Dorman Products (NASDAQ:DORM) executives highlighted record new-product sales, margin expansion, and continued tariff-driven supply chain changes during the company’s fourth-quarter 2025 earnings call, while also outlining 2026 guidance that reflects expected timing headwinds as higher-cost inventory works through the system.
Strategic priorities and 2025 performance
Chief Executive Officer Kevin Olsen said the company delivered on strategic priorities set a year earlier, including innovation, operational excellence, supply chain diversification, channel expansion, and strategic growth. He described 2025 as an “exceptional year” for new-product launches, with “thousands of new SKUs” introduced and record sales from new products. Olsen cited the electronic power steering rack as a notable success and said the company has increased investment in product development, with a pipeline that includes a growing mix of complex electronic solutions.
For the full year, Olsen said net sales reached $2.13 billion, up 6% year over year, driven by strong demand in light duty during the first half and execution of tariff-related pricing initiatives in the second half. He added that while heavy-duty and specialty vehicle markets faced headwinds, teams executed commercialization initiatives during the year.
Fourth-quarter results: modest sales growth, stronger margins
For the fourth quarter, Dorman reported consolidated net sales of $538 million, up about 1% from the prior-year period but below internal expectations. Management attributed the quarter’s growth primarily to tariff-related pricing actions, while shipment volume declined year over year due to a large customer changing ordering patterns to reduce inventory.
Chief Financial Officer David Hession said adjusted gross margin was 42.6%, up 90 basis points from the fourth quarter of 2024 and above company expectations. He attributed the improvement to shipping more pre-tariff, lower-cost inventory during the quarter—partly due to lower-than-expected volume—along with supplier diversification and productivity initiatives.
Adjusted SG&A was 25.2% of net sales, up 100 basis points year over year, driven largely by increased expenses tied to funding higher tariffs and higher wage and benefit costs. Adjusted operating income was $93 million, flat year over year, and adjusted operating margin was 17.4%, slightly lower than the prior year’s quarter. Adjusted diluted EPS was $2.17 for the quarter, down about 1% year over year.
Hession also noted a non-cash goodwill impairment charge of approximately $51 million after taxes in the fourth quarter, related to continued pressure in the trucking and freight industry affecting the heavy-duty segment. The charge was included in GAAP results but excluded from adjusted diluted EPS.
Segment commentary: light-duty ordering shift, heavy-duty resilience, specialty vehicle wage pressures
Light Duty: Fourth-quarter net sales were $429 million, up slightly from the prior-year period. Olsen said point-of-sale (POS) at large customers was up mid-single digits year over year, but sell-in was held back by a major customer’s ordering shift. He said the customer’s order patterns changed significantly as the customer reduced inventory, and Dorman expects order fluctuations to continue in the first quarter of 2026 before stabilizing in the second quarter.
Olsen emphasized continued investment in complex electronics capabilities across EV, hybrid, and internal combustion platforms, describing Dorman as “drivetrain agnostic.” As an example of recent product development, he highlighted a newly launched fuel pump driver module for Toyota and Lexus models, assembled in the U.S., aimed at replacing original equipment modules that can fail due to heat and environmental exposure.
Heavy Duty: Fourth-quarter net sales increased 6% year over year, despite what Olsen called ongoing pressure from the “great freight recession.” Operating margin expanded 130 basis points year over year, which management linked to tariff timing dynamics similar to light duty. Olsen said the company remains focused on improving commercial and operational execution to reach a long-term goal of mid-teens operating margin in the segment. He also pointed to medium-duty expansion and an omnichannel approach aimed at fleet managers, particularly those operating high-mileage last-mile delivery vehicles.
Specialty Vehicle: Fourth-quarter top-line growth was flat year over year, as pricing initiatives offset softer spending across the segment. Operating margin declined year over year primarily due to increased wage and benefit expenses, though Olsen noted the overall change in profit dollars was relatively small. Management said UTV and ATV ridership remains strong and that dealer inventories have generally been right-sized, with demand showing “timing delays” rather than a broad decline. Olsen also cited a new portal gear lift product launched by SuperATV for the CFMOTO UFORCE UTen model, which he said was an early-to-market release.
Cash flow, balance sheet, and tariffs
Hession said operating cash flow improved sequentially to $42 million in the fourth quarter, a $30 million improvement from the third quarter. The company repaid $16 million of debt and repurchased about $25 million of shares during the quarter.
For the full year, Hession said operating cash flow declined 51% versus 2024 and free cash flow declined 61%, largely due to higher-cost inventory driven by tariffs. Net debt ended 2025 at $391 million, down $42 million year over year, with net leverage of 0.89 times adjusted EBITDA, compared with 1.12 times at the end of 2024. Total liquidity was $648 million.
Management also attempted to quantify tariff impacts. Hession said the company estimated a full-year impact of approximately $1.25 on adjusted diluted EPS in 2025 due to timing dynamics of price and costs and one-time miscellaneous tariff-related expenses.
2026 outlook: growth expected, margin timing headwinds in early year
Olsen said 2026 guidance reflects the expectation that higher-cost inventory will weigh more heavily in the first half of the year before normalizing later, driven by FIFO timing. Dorman guided for total net sales growth of 7% to 9% for 2026, with growth “directionally” similar across segments. Management indicated the outlook reflects modest volume improvement over 2025 and the full-year effect of pricing actions that began taking effect in the third quarter of 2025.
For profitability, the company expects operating margin of 15% to 16% for the full year, with a temporary reduction in the first quarter and “meaningful” improvement through the back half of 2026. Olsen said the company expects a “more normalized high teens rate” as it exits 2026. The company guided to an effective tax rate of about 23.5% and adjusted diluted EPS of $8.10 to $8.50.
Olsen noted ongoing uncertainty related to tariffs and trade policy, referencing a recent IEPA ruling by the Supreme Court and new Section 122 global tariffs announced over the weekend. He said guidance assumes future tariff levels remain generally consistent with those in place prior to the IEPA ruling and does not include any potential IEPA-based tariff refunds.
The call also marked a transition in the finance leadership team. Management introduced Charles Rayfield, who is expected to officially step into the CFO role following the company’s filing of its 2025 Form 10-K, and Olsen said the quarter’s call was Hession’s last ahead of retirement.
About Dorman Products (NASDAQ:DORM)
Dorman Products, Inc is a leading independent global supplier of automotive aftermarket parts and hardware. Headquartered in Colmar, Pennsylvania, the company specializes in the design, manufacture and distribution of replacement components for passenger cars, light trucks and commercial vehicles. Dorman’s offerings span both mechanical and electrical systems, providing solutions that help repair shops and retailers address wear-out and collision-related failures on domestic and import vehicles.
The company’s extensive product portfolio includes steering and suspension components, brake system parts, engine management and cooling products, exterior and body hardware, and an array of fasteners, clips and brackets.
