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Dorel Results Slips Down in First Quarter

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MONTREAL, Canada – Dismal weather meant a dismal start to the 2013 bicycle business for Dorel Industries. The company’s overall first quarter results, released on May 9, 2013, showed a 4.3% drop over last year to 489 million euro (US$594.2 million).

Dorel Results Slips Down in First Quarter
“We still believe that our Recreational/Leisure segment will exceed last year’s earnings,” said Martin Schwartz, CEO of Dorel.

“Weather is everything in the bicycle business,” said Martin Schwartz, Dorel’s president and CEO, referring to the big reason for the drop in the company’s bicycle business. “To say it was a negative factor would be an understatement.”

Healthy business

Dorel was down across the board in the Recreational/Leisure segment, home to the brands Cannondale, Schwinn, GT, Mongoose, IronHorse and Sugoi. Operating profit fell over 50%, gross profit was down -12%, and total revenue decreased by 7.9%. Still it’s Dorel, and that means a healthy 167 million euro (US$203.5 million) for the quarter nonetheless, even if it does end 13 consecutive quarters of growth. But Martin Schwartz is confident in his brands and the company’s plans.

April also tough

“Our results for the first quarter do not reflect our expectations for the full year. We still believe that our Recreational/Leisure segment will exceed last year’s earnings,” said Martin Schwartz during his presentation of the results. “April was still a tough month,” said Schwartz later, during a conference call discussing first quarter results. “May on the other hand is going very well. What gives us a lot of confidence that our customers, from mass merchants to IBDs are still aiming to do their original numbers. So, nobody’s panicking yet. We believe we’re going to better than last year.”

Marketing push Cannondale

Expect a big marketing push for Cannondale’s latest high-tech road racing bike, the 2014 Synapse Carbon Hi-MOD, along with heavy promotion of the company’s long-lasting Schwinn marque during Bike Month this May. “When you have a brand like Cannondale, you can’t stop spending (on marketing),” said Dorel Chief Financial Officer Jeffrey Schwartz, responding to an analyst’s question regarding the company’s very visible presence and spending on social media and other forms of marketing.

“Also, social media costs are very minimal,” added Martin Schwartz. “We’re going to be increasing focus there. Like Jeffrey says, we can’t walk away from promoting the brand.” Cannondale has also researched consumer habits and found customers know they are going to buy a bike in the spring, but don’t know where or what brand. To that end Dorel is planning a big marketing push for the Schwinn brand and its dealers during the upcoming Bike Month in May.

Sugoi back on track

Finally back on its feet is SUGOI, Dorel’s less-than-profitable fitness apparel company. After a significant restructuring Schwartz now wants the clothing company to generate revenue. “We’ve definitely turned the business around and now we’re focusing on sales. Operations are going well. To take it to the next level we have to concentrate on sales.”

Dorel has annual sales of 2 billion euro (US$2.5 billion) and employs 5,400 people worldwide. Dorel’s branded products include Safety 1st, Quinny, Cosco, Maxi-Cosi and Bébé Confort in Juvenile, and Cannondale, Schwinn, GT, Mongoose, IronHorse and SUGOI in Recreational/Leisure, along with a home furnishings segment.

Financial highlights first quarter 2013

(x 1,000)

2013

2012

Change %
Total revenue 594,168 621,100 -4.3%
Net income 22,316 29,059

-23.2%

 

Recreational/Leisure Segment

(x 1,000)
2013 2012
US$ % of rev. US$ % of rev. Change %
Total revenue 203,514 220,918 -7.9%
Gross profit 51,289 25.2% 58,440 26.5% -12.2%
Operating profit 9,541 4.7% 21,380 9.7% -55.4%

 

Financial highlights first quarter 2013

(x 1,000)

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