Dorel Faced ‘Weak’ Bike Markets in 2017
MONTREAL, Canada – Dorel Industries Inc reports in its yesterday published 2017 financial results to have been faced with “A continued weak global bike market”. This is troubling its subsidiaries Dorel Sports and Cycling Sports Group. Despite strong performances in Cycling Sports Group’s International business and at Caloi in the third quarter of 2017, its full year revenues dropped by close to 8%.
Listed Dorel Industries Inc, that next to Dorel Sports and Cycling Sports Group includes Dorel Home and Dorel Juvenile, saw a marginal drop of its revenues in 2017 to USD 2.58 billion, compared to USD 2.60 billion the previous year. The company’s net income however improved strongly to USD 30.6 million compared to a reported net loss of USD 11.6 million in 2016.
‘Dorel Sports bounced back’
Dorel Industries CEO, Martin Schwartz commented “Dorel Home posted excellent revenue and operating profit, with record on-line sales continuing to drive the segment. Dorel Juvenile is being transformed into a consumer-centric organization through a market-led business with a heavy emphasis on new products. We have the strongest product pipeline in years featuring exciting, innovative products planned to launch over the next 18 months. Dorel Juvenile has also made important progress in e-commerce, with each of its geographic markets projecting growth through 2018. Dorel Sports bounced back from a difficult third quarter despite continuing industry-wide weakness in the global bicycle market. Similar to Dorel Juvenile, Dorel Sports has developed an exciting line-up of new products to be launched through 2018,” concluded Schwartz.
Interesting is that CEO Schwartz did not mention anything on on-line sales and the possible transformation of Dorel Sports into a consumer-centric company. In particular as a rapidly growing on-line sales in North America is harming the renowned brands badly. What’s also missing in Dorel’s financial report is any mentioning of e-bikes; currently the business driver, particularly in the company’s European markets.
‘Continued weak global bike market’
On Dorel Sports is reported that “Full year revenue decreased by 7.8%, to USD 865.4 million compared to USD 939.0 million a year ago. Organic revenue for the full year declined by approximately 11% when removing foreign exchange fluctuations and the change in Cycling Sports Group (CSG) International’s business model for which the revenue recognition transitioned from a licensing model to a distribution platform in the third quarter of 2016.”
Dorel’s financial report continues “Despite a continued weak global bike market, Dorel Sports grew its fourth quarter top line thanks to strong performances in CSG’s International business and at Caloi. The segment’s revenue improved considerably from the third quarter despite the continuing challenging global bicycle market, particularly in North America.
“Sales in CSG decreased slightly due to the competitive environment and a generally soft industry globally at independent bicycle dealers. Caloi improved its top line due to the on-going stabilization of the Brazilian economy, combined with the success of new product launches of the Caloi and Cannondale brands in Brazil. Inventory remains in a healthy position, finishing the fourth quarter with the lowest level in two years.”
Loss turned into profit
Dorel Sports further reports a 2017 operating profit of USD 24.8 million. In 2016 there was still an operating loss of USD 33.9 million. The company states on this turn around “For the year, the change in adjusted operating profit is explained by lower revenue, partly offset by improved adjusted gross profit which increased by 100 basis points to 22.4%. This is due to continued inventory management improvement in terms of product mix and pricing actions in key markets.”