Dorel Industries Inc (DIIBF) Q2 2024 Earnings Call Highlights: Navigating Challenges with ...
Revenue Increase: $2.9 million or just under 1% compared to last year.
Organic Revenue Growth: Approximately 1.7% after adjusting for foreign exchange rates.
Gross Profit Increase: $5.9 million or almost 10%.
Gross Margin: Increased by 160 basis points to 19% from 17.4% last year.
Impairment Loss on Goodwill: $45.3 million related to the Dorel Home division.
Operating Loss: $49.3 million compared to $13 million last year.
Adjusted Operating Loss: Decreased by $9.6 million to $3.4 million from $13 million last year.
Finance Expenses: Increased by $3.5 million to $9.6 million.
Net Loss: $59.5 million or $1.83 per share compared to $16.7 million or $0.51 last year.
Adjusted Net Loss: $13.6 million or $0.42 per share compared to $16.7 million or $0.51 per share last year.
Dorel Juvenile Revenue Increase: $4.7 million or 2.2%.
Dorel Juvenile Organic Revenue Growth: Improved by about 3.7%.
Dorel Juvenile Gross Margin: 28.5%, an improvement of 260 basis points over last year's 25.9%.
Dorel Juvenile Operating Profit: $6.3 million compared to $800,000 last year.
Dorel Home Revenue Decline: $1.8 million or 1.4%.
Dorel Home Gross Margin: 3.4%, a decline of 60 basis points from 4% last year.
Dorel Home Segment Loss: Increased by $43.7 million to $53.6 million.
Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Dorel Juvenile segment showed significant improvement with the highest revenue since Q2 2022, driven by strong performance in North America and Europe.
The company successfully launched innovative products like the Kindred Collection by Maxi-Cosi, which includes AI-based cry detection technology.
Dorel Juvenile Brazil marked its 15th anniversary with a strong presence at the Pueri Expo, unveiling over 60 new products and winning multiple awards.
Brick-and-mortar sales in the Home segment increased, offsetting declines in online sales, with products like folding furniture and step stools performing well.
The company reduced operating expenses significantly, with a 15.9% reduction in selling, general, and administrative expenses in the Home segment.
Negative Points
Dorel Home segment faced challenges due to high inflation and interest rates, leading to a non-cash impairment loss of goodwill amounting to $45.3 million.
The Home segment experienced a decline in online sales, which was only partially offset by brick-and-mortar growth.
Gross margin in the Home segment decreased due to promotional incentives and lower production levels, impacting profitability.
The company announced the closure of its ready-to-assemble manufacturing facility in Tiffin, Ohio, as part of restructuring efforts.
Finance expenses increased by $3.5 million due to higher debt balances and interest rates, contributing to an overall loss for the quarter.
Q & A Highlights
Q: Can you provide context on the current status of the Juvenile segment in terms of sales, margins, and operating profit? A: Jeffrey Schwartz, Independent Director, clarified that the Juvenile segment is performing as planned for the year, with significant plans for future growth in net margins and sales. New products are being introduced, and production is being increased to meet demand.
Q: Is the organic growth rate in the Juvenile segment affected by production backlogs of new SKUs? A: Yes, the demand for new products like the Fame stroller is outstripping supply, which is affecting growth rates. However, production is being ramped up to meet demand, and better top-line growth is expected in the second half.
Q: What were the growth rates for in-store versus e-commerce sales in the Home segment during the quarter? A: Jeffrey Schwartz reported mid-teens growth in brick-and-mortar sales, while e-commerce sales experienced a decline slightly greater than that.
Q: Is the increase in brick-and-mortar sales due to inventory replenishment or actual growth in line with POS trends? A: The growth is more aligned with POS trends, with retailers recognizing the value of in-store purchases. Dorel's ability to service brick-and-mortar retailers effectively is contributing to this growth.
Q: Will the improvement in the Juvenile segment in the second half be reflected in both sales and profitability? A: While sales are expected to increase, especially in Q4, Jeffrey Schwartz did not provide specific comments on profitability but indicated no issues are anticipated.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.