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Dorel Reports Sharply Deteriorating Results

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MONTREAL, Canada – Dorel’s Sports segment, including the brands Cannondale, Schwinn, Mongoose, GT, Caloi, and Sugoi, continues to put heavy pressure on the Group’s results. For Dorel Sports the Q1-3 operating profit of US$2.47 million (2.23 million euro) in 2015 turned into a US$38.9 million (35.2 million euro) loss this year.

Dorel Reports Sharply Deteriorating Results
‘Purchasing patterns of US IBDs are changing significantly,’ said Dorel President and CEO Martin Schwartz at the presentation of third quarter results. – Photo Bike Europe

Dorel Sport’s third quarter revenue decreased by US$15.8 million (14.3 million euro) or 5.9% to US$250.7 million (226.8 million euro). The year-to-date revenue decreased by US$42.8 million (38.7 million euro) or 5.7% to US$703.7 million (636.7 million euro).

Changes at North American IBDs

The Canadian company points out that the segment’s lower sales in the third quarter as well as the past nine months can be attributed to a softer global bike market and changes in the North American independent bicycle dealer (IBD) retail environment.

Changing purchasing patterns

Referring to this changing retail landscape, Dorel President and CEO Martin Schwartz stated that, “the purchasing patterns of the IBDs are changing significantly. Without doubt they will move fourth quarter orders to the first quarter of 2017. Therefore it is expected that there will be a reduction in second half of Cycling Sports Group’s shipments which should result in year-over-year growth in the first half of 2017.” What Schwartz didn’t say is that this development will also negatively affect the fourth quarter results of Dorel’s Sports segment.

Successful product introduction

A strict program of cost-cutting, restructuring and impairment losses in the past months resulted in a small operating profit of US$5.8 million (5.2 million euro) for the third quarter at Dorel Sports while the division still reported a loss of US$26 million (23.5 million euro) in the third quarter last year. “The year-over-year increased operating profit was mainly driven by margin improvement at all divisions, particularly Pacific Cycle due to their new product introduction success and logistics efficiencies. Also Dorel Sport’s Brazilian company Caloi contributed to this positive results thanks to price increases. At Cycling Sports Group reduced inventory levels followed by less discounting contributed to the improvement,” said Schwartz. Despite the restructuring, Dorel Sports still reported a year-to-date operating loss of US$38.9 million (35.2 million euro) compared to a profit of US$2.5 million (2.3 million euro) in 2015.

Outlook

Martin Schwartz expects that, “for the Sports segment overall we believe the positive trend on adjusted operating profit will continue in the fourth quarter which will result in improved earnings compared to last year’s fourth quarter.”

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