Dorel ‘flooded’ with stocks | The press

The supply chain continues to be a concern for Dorel. After delays and rising transport costs, the manufacturer of furniture and children’s products now has too many goods in stock.

Posted at 12:44pm

Stephane Rolland
The Canadian Press

The situation is particularly difficult for the Dorel Home division, which saw sales fall 11.4% to $209.8 million in the second quarter.

“The second quarter began with serious supply problems, be it container availability, logistics or unloading problems,” said CEO Martin Schwartz on Tuesday in a conference call to discuss the quarterly results.

However, the Montreal company saw a quick turnaround in the situation, which led to other problems, the manager explains.

During the quarter, some issues improved enough to allow goods to flow in at a time when consumer habits had changed drastically.

Martin Schwartz, President and CEO of Dorel

Household spending on furniture has declined as consumers travel more or worry about rising food and fuel prices. “This situation has resulted in a flood of inventory for us, but also for our retail customers who have reduced their orders. »

For the company as a whole, overstocked inventories have swallowed the equivalent of $80 million in cash that cannot be used for other purposes, Chief Financial Officer Jeffrey Schwartz added.

On the other hand, the management was more optimistic about the children’s products sector, which is also struggling with overstocks. If retailers have reduced orders to sell their stocks, Dorel expects a return to normal by the end of the year due to the ‘essential’ nature of its products.

Jeffrey Schwartz observes that the war in Ukraine has had a negative impact on demand in Europe, which is geographically close to the conflict.

“We believe this is not sustainable. Eventually, people will need to buy more products. »

He cited a study commissioned by a third party which claims that the market for children’s products in Europe has fallen by 10%. Market research leads Dorel to believe it’s been gaining market share there despite the headwinds. “That should be reflected in the fourth quarter results [une fois que la demande aura remonté]. »

Division sales reached $218.0 million, an increase of 3.4%.

For the second quarter, Dorel reported a net loss of $13.6 million, compared to a loss of $1.4 million in the same period last year. Revenue, for its part, fell 4.4% to $427.8 million.

Shares of Dorel fell 45 cents, or 6.6%, to $6.41 on the Toronto Stock Exchange.

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