
“We
reached and surpassed several important internal objectives which had been
established for the quarter. Our earnings are ahead of plan and we have reduced
our record level of inventory by US$90 million, exceeding our expectations as
we made significant progress in reducing these high levels created by retailers
drastically cutting their in-stock levels last year. This will translate into a
much improved cash flow as we move through 2009. We are building on the
progress made in our Home Furnishings businesses in the past year and expect
the earnings seen thus far to continue to improve. In addition, we will take
further costs out of operations throughout the organization. In light of the
reality of the current economic situation, we are pleased where point-of-sale
(POS) levels are at our major North American customers as consumers recognize
the value of many of our various product lines,” commented Mr. Schwartz.
In other
segments, sales at the Juvenile Segment were down 17.7% to $254.0 million while
operating profits skidded 21.8% to $28.7 million. In its Home Furnishings
segment, revenues gained 2.8% to $109.8 million operating earnings catapulted
366.5% to $4.4 million.
Outlook
“The
year has started off well for us and all of our management teams are extremely
focused on performance. The positive results of our efforts are apparent in the
first quarter figures. Given the context of the economic situation, we are more
than satisfied with the start to the year. Consumers have again demonstrated
their preference for our value-added product lines in the opening and mid-price
point categories, where we generate the majority of our revenue. Juvenile
remains an excellent, profitable business as parents consistently put their
families first. We are seeing recovery in North American juvenile markets, with
POS levels remaining relatively steady and where we are picking up listings
from competitors. The slowdown started later in Europe and, as such, it appears
recovery there will lag the
We are quite optimistic for the balance of 2009 in Juvenile and have a number
of innovative new products in the pipeline. As stated in our year-end results
release issued in March, non-cash unrealized gains on foreign exchange
contracts in the amount of US$10.5 million pre-tax or US$7.4 million after tax
were recognized in 2008 that pertain to 2009. While this is still expected to
negatively affect the current year, the impact was not material in the first quarter,
but will impact the balance of the year,” stated Mr. Schwartz.
“The
situation in bikes remains unpredictable as consumer buying patterns have been
inconsistent. Meanwhile we have made important investments in this segment for
the future, while at the same time being highly prudent with expenses. One
exception, however, is in product development, particularly with
Recreation/Leisure's new Worldwide Centres of Excellence strategy. In Home
Furnishings, indications point to a good 2009 led by Ameriwood which is now a
solid money maker. The expertise that turned around that operation is now being
focused on Cosco Home & Office.
“Even
after considering all of the issues in 2009, our full year outlook remains
unchanged. We are committed to reducing expenses and to building cash flow,
which we anticipate will be at least US$150 million this year. We also expect
input costs will remain stable through 2009,” concluded Schwartz.
