Dorel shares hit 10-year low

Dorel Industries Inc. shares hit a near 10-year low after the company missed analyst forecasts in its latest results and warned that it is getting caught up in the trade war between the United States and China.

Shares in the bicycle, baby gear and home furnishing maker hit a low of $19.71 in Friday morning trading on the Toronto Stock Exchange, the lowest point since April 2009. They recovered somewhat to be down $1.65 or 7.43 per cent to $20.55 in midafternoon trading.

“It was a very disappointing quarter, but we’re doing a lot of things and I don’t think we need to wait very long to see some improved results over the third quarter,” said chief financial officer Jeffrey Schwartz on an earnings call Friday.

The Montreal-based company said U.S. tariffs of 10 per cent on Chinese imports mainly affects its home furnishings and sports products businesses, since juvenile products such as car seats and strollers were excluded from the tariffs.

However, the company is worried that the tariffs imposed in September on thousands of products could reach 25 per cent in the new year without an agreement.

The company intends to pass on to retailers the rising costs from tariffs, as well as from higher input costs like resin and other inflationary pressures, said Schwartz.

“We do fully intend to pass all the costs on. There could be an effect on demand.”

He said the majority of producers are looking to pass on costs to retailers, and that those who aren’t yet will have to if the 25 per cent tariffs kick in.

The higher prices mean customers might start shopping down a tier, but that Dorel is prepared since it offers products in a range of price points.

“We’re going to see people, as the price gets a bit out of reach, stepping down in product,” said Schwartz.

Earlier this year, Dorel was forced to write off a US$3.8 million bad debt expense because of the bankruptcy and liquidation of U.S. retailer Toys “R” Us.

Dorel says its third-quarter net income fell nearly 28 per cent to US$9.6 million or 29 cents per diluted share.

Excluding one-time items, it earned US$11 million or 34 cents per share in adjusted profits. That’s three cents below forecasts of analysts polled by Thomson Reuters Eikon and compared with US$14.5 million or 45 cents per share a year earlier.

Revenues grew 4.3 per cent to US$670.1 million, from US$642.6 million.