HF Investor Day 2012 VF Web

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Furniture Industry

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  • DorelHomeFurnishings

    NormanBraunstein President,DorelHomeFurnishings

    Ourvision:Tobetheproduct,innovation,andvolumemarketleadersinthesupplyofHomeFurnishingstothemajorNorthAmericanretailers

    Fiveindividualbusinessunits Greatproductdiversity Currentlytakeadvantageofsharedservicestoreducecostand

    increaseefficiencywithinIT,SG&A,supplychainanddistribution

    2

  • Todaysagenda

    Overviewofthefurnitureindustryy DorelHomeFurnishingsDivisions

    CoscoHomeandOfficeA i d Ameriwood

    Altra DHP DorelAsia

    ECommerceC l i Conclusion

    $

    3

    Note:amountsareinUS$

  • OverviewofUSFurnitureMarket

    Aft t f d li th US f it k t 4% i 2010 d Aftertwoyearsofdecline,theUSfurnituremarketgrew4%in2010and2.4%in2011.

    Furniture demand is strongly tied to new home and home sale increases.Furnituredemandisstronglytiedtonewhomeandhomesaleincreases.BothofthesedatapointshavebeenfairlystagnantintheUS.,butarenowshowingsignsofimprovement.

    Upholsteryisexpectedtobethefastestgrowingsegmentashomeownersinvestintheirhomes.Bedroomisthelargestsegment.

    Furniture stores continue to be the largest sales channel however non Furniturestorescontinuetobethelargestsaleschannel,howevernontraditionalchannelssuchasInternetandmassmerchantsaregrowingatamuchfasterrate.

    Walmart,includingSamsClub,isUSslargestfurnitureretailer.

    Ashley(furniturestore),Walmart (massmerchant)andIKEA(specialty)arethethreelargestretailersoffurniture.

    4

  • $ValueofUSHomeFurnitureSales

    Afteradeclinein2008and2009thefurnituremarkethasshowngrowthin2010and2011.Furnitureisexpectedtogrowby18%from2011to2016.

    $80.0$90.0$100.0

    y

    ($billions)

    $30 0$40.0$50.0$60.0$70.0$80.0

    ReasonsforIndustryGrowth ImprovedhousingmarketLifestyle changes

    $0.0$10.0$20.0$30.0 Lifestylechanges

    HispanicpurchasingpowerReplacementofwornitems

    Source:MintelIntl.Group,October2011&August2012

    5

  • Wheredopeoplebuyfurniture?

    70 20042007

    DorelHFsalesviaInternetpresentsabigopportunity

    DorelwellpositionedTotakeadvantagein

    40

    50

    60e

    n

    t

    2007

    2011thesethreecategories

    20

    30

    P

    e

    r

    c

    e

    0

    10

    Internet Furniture Mass Home* Club Departmenttstore

    Basedonasurveyof1000peoplewhohaveboughtfurnitureinthelastyear *Nodatafor2004

    Source:MintelIntl.Group,October2011

    6

  • USDistributionofRetailFurniturePeople are buying furniture outside of the traditional channelsPeoplearebuyingfurnitureoutsideofthetraditionalchannels

    $20

    $30

    $40

    $50

    20082009

    (inbillions)

    $0

    $10

    $20

    FurnitureStores MassMerc. AllOther*

    20102011

    * AllotherincludesInternet,catalogue,officesuperstores,homecentersandspecialtystores

    Source:MintelIntl.Group,October2011

    7

  • HaveyouPurchasedFurnitureinthelast24months?

    40%

    60%

    AgeofFurnitureBuyer

    40%60%

    IncomeofFurnitureBuyer

    0%

    20%

    40%

    0%20%

    Furniture Buying by

    40%

    60%

    FurnitureBuyingbyEthnicity

    0%

    20%

    40%

    Caucasian African Asian Hispanic Other

    Source:MintelIntl.Group,August2012

    Caucasian AfricanAmerican

    Asian Hispanic Other

    8

  • LeadingUSFurnitureRetailers2011

    $3.0(inbillions)

    $1 5

    $2.0

    $2.5

    $0.5

    $1.0

    $1.5

    $0.0

    =CurrentDorelHFCustomerSource:FurnitureToday,Aug2012

    9

  • ManufacturerSalesofFurnitureintotheUS20092010

    $

    $3.5(inbillions)

    $

    $2.0

    $2.5

    $3.0

    $0 0

    $0.5

    $1.0

    $1.5 2009

    2010

    $0.0

    Source:FurnitureToday:November,2011

    10

  • DorelHomeFurnishings

    11

  • DorelHomeFurnishingsSources

    Canada26%26%

    Import50%

    US24%

    50%

    Doreliswell positionedtocapitalizeonthegrowthofimportedfurniturewhilehavingasubstantialNorthAmericanpresenceinRTAandlowcostfutonmanufacturing.g

    12

  • HomeFurnishingsSegmentAsiaOperations

    Asia:

    InvestmentinonthegroundresourcesProductDevelopmentEngineeringQualityControlOrder Flow and LogisticsOrderFlowandLogisticsSourcing60Employees

    Kunshan

    Xiamen

    DongguanHoChiMinh

    13

  • HomeFurnishingsGeographicStrategy

    Canada ReorganizedourCanadianHomeFurnishingsorganizationin

    2009

    Substantialgrowthinthelastthreeyears SellproductfromallDorelHomeFurnishingsdivisions TargetCanadaopportunity

    ExploringsalesopportunitiesoutsideNorthAmerica SouthAmerica/CentralAmerica Europe Australia/NewZealand China

    14

  • LargeBreadthofProductCategoryDivision Ameriwood Altra DHP DorelAsia Cosco

    Folding Steel/woodg /

    Step Stools\Ladders Steel/alum.

    Bedroom RTA RTA Metal Wood/Metal

    Office RTA RTAWood

    Storage RTA RTAStorage RTA RTA

    Entertainment RTA RTAWood

    HollowCoreAccents

    Futons Metal\woodUpholsteredUpholstered

    Sofas Fabric\PULeather

    Upholstery Fabric\PULeather

    Commercial RTA BlowMold

    Dinning Wood\metal\Glass

    Mattresses Coil\Foam\Fiber

    15

  • CoscoHome&Office

    Location Columbus,IN, Imports foldingfurniture,stepstools,handtrucksand

    specialtyladders

    Importdistributionfacilities Ontario,CaliforniaandSavannah,Georgia

    Main customers Mass merchants clubs home centersMaincustomers Massmerchants,clubs,homecenters,commercialofficesuppliers,hardwarechains

    16

  • FoldingFurniture:

    17

  • FoldingFurnitureMarketldi f i i $ kFolding furniture is a $465M market averaging 3% historical growth

    3

    0

    0

    500(in millions)

    $

    3

    6

    7

    .

    5

    $

    3

    8

    5

    .

    9

    $

    4

    0

    5

    .

    2

    $

    4

    2

    1

    .

    4

    $

    4

    4

    0

    .

    5

    $

    4

    6

    0

    .

    3

    $

    4

    8

    1

    .

    0

    $

    4

    5

    1

    .

    0

    $

    4

    6

    5

    .

    0

    200300400

    0100

    0

    0

    2

    0

    0

    3

    0

    0

    4

    0

    0

    5

    0

    0

    6

    0

    0

    7

    0

    0

    8

    0

    0

    9

    0

    1

    0

    2

    0

    2

    0

    2

    0

    2

    0

    2

    0

    2

    0

    2

    0

    2

    0

    2

    0

    Source:2010HomeWorldBusinessandCoscoHomeandOffice

    Coscohasa40%shareatretail

    18

  • StepStoolsandLadders:

    19

  • StepStoolMarket

    Retail Dollar Sales of Step Stools (inmillions)

    200

    250

    167178 187

    199211

    179164 166

    150

    167 164 166

    50

    100

    Source: 2010 HomeWorld Business and

    02004 2005 2006 2007 2008 2009 2010 2011

    Source:2010HomeWorldBusinessandCoscoHomeandOffice

    20

  • ProductLineExpansions::

    21

  • Ameriwood

    Location Wright City MO Location WrightCity,MO DomesticmanufacturerofRTA.Maincategoriesinclude

    homeoffice,entertainment,bedroom,garageandmultipurposestorage

    Manufacturinganddistributionfacilities Cornwall,ON,Tiffin OH and Dowagiac MITiffin,OHandDowagiac,MI

    Maincustomers massmerchants,homecenters,officesuperstores

    22

  • $SalesofReadytoAssembleFurniture

    Consumer spending on RTA furniture ended the year 5% ahead of last year, totaling over $3.3 billion in 2011

    $3,000,000

    $3,500,000

    $4,000,000(Dollars - Thousands)

    $1,500,000

    $2,000,000

    $2,500,000

    $3,000,000

    $0

    $500,000

    $1,000,000

    , ,

    2007 2008 2009 2010 2011

    Dollars 3,456,555 3,203,928 3,354,260 3,175,330 3,338,479

    2007 2008 2009 2010 2011

    Source:KeyStatMarketing,Q42011

    23

  • WhichoftheFollowingistheMostImportantFactortoYouWhenPurchasingRTAFurniture?

    Style/Color,10.40%

    Brand,1.40%

    Quality/Perf.,28.40%

    EaseofAssembly,12 80%12.80%

    MadefromSolid

    Price,26.30%

    Wood,20.80%

    Source:KeyStatMarketing,Q42011

    24

  • MarketShareofRTAFurnitureSoldInUSA

    MarketShareQ42011

    17% IKEA

    Dorel

    9%

    53%

    Dorel

    Walmart

    Sauder

    h8%

    7%

    53% Bush

    Target

    Other

    2%1%

    Source:KeyStatMarketing,Q42011

    25

  • RTAStorage:Ameriwood

    26

  • RTABedroom/Office:Ameriwood

    27

  • DorelhastheAdvantageofDomesticallyProducedRTA

    Ameriwood,throughitsdomesticmanufacturingfacilities,isasignificantsourceofcashgenerationandrevenueforDorelHomeFurnishingsFurnishings.

    Ameriwoodoperatesthreehighlyefficient/lowCAPEXmanufacturinganddistributionfacilities

    Cornwall ON Cornwall,ON Tiffin,OH Dowagiac,MI

    Retailersrecognizetheadvantagesofdomesticproduction Shorterleadtimes Reducedinventorycosts Reducedfreightcosts

    Morestablecostenvironmentcomparedtoimport MadeinNorthAmerica

    28

  • AltraFurniture

    Location WrightCity,MOg y, ImporterofRTAwithconcentrationinhomeentertainment,

    homeoffice,commercialoffice,andstoragefurniture

    Importerofcasepiecesforhomeofficeandhomeentertainment

    Import distribution facilities Ontario California andImportdistributionfacilities Ontario,CaliforniaandSavannah,Georgia

    Maincustomers massmerchants,officesuperstores,homeentertainmentsuperstores,clubs

    29

  • RTA ReadytoAssemble:Altra

    30

  • CasePieces:Altra

    31

  • RTA/BacktoCollege:Altra

    32

  • DorelHomeProducts

    Location Montreal,QC Manufacturerandimporteroffutons,mattresses,baby

    mattresses

    Importer of futons accent tables leisure seating and metal Importeroffutons,accenttables,leisureseatingandmetalbunkandloftbeds

    Importdistributionfacility Ontario,California,Savannah,Georgia

    Domesticdistributionfacility Montreal,QCM i t h t di t h i I t t Maincustomers massmerchants,discountchains,Internet

    33

  • Futons

    MassRetailersandClubs

    Source:InternalAnalysis,2012

    34

  • Futons:DHP

    35

  • Mattresses:DHP

    36

  • MattressSalesStartingtoRebound

    $

    $17

    s

    SalesofMattresses&OtherSleepEnvironments

    $14

    $15

    $16e

    s

    $

    b

    i

    l

    l

    i

    o

    n

    s

    Environments

    l$12

    $13

    $14

    a

    t

    t

    r

    e

    s

    s

    S

    a

    l

    e

    $3$10

    $16 $19DorelMattressSales$millions

    $10

    $11

    $12

    U

    S

    M

    a

    $102007 2008 2009 2010 2011 2012est

    Source:MintelInternational,Oct2011&Internal

    37

  • 38

  • MetalBunkBeds:DHP

    39

  • DorelAsia

    ImporterUpholstery Upholstery

    Bedroom Dining and KitchenDiningandKitchen Youth Accent

    Importdistributionfacility Ontario,California,Savannah,

    GeorgiaGeorgia

    Maincustomers massmerchants,clubs,Internet

    40

  • Upholstery:DorelAsia

    41

  • BedroomFurniture:DorelAsia

    42

  • Dining/Accent:DorelAsia

    43

  • ECommerce Onlineresearchnowveryimportantforcomparisonshopping FreeShipsightsorfreepickupatstoredrivingonline

    purchasespurchases

    Importanceofonlinereviewsinbuyingdecision Physicalfootprintoffurnitureatbrickandmortarretailersis

    d l ldrivingonlinelineextensions

    Abilitytousevideoandanimationwillallowforincreasesonline

    2/3rdsofconsumersstillwanttotouchandfeelfurniturebeforepurchase,especiallyatthehigherend

    Youngerconsumersincreasinglylikelytobuyonline

    44

  • GrowthofDorelHFOnlineBusiness

    $100

    $millions

    $70

    $80

    $90

    $50

    $60

    $70

    $ USD

    $20

    $30

    $40$USD

    $0

    $10

    $20

    2009 2010 2011 2012*2009 2010 2011 2012* *Projected

    45

  • HomeFurnishingsOnlineStrategy

    Todelivertothefrontdooroftheconsumerthebestvalueinfurniture

    Newonlinedistributionf lfacilityinSavannah,Georgia

    ExistingWestCoastDistribution

    46

  • OnlineAllowsProductExtensionsBeyondtheInstorePurchase

    47

  • OnlineAllowsProductExtensionsBeyondtheInstorePurchase

    InstoreNolanItematTarget

    NolanExtensionsofferedonTarget.com

    48

  • OnlineAllowsProductExtensionsBeyondtheInstorePurchase

    InstoredeskatOfficeDepot

    LineextensionsatOfficedepot.com

    49

  • HomeFurnishingsConsolidatedFinancials(in thousands)

    H F i hi 2007(1) 2008(1) 2009(1) 2010 2011

    (inthousands)

    HomeFurnishings 2007(1) 2008(1) 2009(1) 2010 2011

    Sales $422,244 $451,545 $463,734 $507,790 $522,278

    ( ) $ $ $ $ $GrossProfit(2) $56,070 $50,915 $77,308 $69,083 $65,589

    OperatingProfit $10,083 $7,964 $36,696 $34,587 $29,251

    (1)Financialinformationfor2007,2008and2009hasbeenpreparedinaccordancewithCanadianGAAP.

    (2)SincethefiscalyearendedDecember30,2009,theCompanyhasappliedCICAsection3031Inventoriesandaccordingly,depreciationexpenserelatedtomanufacturingactivitiesisincludedincostofsales starting in 2008

    50

    salesstartingin2008.

  • DorelPoisedforTurnaroundinHousing

    700

    800$463

    $508 $522

    Dorel Sales

    500

    600

    700a

    l

    e

    s

    (

    0

    0

    0

    s

    )

    $422 $428DorelSales$millions

    300

    400

    w

    H

    o

    m

    e

    S

    a

    0

    100

    200

    U

    S

    N

    e

    w

    02007 2008 2009 2010 2011

    51

  • ComparisontoFurnitureIndustry

    50%

    60%

    SGA%ofRevenue

    30%

    40%

    10%

    20%2009

    2010

    2011

    0% LaZB

    Ethan

    FBI

    Hooke

    Stanle

    Flexst

    Besta

    Steelc

    Basse

    Natuz

    DorelBoy

    nAllen

    er

    ey

    teel

    r case

    ett

    zzi HF

    52

  • ComparisontoFurnitureIndustry

    5%

    10%OperatingReturnonRevenue

    5%

    0% LaZBo

    EthanA

    FBI

    Hooke r

    Stanley

    Flexstee

    Bestar

    Steelca

    Basset t

    Natuzzi

    DorelH

    15%

    10%

    oy

    Allen

    r y el

    se

    t i HF

    2009

    2010

    2011

    25%

    20%

    35%

    30%

    53

  • TheNextThreeYears

    ContinuetogeneratesignificantcashflowforDorelIndustries Revenuegrowththroughthedevelopmentofvalue oriented,

    ell designed prod ctwelldesignedproduct

    Increasedpenetration:additionalcustomersandchannelsStrongefforttoincreaseonlinesales

    Possibleconsolidationofdivisionstoincreaseprofitability,efficienciesandeffectivenessinproductdevelopment,sourcing,andcustomerpresentations

    Possibleacquisitionsinordertodriverevenue,expandourproductline,orenableverticalintegration

    Continuedfocusonbottomlineprofitabilitywhileincreasingd lrevenueandreturnoncapital

    54

  • InConclusion:TheDorelAdvantage

    Diversification Domesticmanufacturingandimportdistributionfootprint Industryleadersinfoldingfurniture,stepstools,futons,and

    amongtheleadersinRTA

    CustomerBase:Focusonbigboxretailers fastestgrowingfurnituresegment.Provideproduct,sourcing,andlogisticsexpertise

    Takingadvantageofconsumertrends Potentialtoleveragecrossdivisionalsynergiesthrough

    administrative,distribution,andsales/marketingconsolidation

    Strongdivisionalmanagementteamg g Corporatestrength

    THANKYOU.....ANYQUESTIONS?55