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Dorel cancels dividend, blames tariff

Published October 1, 2019

MONTRÉAL (BRAIN) — Dorel Industries Inc., parent of Schwinn, Cannondale and other brands, has suspended its dividend and says its third quarter results will be harmed by increased U.S. tariffs on Chinese bikes, furniture and other goods Dorel sells.

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Dorel will announce full third quarter results on Nov. 8.

The company said the tariff increase to 25% in May "is having a much greater impact on the business than the original implementation of 10% introduced a year ago."

On the news Tuesday, Dorel's stock fell 23% to its lowest price since 1996, $7 Canadian ($5.28).

"The impact of the (tariff) increase on Dorel businesses was still unclear at the end of the second quarter. We raised prices midway through the third quarter and this has had several negative consequences," said Dorel's president and CEO, Martin Schwartz. 

"Not all competitors nor retailers raised prices at the same time or rate. Retailers have also changed their buying routines. New price points have caused some consumers to opt for different items creating a considerable product mix imbalance. As well, elevated warehousing costs are still being incurred as the shift in demand has delayed our inventory balancing program. The net result of these challenges is that Dorel Home's expected gross margin improvement from first half levels will be delayed to the beginning of 2020." 

The company said another factor affecting the third quarter is that some of Dorel's large U.S. customers have delayed Christmas 2019 deliveries to the beginning of the fourth quarter.

The rise in value of the U.S. dollar also negatively affected its results.

Dorel said sales in the independent bicycle dealer and sporting goods channels have remained strong and the outlook remains positive.

"It is prudent to suspend the dividend until the chaotic market conditions created by tariffs are normalized," said Schwartz. A dividend announced last month will still be paid out Wednesday.

More information: Dorel stock quote on Yahoo Finance.

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