Next to Dorel Also Accell Hit by Troubled US Market
HEERENVEEN, The Netherlands – This morning Accell Group warns for a lower than anticipated 2017 operating result due to a strong sales decline in North America. The holding company for numerous bike companies located in Europe, Asia and North America also points to higher than anticipated costs related to the implementation of its new omni-channel strategy.
Accell’s new CEO Ton Anbeek, appointed on 1 November, will have wished for a better first message to bring to his shareholders than what he had to publish this morning. The holding company announces that it is “Further adapting the North American organization to the changed market conditions”. This adaptation comes with declining results and profits.
How much the decline in Accell’s operating result will be this year compared to 2016 is indicated in today’s statement with: “The underlying operating result for 2017 will be affected by the strong sales decline in North America. The restructuring of the American organization and the scale-down of inventories will have an impact of around € 5 million. As a result of the above, the underlying operating result for the full year will be lower than in 2016.”
More higher costs
Accell’s 2016 operating result stood at € 65.9 million. Due to other higher costs than anticipated it is likely to drop below the 60 million mark as today’s statement furthers with “The operating result (before interest and taxes) for 2017 will in addition be influenced by higher costs in the second half of the year related to the implementation of the new group strategy. We do not anticipate to fully complete the reduction of inventories in North America during the remainder of 2017, which will have a negative effect on working capital at year-end.”
Toys ‘R’ Us bankruptcy
Next to Accell also Dorel’s Sports division including its Cycling Sports Group is faced with the troubled North America market. Dorel’s first nine months bike sales of 2017 were down by close to 11%. What substantially affected Dorel’s revenues was last September’s Toys ‘R’ Us bankruptcy filing. Accell says about its North American sales “Next to an overall tough market for bicycles, sales via the traditional distribution channels (dealers and MultiSport) have been under pressure for a longer period of time in North America. As such, we also recently saw an unanticipated contract termination by a large MultiSport chain.”
Online and e-bike sales growing fast
This morning’s Accell statement also carried some good news as it says “On the opposite, online sales (via own webshops and third party online stores) and sales of e-bikes are growing fast. In addition, the related cooperation with Beeline for home deliveries, ready-to-ride bike assembly and service is doing well. These positive developments cannot yet fully compensate for the lower sales in general and more in particular via the MultiSport channel. Hence, we are further adjusting our American organization. Senior management has been replaced and the activities in North America will be fully integrated. Inventories destined primarily for the MultiSport chains will be scaled down as quickly as possible.”
On the longer term Accell’s new CEO Ton Anbeek expects even better results as he says “During the past year, a lot of hard and goal-oriented work has gone into the execution of our new strategy in North America and Europe. In the years to come, we expect to show a clear trend reversal of our group performance in terms of turnover, results and working capital. In North America we see sound opportunities for omnichannel, while the evolution of the e-bike segment is running a few years behind the e-bike segment in Europe. As such, the region offers us clear potential for future growth.”
On the Amsterdam stock exchange Accell’s share rating dropped by about 8% to € 22.80 this morning.