Dorel Endures Tariff Headwinds In Q3

Tariffs hurt Dorel Industries in the third quarter but the company has been making adjustments to minimize the effects.

For the third quarter, Dorel posted a net loss of $4.3 million, or 13 cents per diluted share, compared to net income of $9.6 million, or 29 cents per diluted share, in the year-previous period. Adjusted net income, excluding one-time charges, was $2.4 million, or seven cents per diluted share, compared to $11 million, or 34 cents per diluted share, in the period a year before.

Third quarter revenue was $685.7 million, up 2.3% from the year-earlier period. Operating profit was $10.9 million versus $17.7 million in the quarter a year prior.

The Dorel Home division posted revenue of $212.5 million in the quarter versus $221.6 million in the previous third quarter. Operating profit was $15.7 million versus $19.5 million in the year-before quarter.

Dorel said it raised prices midway through the quarter to reflect increased tariffs imposed by the U.S., which had a negative effect on retailers’ purchasing decisions. Despite challenging market conditions, e-commerce sales advanced to 61% of total segment gross sales compared to 58% in last year’s timeframe. The CosmoLiving and Novogratz brand sales beat prior-quarter numbers substantially, Dorel added. Tariff-related issues affecting the segment during the first half, including elevated inventory levels and warehousing costs, and a less profitable product mix, continued into the third quarter. However, the company has taken steps to mitigate the effects through stringent operational improvements, Dorel asserted.

“As expected and previously communicated, the third quarter was a difficult one primarily due to various issues related to U.S. imposed tariffs,” said Martin Schwartz, Dorel president and CEO. “In addition, some of our large U.S. customers delayed holiday orders from September to October. All Dorel segments have done an excellent job of holding the line on most expenses and creative product development has resulted in many new exciting introductions. Inventory reduction across all segments is a strong focus and is on track, and new sourcing strategies are being implemented where appropriate.”