DOREL INDUSTRIES $28.28 (Toronto symbol DII.B; TSINetwork Rating: Extra Risk) (514-934-3034; www.dorel.com; Shares outstanding: 32.3 million; Market cap: $923.8 million; Dividend yield: 5.8%) makes a range of items: ready-to-assemble home and office furniture; juvenile products such as car seats, strollers, high chairs, toddler beds and cribs; and bicycles and other sporting goods.
In the three months ended December 31, 2015, Dorel’s sales fell 4.6%, to $668.9 million from $701.0 million (all figures except share price in U.S. dollars). Sales of juvenile products fell 12.5%; sales of sporting goods dropped 2.5%. Those declines offset a 6.9% gain in home furnishings. Factoring out the effects of a higher U.S. dollar, overall sales rose 4.0%.
Excluding one-time items, earnings per share in the latest quarter rose 26.5%, to $0.43 a share from $0.34. That came despite the fact that Dorel gets half of its sales from outside of the U.S. The high U.S. dollar cut the company’s earnings per share by $0.28.
The strong U.S. dollar remains a risk factor for the company. That’s especially so in Brazil, where a weak economy and rising inflation continue to push down the value of the Brazil Real. Dorel owns 70% of Caloi, the country’s largest bike maker. It has a 40% market share.
Meanwhile, the company’s competitors in the premium bicycle market have started this year by offering pricing discounts. However, sales remain strong through its mass-market channels such as Wal-Mart. Dorel makes about 30% of its overall revenue from that retail chain. It’s a risk factor, but the company has a longstanding relationship with Wal-Mart.
Dorel’s improved profit in the latest quarter came from the introduction of new higher-profit-margined products. As well, the company’s investments to improve shipping and warehousing—as well as its ecommerce operations—have paid off.
The stock trades at a low 10.8 times Dorel’s forecast 2016 earnings of $2.07 U.S. per share. It yields a high 5.8%.
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