Dorel: Decline in 2013 Results, but Positive on 2014
MONTREAL, Canada – Dorel Industries Inc announced that its 2013 fourth quarter Recreational/Leisure earnings which includes bicycles will be substantially below prior year levels due to top line weakness and a poorer product mix. As such, its consolidated results for full year will be below 2012.
“We had felt that things were improving at the end of the third quarter but additional market issues had more of an impact than originally expected,” says Martin Schwartz, Dorel President and CEO.
Less mass market orders
One of the issue Schwartz meant are lower sales volumes to US Pacific Cycle’s mass merchant customers during the fourth quarter compared to last year as retailers in general experienced fewer consumer visits during the holiday period and even withdraw orders.
Also Cycling Sports Group (CSG) sales to the IBD channel were more profoundly affected as dealers were reluctant to increase inventories going into the new year. “Industry discounting continued to be a market reality and the number of 2013 model year bicycles sold carrying lower margins was more than anticipated,” explains Schwartz.
Supply chain problems
On top of customer orders for more than US$ 10 million of CSG 2014 models did not arrive in time for fourth quarter delivery and are being shipped during the current first quarter. Another negative factor during the quarter was unfavorable foreign exchange reports Dorel.
Outlook for 2014
Nevertheless Schwartz’s outlook for 2014 is positive. “With January completed, normally the quietest month of the year and barring any disasters in weather, the Recreational/Leisure earnings for the first quarter should improve by at least 20% to 25% over the corresponding quarter last year.
There are now several positive trends working in our favour. Dealer orders are being driven by a firming consumer demand with new models selling at full margins, new SKUs at some of our largest customers, increased licensing revenue, strict cost controls and foreign exchange benefits.”
“We are confident about the year ahead. To be clear, the restructuring and associated charge announced last month was not related to the fourth quarter’s poor performance but was undertaken to enhance our competitiveness in the bicycle industry. This will improve our profit through 2014 and 2015,”concludes Martin Schwartz.
Dorel will announce year-end results on March 4, 2014.