Trump Tariffs Cause Chaos on North American Bike Market
MONTREAL, Canada – Dorel Sports including Cycling Sports Group (CSG; Cannondale, GT, Mongoose among other brands as well as Pacific Cycle and Caloi) is ringing alarm bells on the current situation at the North American bike market. “The impact of increased U.S. imposed Trump tariffs created chaotic market conditions,” stated Dorel President & CEO, Martin Schwartz.
Listed Dorel Industries Inc. is directly hit by the trade war triggered by President Trump between the U.S. and China. It has led the U.S. to charge the import of regular bicycles as well as electric bikes and bike products from China with a tariff ranging between 10 to 25 percent. Earlier the US’ biggest bicycle importer, Huffy Corp, already warned for the devastating impact of these tariffs on bike sales and the American bicycle industry.
Effect unclear at the end of the second quarter
Sales at independent bicycle dealers (IBDs) remained strong
According to Dorel CEO Martin Schwartz, “The impact of the Trump tariffs on our businesses was still unclear at the end of the second quarter. We raised prices midway through the third quarter and this has had several negative consequences. Not all competitors nor retailers raised prices at the same time or rate.”
“Retailers have also changed their buying routines,” Schwartz continues. “New price points have caused some consumers to opt for different items creating a considerable product mix imbalance. As well, elevated warehousing costs are still being incurred as the shift in demand has delayed our inventory balancing program.”
Christmas deliveries delayed
“Another factor affecting the third quarter is that some of our large U.S. customers have delayed Christmas 2019 deliveries to the beginning of the fourth quarter. In addition, the recent rise in value of the U.S. dollar has had a negative impact on Dorel’s Sports and Juvenile segments as major currencies that affect our financial results dropped between 3% and 8%.
“Tariffs have also impacted Dorel Sports’ mass merchant business. Although sales have remained strong, the mix has been negative, and gross margins are lower. Sales in the independent bicycle dealer (IBD) and Sporting Goods channels have remained strong and the outlook remains positive,” claims Schwartz.
The current market situation prompted Dorel’s Board of Directors to suspend dividend. Only the dividend declared on 2 August 2019 is not affected and was paid as scheduled on 2 October 2, 2019. Yesterday, the stock market responded immediately on the Dorel Inc announcement. The U.S.-listed stock Dorel Industries shares plummeted 31 percent to a record low of USD 4.69 (4.28 euro). That was by far the biggest one-day decline since it went public in May 1998.