Cycling Becomes the Bright Spot in Dorels Results
Dorel Industries Inc. reported slight growth and a small drop in earnings per share on Tuesday, August 9th, in their second quarter report. Total revenue for the period was US$ 619 million (euro 393.5 million), up
MONTREAL, Canada – Dorel Industries Inc. reported slight growth and a small drop in earnings per share on Tuesday, August 9th, in their second quarter report. Total revenue for the period was US$ 619 million (euro 393.5 million), up 1.9% from US$ 607.7 million (euro 386.4 million) for the same quarter last year.
Net income was US$ 23 million (euro 14.6 million) compared with US$ 32.9 million (euro 20.9 million) for the corresponding quarter of 2010.
For the first time, the cycling-oriented recreational/leisure division of the company beat out the juvenile segment (car seats, strollers, children’s furniture) for revenues in the quarter. Recreational/Leisure’s revenues for the period totalled US$ 249.1 million (euro 158.4 million) for US$ 21.3 million (euro 14.7 million) in earnings. The Juvenile division by comparison, only earned US$ 14.9 million (euro 9.5 million) on US$ 244 million (euro 155 million) in revenue.
“Dorel’s Recreational / Leisure segment maintained its strong performance through the second quarter with a year-over-year revenue increase of 16% and an operating profit gain of 25%”, commented Dorel President and CEO, Martin Schwartz during a conference call with investors and analysts.
According to a company press release, Dorel’s premium bicycle brands, especially Cannondale, continue to generate strong consumer demand, while GT, Schwinn and Mongoose products are making gains in North American and European IBD channels. “The sales success for the segment’s premium bicycles can be attributed to successful new product introductions and increased promotional spending, which has increased brand awareness,” said Schwartz.
Revenues from the Pacific Cycle arm of the Cycling Sports Group were hampered by a wet spring impacting sales to the mass merchant distribution channel. Pacific Cycle still improved its position however, with sales up slightly over last year. An aggressive marketing campaign for the Schwinn brand also delivered results, with a better performance for the brand compared to the second quarter of 2010.
Questions were raised during the conference call regarding Sugoi, the flagship apparel brand in Dorel’s Apparel Footwear Group (AFG), and a poor performer of late. The chief factor, according to Schwartz, was the management team, which has since been replaced. “We take responsibility for not having the right people in place. A good product, good brand, but we’re not doing the basics right. With the product we have, it will turn around nicely.”
Unlike its recreational/leisure division, Dorel’s other businesses couldn’t boast the same strong growth, due to worldwide economic conditions and a drop in consumer spending. Overall organic revenue decline for the juvenile division was approximately 12% for the quarter and 9% for the first half. The home furnishing division is also struggling, as revenues decreased 5.3% in the second quarter and are up 0.7% for the year-to-date. Dorel’s cycling brands include Cannondale, Schwinn, GT, Mongoose, IronHorse, and Sugoi. Dorel is a US$ 2.3 billion (euro 1.47 billion) company with 4,700 employees and facilities in 19 countries.