Dorel’s Revenue Under Pressure by Weak North American Market
MONTREAL, Canada – Dorel Industries Inc. announced its results for the first half of 2017 which showed a 2.0% drop in revenues to USD 1.258 billion (€ 1.065bn). This resulted in a net profit of USD 20.3 million (€ 17.1mn) compared with a net loss of USD 21.9 million (€ 18.5mn) in the first half of 2016. Revenues of Dorel’s Sports division with the Cycling Sports Group (CSG) was under pressure as a result of the weak North American market.
Less discounting and selective price increases at CSG and Pacific Cycle’s favorable product mix resulted in improved margins in the Dorel Sports segment. Next to the Dorel Sports division Dorel Industries also includes Home and Juvenile divisions.
From loss to small profit
For the first six months of 2017, Dorel Sports’ generated a revenue of USD 423.1 million (€ 358.2mn), a decrease of USD 29.9 million (€ 25.3mn), or 6.6%. Thanks to improved margins Dorel Sports reported an operating profit of USD 15 million (€ 12.7mn), a major increase compared with the USD 44.7 million (€ 37.8mn) loss in the first six months of 2016.
Part of the revenue decline was attributed to the change in CSG’s international business model for which the revenue recognition transitioned from a licensing model to a distribution platform.
Retailers’ inventory levels
However the shortfall in revenue was mainly due to ongoing weakness in consumer demand for bikes in the mass channel due particularly to the prolonged unfavourable North American weather. Lower sales volumes in CSG were also caused by inclement weather, lower discounted sales than prior year’s second quarter and continued reduction in the IBD retailers’ inventory levels, but with a healthier mix towards current model year sales.
CSG’s closeout sales in the quarter represented 7% of sales volume in 2017 compared to 21% in the prior year’s second quarter and excluding these closeout sales, CSG’s revenue was flat for the second quarter year-over-year.
Further Dorel Sport points out that revenue at its Brazilian subsidiary Caloi was negatively affected by weak consumer demand in Brazil, amid ongoing political and economic turmoil as well as increased competitive pressure as other key brands in the market began to reduce retail price points.