Dorel Industries Inc. (TSX: DII.B, DII.A) has released financial results for the first quarter ended March 31, 2020. Revenue was US$580.8 million, down 7.2% compared to US$625.6 million a year ago. Reported net loss was US$57.8 million, or US$1.78 per diluted share, compared to US$8.3 million or US$0.26 per diluted share last year. Adjusted net loss1 was US$13.6 million or US$0.42 per diluted share compared to an adjusted net income of US$5.8 million or US$0.18 per diluted share.
“In mid-March, the Coronavirus pandemic literally brought a halt to the global economy as lockdown orders forced an unprecedented situation. Our priority is to ensure the health and well-being of our employees worldwide. Additional safety measures have been implemented in our facilities and where possible, employees began working from home. While like most companies, Dorel’s revenues have been affected, many of our products have remained popular with consumers purchasing them in stores where open, and increasingly online. We feel we are in a good position in the short-term and going forward as the economy recovers. Both Dorel Home and Dorel Sports have been experiencing strong demand since the virus hit,” commented Dorel President & CEO, Martin Schwartz.
The first quarter was the fourth consecutive quarter of revenue growth for the Dorel Sports segment which includes the GT, Schwinn and Cannondale brands. Revenue growth fro the segment was US$188.2 million, an increase of US$3.6 million, or 2.0%, compared to a year ago. Sales improvements were at Cycling Sports Group (CSG) and Pacific Cycle (PCG), partially offset by weakness at Caloi. PCG saw strong retail point-of-sale (POS) with growth accelerating particularly in the last two weeks of March as consumer demand for bikes spiked amid the pandemic lockdowns, and ahead of the Easter holiday period. Caloi’s decline was attributed to lower demand due to price increases aimed at offsetting devaluation of the Brazilian Real and the Coronavirus which forced many retailers to close towards the end of the quarter. Operating loss was US$0.6 million versus an operating profit of US$4.5 million last year. The Coronavirus reduced first-quarter operating profit by over US$6.0 million through a combination of reduced sales in the second half of March due to lockdowns, unfavorable foreign exchange due to the strength of the US dollar and an increased impairment loss on trade accounts receivable considering the economic impact of the COVID-19 pandemic.
In a press release, Dorel noted that despite some constraints, second-quarter sales are expected to remain strong where consumers can access bikes, including mass retailers and e-commerce, two channels experiencing an exponential increase. Through April, PCG customer POS has increased significantly versus the prior year. Dorel expects CSG’s North American business to deliver sales growth while European revenues are expected to decline due to ongoing lockdowns across Southern Europe. The company further believes that Caloi sales will decline as many of its key customers are expected to remain closed through the quarter. Even though short-term supply will be an issue due to the high demand, and store closures will affect distribution, a return to profitability is expected for the second quarter.