Dorel Industries Inc. is in high-end bicyclesimago sportfotodienst
Over the years, Dorel Industries Inc. has gone after a disparate bunch of businesses as part of its growth strategy.
The Montreal-based consumer-products manufacturer is in high-end bicycles, mass-market bicycles, children's car seats and strollers, assemble-it-yourself furniture and – more recently – retailing.
It's also moving further away from its U.S. and European markets as it expands into the high-potential South American region.
On Wednesday, the company unveils its fourth-quarter and year-end results, providing an opportunity for investors and analysts to figure out just how well this odd mix is working.
So far, Dorel – controlled by the Schwartz family – has done well by its strategy, although it has been experiencing slow growth in its juvenile segment lately.
The recreational and leisure unit – which includes bikes – has been the star performer, with its pricey Cannondale line leading the way, CIBC World Markets analyst Mark Petrie said in a recent Q4 preview note. Growth in juvenile – car seats, strollers, etc. – is likely to remain modest but gross margins should have improved on a better balance of costs and pricing, especially in the United States, he said. He's expecting revenue of $606.8-million (U.S.), up 8 per cent from the year-earlier period and consolidated gross profit of $153.1-million or 25.22 per cent of sales, up 163 basis points. Mr. Petrie forecasts share profit of 73 cents, up 35.3 per cent.
Leon Aghazarian of National Bank Financial says the fact that Dorel doubled its dividend to 30 cents last quarter has certainly helped them win more favour with shareholders. One topic expected to be on the minds of analysts on the Q4 conference call is how the South American strategy is doing. Dorel has a controlling stake in a group of companies that owns the most popular juvenile-products brand in the region, Santiago-based Silfa. There is also a modest retail presence: 52 Baby Infanti stores in Chile and Peru. Dorel chief executive officer Martin Schwartz has said the chain provides a window on a market rich with young consumers and a swelling middle-class but that he's in no hurry to go gangbusters into retailing. Management is betting on geographical diversification to provide greater growth potential, Mr. Aghazarian – who has a $38 (Canadian) 12-month target on the stock – said in an interview. "The strategy makes sense. It's just going to take time to translate into meaningful numbers."
Bertrand Marotte