Why Dorel Industries Stock Fell 10% on Friday

Dorel (TSX:DII.B) stock fell by 10% on Friday, as the company reported a 122% increase in its net losses and doesn’t yet see an end in sight.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published March 11, 2022 1:30 pm EST

Dorel Industries (TSX: DII.B) saw shares fall by 10% on Friday after the company reported fourth-quarter earnings that were hurt by supply chain disruptions.

What happened?

Dorel stock reported earnings that fell below estimates as management explained lack of supply and higher costs hurt company performance. Inflation continues to rise, and yet the stock continues to lag behind demand for product.

“The fourth quarter was a difficult one, as continuing global supply chain constraints and related higher costs for products, services and commodities pressured margins, reducing earnings at both Dorel Home and Dorel Juvenile,” stated Chief Executive Officer and President Martin Schwartz. “Demand was strong at many of our divisions; however, frustratingly, like many companies, we were unable to secure the necessary goods or parts to fully satisfy consumer requirements.”

So what?

The main issue is that Dorel stock doesn’t see this ending any time soon. Or at least, it has no idea when it might end. That’s because these problems remain out of company hands. Demand is strong, but supply is low. And no one can foresee just how far inflation might rise before levelling out, even with increases interest rates.

The one bright sign is the company’s use of the net proceeds from selling off Dorel Sports. The company remains in a “strong financial position” thanks to the sale. Therefore, it can still navigate through these headwinds and hopes to come out the other end relatively unscathed.

Now what?

The fourth-quarter revenue came in at US$435.3 million, down 0.9% from the year before. Its net loss came in at US$29.6 million, or US$0.91 per diluted share, an increase of 122% from the year before. While revenue increased for the full year by 2.4%, net loss for the year also increase to US$111.8 million.

Because it’s unknown when these inflation and supply problems will subside, investors will have to hope Dorel stock is right in its sale of Dorel Sports holding the company strong. If not, losses could continue to pile up for at least the near-term future.

Shares of Dorel stock were down 9.56% as of writing and 56% year to date.