strong>DOREL INDUSTRIES $38.10 (Toronto symbol DII.B; TSINetwork Rating: Extra Risk) (514-731-0000; www.dorel.com; Shares outstanding: 31.5 million; Market cap: $1.2 billion; Dividend yield: 3.2%) makes a wide range of products, including ready-to-assemble home and office furniture; juvenile products, such as car seats, strollers, high chairs, toddler beds and cribs; and recreational products, mainly bicycles.
In the three months ended March 31, 2013, Dorel’s sales fell 4.3%, to $594.2 million from $621.1 million a year earlier (all figures except share price and market cap in U.S. dollars). Earnings per share fell 23.1%, to $0.70 from $0.91.
In mid-June, the company said that it expects its results to remain weak for the quarter ended June 30, 2013. That’s because poor weather across the U.S., Canada and Europe has led to lower-than-expected sales volumes, particularly for bicycles, which supply 34% of Dorel’s overall sales. The slowdown has also prompted the company’s competitors in the bicycle industry to cut their prices.
To offset the slow sales, Dorel is cutting costs across its recreational and leisure products segment. That includes laying off 50 employees, or roughly 5% of this business’s workforce. As a result, Dorel will record a one-time charge of $2 million U.S. for severance costs in the 2013 second quarter.
But even with the weaker quarter, Dorel’s outlook is positive. The stock has risen over 41% for us in the last year, but it still trades at a low 11.1 times Dorel’s forecast 2013 earnings of $3.44 a share. The shares also trade at just 9.1 times the company’s 2014 estimate of $4.20 a share.
Dorel Industries is still a buy.
