Dorel Sports rebounds from tough start to 2018 in Q2

Dorel Sports second quarter financials have shown improvement on a rocky start to the year, rising 7.4% like-for-like.

Adding 1.9% like-for-like in the first half, Dorel Sports division sales in the first half rose to $431.2 million and $224.5 million specifically in the second quarter.

This surpassed the expectations set out in the Q1 financials. Six month revenue increased US$8.1 million, or 1.9%, which is flat to prior year after removing the impact of varying foreign exchange rates year-over-year.

The sale of apparel businesses Sombrio and Sugoi came during the quarter in a transaction that has added restructuring costs of €11.2 million. The primary components of the restructuring costs were a write-down of the Sugoi trademark and inventory markdowns. This divestiture is part of Dorel Sports goal to focus on its core strategic businesses of bikes, parts and accessories categories and electric bikes.

The operating loss for the second quarter tallied $3.3 million, compared to an operating profit of US$4.9 million a year ago due to aforementioned restructuring costs.

Excluding restructuring and other costs, adjusted operating profit rose $2.3 million, or 40.5%, to $8.0 million from $5.7 million last year.

For the six months, operating loss was $4.1 million compared to an operating profit of $15.0 million in 2017. When excluding the $6.6 million impairment loss on trade accounts receivable from Toys“R”Us U.S. recorded in the first quarter of 2018, adjusted operating profit for the six months was $13.8 million compared to $15.1 million a year ago. Dorel says this is mainly explained by the 70 basis points decrease in adjusted gross profit offset by higher revenue.

“Dorel Sports remains on track to significantly improve earnings over last year. The second quarter was slightly better than expectations and our outlook remains positive with upcoming new products expected to drive improved sales and adjusted operating profit in both the third and fourth quarters.

“In all three of our segments, proposed tariffs recently announced in the U.S. would impact a significant number of our product categories, and is creating business uncertainty. However, our competition will be similarly affected as we will all be required to adjust pricing upwards and higher costs will ultimately be passed on to consumers,” concluded Dorel CEO Mr. Schwartz.

Across the business as a whole, like-for-like revenue has risen 2% year-on-year, hitting $623.2 million.

Reported net loss was US$14.8 million or US$0.46 per diluted share, compared to reported net income of US$11.4 million or US$0.35 per diluted share in the second quarter of 2017. Adjusted net income increased 1.7% to US$12.7 million or US$0.39 per diluted share, compared to US$12.4 million or US$0.38 per diluted share last year.

Dorel Juvenile U.S. had its best year-over-year revenue growth quarter in 9 years.