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Q1 sales trend down, but Leisure Trends says don’t worry yet

Published April 12, 2013

BOULDER, CO (BRAIN) — Retail sales are trending down through the first quarter this year compared to last year but that’s no reason for suppliers to panic, JJ Rudman, retail analyst for Leisure Trends Group, told attendees on a webinar yesterday.

Anecdotally, three-quarters of retailers on the Leisure Trends Cycling panel indicated their sales were down compared to the first quarter last year. Leisure Trends will publish March retail sales figures at the end of the month. Through February, retail sales at IBD were down 4 percent in dollars compared to the first two months the prior year.

Comparisons to last year are particularly unfavorable due to an unseasonably warm winter last year. In 2012, retailers saw 64 percent of the annual dollar increase in the first quarter. But historically the first quarter accounts for just 17 percent of annual IBD sales. Rudman said that allows plenty of room for retailers to claw back from a slow start to the year.

“Everything got front-loaded last year. These are extreme comparisons. It’s too early to worry,” Rudman said on the webinar scheduled in advance of the Bicycle Leadership Conference next week. Around 170 people attended the one-hour webinar, with about one-fifth of them retail attendees.

Rudman attributed the sales decline in the first few months not to economic uncertainty or concerns over government sequestration, but to an unseasonably warm winter last year.

Last year was the warmest year on record. This year, January and February returned to normal and below normal temperatures. “This year is not so great for bike sales. We’re seeing the cold stick around and that’s really affecting what’s going on with these industries,” said Rudman, referencing other industries that Leisure Trends Group tracks including outdoor and paddlesports.

“Generally these industries are very well insulated from economic turbulence and it’s more weather driven. With IBDs, we’re seeing a decrease in sales driven by weather,” said Rudman, noting continued unseasonable weather in key bike markets such as Colorado.

In 2012, IBD retail sales grew 6 percent to reach $3.6 billion, a record sales number. Bikes were up 7 percent and aftermarket parts and accessories were up 5 percent. But units painted a different picture, with units flat at about 1 percent overall and 2 percent in bikes.

Rudman pointed to the higher average retail price that he expects will continue to drive dollar increases through 2013. “When you look at it from an average, even relatively small changes in average retail can have a fairly big effect,” said Rudman.

Much of the growth in 2012 was in the mountain bike category, where 29ers have been driving the growth. 

In dollars, 29-inch bikes grew 50 percent in front-suspension and increased 64 percent in the full-suspension in 2012. Rudman noted that 29-inch bikes reached a parity point in Q3 last year, when retailers sold more 29-inch bikes than 26-inch bikes in dollars. The story is slightly different in units, where 29-inch wheeled bikes have yet to approach parity but Rudman noted we’re getting closer. “We’re seeing the evolution of this category slowing taking away from 26,” he said.

Rudman also noted that transit/fitness is an intriguing category, up 14 percent in dollars last year and up 9 percent in units, making it the largest bike category in units. It also brings an attractive margin, making more 40 percent margin for retailers.

“Don’t discount this category,” said Rudman. “They’re selling well, they have a good margin, and women’s models are selling. It’s a really important category to keep in mind moving into 2013.”

Topics associated with this article: Earnings/Financial Reports

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