E-MTBs Drive Accell’s Rise in Turnover in Third Quarter
HEERENVEEN, the Netherlands – Electric Mountainbikes continue to be THE rising star at Accell Group. Today’s trading update for the third quarter of 2016 by the (holding) company specifically names them as growth driver. The update also stipulates that results were under pressure due to higher discounts for reducing seasonal inventories of regular bikes.
Comparing Accell’s rise in turnover with other international operating bicycle companies like Dorel (Cannondale, Mongoose, GT), Giant and Merida puts the performance of the Dutch holding company into perspective. Dorel Sports (the bicycle division of the Canadian holding company) saw its third quarter revenues drop by 6%; Giant’s latest trading update on the 2016 results specify a 5.7% drop in sales while Merida names a close to 20% drop.
Market and weather conditions
Accell Group CEO René Takens says on the 3rd quarter results, “The market conditions for bicycle sales in the third quarter were comparable to those in the first half of the year. Weather conditions had a negative impact on bike sales in many countries. Turnover in e-bikes continued to increase, in particular e-performance bikes. The strong growth of e-performance bikes is partly at the cost of sports bikes, which is a trend we are seeing in most of our sales markets. This development contributed to the decline in turnover from regular bikes.”
Omni-Channel strategy implemented in US
Takens continues, “The order intake for the new 2017 collection is positive, once again in particular for our sports brands. In the US, we implemented the omni-channel strategy and continued to adapt our organization. The Raleigh brand is now sold via specialist retailers, as well as via online retailers and direct online sales. We are working with a mobile services provider for some of our direct deliveries in the US. The first effects of our new supply chain organization have become visible in greater delivery reliability and reduced working capital.”
Turnover growth in Europe except for UK
Accell’s turnover in both bicycles and bicycle parts increased in the third quarter. Virtually all countries in Europe contributed to the turnover growth. In the US, turnover declined due to difficult conditions in the specialist retail trade, the loss of sales via two large multi-sports chains (due to bankruptcy) and the divestment of the bicycle parts activities. Accell Group is now seeing the first effects of the new omni-channel strategy. This strategy is expected to compensate for the reduced sales via the specialist retail trade in the US. Turnover in the UK was down in the third quarter, partly as a result of the decline of the British pound following the Brexit vote.
Discounts and stronger Yen
Accell trading update further stipulates, “Due to lower sales in the summer months a greater number of bikes was sold at a discount at the end of the season, which had a negative impact on the added value. In addition, the cost of materials was impacted by higher guarantee costs (primarily related to electric bikes) and a stronger Yen, which raised the purchase prices of gear group sets and electric motors.
Direct sales to consumers
“Other operating costs continued to decline as a percentage of turnover in the third quarter, despite higher marketing and consultancy expenses. The higher consultancy costs are largely related to the organizational changes in the supply chain and the tightening of the group strategy. In terms of the latter, the organization will in future be more geared towards (direct) sales to consumers, while Accell Group is developing and implementing omni-channel strategies for its operating companies in various countries. In terms of the sales of bicycle parts and accessories, Accell Group is looking to intensify the cooperation between its various operating companies and will integrate certain activities.
“The working capital was down both as a percentage of turnover and in absolute terms. This is partly due to the newly-founded supply chain organization at group level. Accell Group expects this positive trend to continue in the coming months.”
Full year outlook
Today’s trading updates says further, “Taking into account the normal effects related to seasonal sales, there were no significant changes in Accell Group’s financial position over the past months. Due to the seasonal nature of the company’s activities, profit is generally substantially lower in the second half of the year than in the first half.
“One-off costs as a result of the write-down of bad debts due to two bankruptcies and the reorganization in the US will have a negative impact on the results in 2016. Barring unforeseen circumstances and based on the developments in the past few months, Accell Group expects an increase in turnover for the full year 2016 and a result around the same level as 2015.”
In 2015 Accell’s net profit was up with 22% to € 32,3 million. Turnover increased 12% to € 986,4 million.