Dorel Home Furnishings

Dorel Home Furnishings
•
Norman Braunstein ‐ President, Dorel Home Furnishings
•
Our vision: To be the product, innovation, and volume market leaders in the supply of Home Furnishings to the major North American retailers
•
Five individual business units
– Great product diversity – Currently take advantage of shared services to reduce cost and increase efficiency within IT, SG&A, supply chain and distribution
2
Today’s agenda
• Overview of the furniture industryy
• Dorel Home Furnishings Divisions
–
–
–
–
–
Cosco Home and Office
A
Ameriwood
i
d
Altra
DHP
Dorel Asia
• E‐Commerce
• Conclusion
C l i
Note: amounts are in US$
$
3
Overview of US Furniture Market
•
After two years of decline, the US furniture market grew 4% in 2010 and Aft
t
f d li
th US f it
k t
4% i 2010 d
2.4% in 2011. •
Furniture demand is strongly tied to new home and home sale increases. Furniture
demand is strongly tied to new home and home sale increases.
Both of these data points have been fairly stagnant in the US., but are now showing signs of improvement.
•
Upholstery is expected to be the fastest growing segment as home owners invest in their homes. Bedroom is the largest segment.
•
Furniture stores continue to be the largest sales channel, however non‐
Furniture
stores continue to be the largest sales channel however non
traditional channels such as Internet and mass merchants are growing at a much faster rate. •
Walmart, including Sam’s Club, is US’s largest furniture retailer.
•
Ashley (furniture store), Walmart (mass merchant) and IKEA (specialty) are the three largest retailers of furniture. 4
$ Value of US Home Furniture Sales
After a decline in 2008 and 2009 the furniture market has shown growth in 2010 and 2011. Furniture is expected to grow by 18% from 2011 to 2016.
y
($billions)
$100.0
$90.0
$80.0
$70.0
$60.0
Reasons for Industry Growth
$50.0
• Improved housing market
$40.0
•Lifestyle changes
•Lifestyle changes
$30 0
$30.0
•Hispanic purchasing power
$20.0
$10.0
•Replacement of worn items
$0.0
Source: Mintel Intl. Group, October 2011 & August 2012
5
Where do people buy furniture?
70
Dorel HF sales via Internet presents a big opportunity
60
2007
2011
50
Perce
ent 2004
Dorel well positioned To take advantage in these three categories
40
30
20
10
0
Internet
Furniture Mass
Home*
Based on a survey of 1000 people who have bought furniture in the last year
Club
Department store
t
* No data for 2004
Source: Mintel Intl. Group, October 2011
6
US Distribution of Retail Furniture
People are buying furniture outside of the traditional channels
People are buying furniture outside of the traditional channels
(in billions)
$50
$40
2008
2009
2010
2011
$30
$20
$10
$0
Furniture Stores
Mass Merc.
All Other*
* All other includes Internet, catalogue, office superstores, home centers and specialty stores
Source: Mintel Intl. Group, October 2011
7
“Have you Purchased Furniture in the last 24 months?”
Age of Furniture Buyer
60%
Income of Furniture Buyer
60%
40%
20%
0%
40%
20%
0%
Furniture Buying by Furniture
Buying by
Ethnicity
60%
40%
20%
0%
Caucasian African African
American
Asian
Hispanic Hispanic
Other
Source: Mintel Intl. Group, August 2012
8
Leading US Furniture Retailers
2011
(in billions)
$3.0
$2.5
$2.0
$1 5
$1.5
$1.0
$0.5
$0.0
= Current Dorel HF Customer
Source: Furniture Today, Aug 2012
9
Manufacturer Sales of Furniture into the US
2009‐2010
(in billions)
$3.5
$
$3.0
$2.5
$2.0
$
$1.5
$1.0
2009
2010
$0.5
$0 0
$0.0
Source: Furniture Today: November, 2011
10
Dorel Home Furnishings 11
Dorel Home Furnishings Sources
Canada
26%
Import
50%
US
24%
Dorel is well‐ positioned to capitalize on the growth of imported furniture while having a substantial North American presence in RTA and low‐cost g
futon manufacturing.
12
Home Furnishings Segment Asia Operations
Asia:
—Investment in “on the ground” resources
—Product Development
—Engineering
—Quality Control
Order Flow and Logistics
Flow and Logistics
—Order
—Sourcing
—60 Employees Kunshan
Xiamen
Ho Chi Minh Dongguan
13
Home Furnishings Geographic Strategy
•
Canada
– Reorganized our Canadian Home Furnishings organization in 2009
– Substantial growth in the last three years
– Sell product from all Dorel Home Furnishings divisions
– Target Canada opportunity
•
Exploring sales opportunities outside North America
– South America/Central America
– Europe
– Australia/ New Zealand
– China
14
Large Breadth of Product Category
Division
Ameriwood
Altra
DHP
Dorel Asia
Cosco
Foldingg
Steel/wood
/
Step Stools\Ladders
Steel/alum.
Bedroom
RTA
RTA
Office
RTA
RTA
Wood
Storage
RTA
RTA
Entertainment
RTA
RTA
Wood
Futons
Metal
Wood/Metal
Hollow Core
Accents
Metal\wood
Upholstered
Sofas
Fabric\PU
Leather
Upholstery
Fabric\PU
Leather
Commercial
RTA
Blow Mold
Dinning
Mattresses
Wood\metal\
Glass
Coil\Foam\
Fiber
15
Cosco Home & Office
,
• Location ‐ Columbus, IN
• Imports – folding furniture, step stools, hand trucks and specialty ladders
• Import distribution facilities – Ontario, California and Savannah, Georgia
• Main customers‐
Main customers‐ Mass merchants, clubs, home centers, Mass merchants clubs home centers
commercial office suppliers, hardware chains
16
Folding Furniture: 17
Folding Furniture Market
ldi ffurniture
i
iis a $$465M market
k
Folding
averaging 3% historical growth
(in millions)
$367.5
$385.9
$405.2
$421.4
$440.5
$460.33
$481.0
0
$451.0
$465.00
20
002
20
003
20
004
20
005
20
006
20
007
20
008
20
009
20
010
500
400
300
200
100
0
Cosco has a 40% share at retail
Source: 2010 HomeWorld Business and Cosco Home and Office
18
Step Stools and Ladders: 19
Step Stool Market
Retail Dollar Sales of Step Stools
( in millions)
250
200
167
178
187
199
211
179
164 166
150
100
50
0
2004
2005
2006
2007
2008
2009
2010
2011
Source: 2010 HomeWorld Business and Source:
2010 HomeWorld Business and
Cosco Home and Office
20
Product Line Expansions: : 21
Ameriwood
• Location
Location ‐ Wright City, MO
Wright City MO
• Domestic manufacturer of RTA. Main categories include home office, entertainment, bedroom, garage and multi‐
purpose storage
• Manufacturing and distribution facilities– Cornwall, ON, Tiffin OH and Dowagiac MI
Tiffin, OH and Dowagiac, MI
• Main customers‐ mass merchants, home centers, office superstores
22
$ Sales of Ready to Assemble Furniture
• Consumer spending on RTA furniture ended the year 5% ahead
of last year, totaling over $3.3 billion in 2011
$4,000,000
(Dollars - Thousands)
$3,500,000
$3,000,000
$2,500,000
$2,000,000
$1,500,000
,
,
$1,000,000
$500,000
$0
Dollars
2007
2008
2009
2010
2011
3,456,555
3,203,928
3,354,260
3,175,330
3,338,479
Source: KeyStat Marketing, Q4 2011
23
Which of the Following is the Most Important Factor to You When Purchasing RTA Furniture?
Style/Color, 10.40%
Brand, 1.40%
Quality/Perf., 28.40%
Ease of Assembly, 12 80%
12.80%
Made from Solid Wood, 20.80%
Price, 26.30%
Source: Key Stat Marketing, Q4 2011
24
Market Share of RTA Furniture Sold In USA
Market Share Q4 2011
IKEA
17%
Dorel
9%
Wal‐mart
Sauder
53%
8%
7%
Bush h
Target
Other
1% 2%
Source: KeyStat Marketing, Q4 2011 25
RTA‐Storage: Ameriwood
26
RTA‐Bedroom/Office: Ameriwood
27
Dorel has the Advantage of Domestically Produced RTA
•
•
•
•
•
Ameriwood, through its domestic manufacturing facilities, is a significant source of cash generation and revenue for Dorel Home Furnishings.
Furnishings
Ameriwood operates three highly efficient/low CAPEX manufacturing and distribution facilities – Cornwall, ON
Cornwall ON
– Tiffin, OH – Dowagiac, MI
Retailers recognize the advantages of domestic production
– Shorter lead‐times
– Reduced inventory costs
– Reduced freight costs
More stable cost environment compared to import
“Made in North America”
28
Altra Furniture
• Location ‐ Wright City, MO
g
y,
• Importer of RTA with concentration in home entertainment, home office, commercial office, and storage furniture
• Importer of case pieces for home office and home entertainment
• Import distribution facilities
Import distribution facilities– Ontario, California and Ontario California and
Savannah, Georgia • Main customers‐ mass merchants, office superstores, home entertainment superstores, clubs
29
RTA – Ready to Assemble: Altra
30
Case Pieces: Altra
31
RTA/Back to College: Altra
32
Dorel Home Products
• Location ‐ Montreal, QC
• Manufacturer and importer of futons, mattresses, baby mattresses
• Importer of futons, accent tables, leisure seating and metal Importer of futons accent tables leisure seating and metal
bunk and loft beds
• Import distribution facility– Ontario, California, Savannah, Georgia
• Domestic distribution facility‐ Montreal, QC
• Main customers‐
M i
t
mass merchants, discount chains, Internet
h t di
t h i I t
t
33
Futons
Mass Retailers and Clubs
Source: Internal Analysis , 2012 34
Futons: DHP
35
Mattresses: DHP
36
Mattress Sales Starting to Rebound
Sales of Mattresses & Other Sleep Environments
US Maattress Sale
es $billionss
$17
$
$16
$15
$14
$13
$12
$11
$10
$3
$10
2007
2008
2009
2010
$16
$19
l
Dorel Mattress Sales $ millions
2011 2012 est
Source: Mintel International, Oct 2011 & Internal 37
38
Metal Bunk Beds: DHP
39
Dorel Asia
• Importer
– Upholstery
– Bedroom
– Dining and Kitchen
Dining and Kitchen
– Youth – Accent
• Import distribution facility– Ontario, California, Savannah, Georgia
• Main customers‐ mass merchants, clubs, Internet
40
Upholstery: Dorel Asia 41
Bedroom Furniture: Dorel Asia 42
Dining/ Accent: Dorel Asia 43
E‐Commerce
•
•
•
•
•
•
•
On‐line research now very important for comparison shopping “Free Ship” sights or “free pick‐up at store” driving on‐line purchases
Importance of on‐line reviews in buying decision
Physical footprint of furniture at “brick and mortar” retailers is d
driving on‐line line extensions
l
l
Ability to use video and animation will allow for increases on‐
line
2/3rds of consumers still want to touch and feel furniture before purchase, especially at the higher end
Younger consumers increasingly likely to buy on‐line
44
Growth of Dorel HF Online Business
$ millions
$100
$90
$80
$70
$60
$50
$ USD
$ USD
$40
$30
$20
$10
$0
2009
2010
2011
2012*
*Projected
45
Home Furnishings Online Strategy
“To deliver to the front door of the consumer the best value in furniture” Existing West Coast Distribution
New online distribution f l
facility in Savannah,
Georgia
46
Online Allows Product Extensions
Beyond the In‐store Purchase 47
Online Allows Product Extensions
Beyond the In‐store Purchase
In‐store Nolan Item at Target
Nolan Extensions offered on Target.com
48
Online Allows Product Extensions
Beyond the In‐store Purchase
In‐store desk at Office Depot
Line extensions at Officedepot.com
49
Home Furnishings Consolidated Financials
(in thousands)
(in thousands)
H
Home Furnishings
F i hi
Sales
2007(1)
$422,244
2008(1)
2009(1)
2010
$451,545 $463,734 $507,790
2011
$522,278
( )
Gross Profit(2)
$
$56,070
$
$50,915
$
$77,308
$
$69,083
$
$65,589
Operating Profit
$10,083
$7,964
$36,696
$34,587
$29,251
(1) Financial information for 2007, 2008 and 2009 has been prepared in accordance with Canadian GAAP.
(2) Since the fiscal year ended December 30, 2009, the Company has applied CICA section 3031 Inventories and accordingly, depreciation expense related to manufacturing activities is included in cost of sales starting in 2008
sales starting in 2008.
50
Dorel Poised for Turnaround in Housing
$508
US New
w Home Saales (000’s)
800
700 $422
600
$428
$522
$463
Dorel Sales Dorel
Sales
$ millions
500
400
300
200
100
0
2007
2008
2009
2010
2011
51
Comparison to Furniture Industry
60%
SGA % of Revenue
50%
40%
30%
2009
2010
20%
2011
10%
0%
Dorel HF
Natuzzzi
Basseett Steelccase
Bestar
Flexstteel Stanleey Hookeer
FBI
Ethan
n Allen La‐Z‐B
Boy 52
Comparison to Furniture Industry
10%
Operating Return on Revenue
5%
0%
Dorel H
HF
Natuzzii
Bassettt Steelcase
Bestar
Flexsteeel Stanleyy Hookerr
FBI
Ethan A
Allen ‐10%
La‐Z‐Bo
oy ‐5%
2009
2010
‐15%
2011
‐20%
‐25%
‐30%
‐35%
53
The Next Three Years
•
•
•
•
•
•
Continue to generate significant cash flow for Dorel Industries
Revenue growth through the development of value‐ oriented, well‐designed product
ell designed prod ct
Increased penetration: additional customers and channels Strong effort to increase on‐line sales
Possible consolidation of divisions to increase profitability, efficiencies and effectiveness in product development, sourcing, and customer presentations
Possible acquisitions in order to drive revenue, expand our product line, or enable vertical integration
Continued focus on bottom line profitability while increasing revenue and return on capital
d
l
54
In Conclusion: The Dorel Advantage
•
•
•
•
•
•
•
•
Diversification
Domestic manufacturing and import distribution footprint
Industry leaders in folding furniture, step stools, futons, and among the leaders in RTA
Customer Base: Focus on big box retailers‐ fastest growing furniture segment. Provide product, sourcing, and logistics expertise Taking advantage of consumer trends
Potential to leverage cross‐divisional synergies through administrative, distribution, and sales/marketing consolidation
Strong divisional management team
g
g
Corporate strength
THANK YOU.....ANY QUESTIONS?
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