OSAKA, Japan (BRAIN) — Shimano's worldwide bicycle-related sales slumped 17.4 percent in the company's fiscal 2016 to 259,455 million yen ($2.27 billion), while operating income in that segment declined 27.5 percent, the company announced Tuesday.
The company's net sales were down 14.7 percent, exceeding the 8 percent drop for the year that the company forecasted last February and slightly exceeding the 14.2 percent decline the company forecast in releasing its first half results in October and re-iterated after its first three quarters. Shimano's sales were up 14 percent in 2015, but quickly declined in 2016, when bike sales were down 20 percent in the first quarter.
In a typically terse summary of financial results for 2016, the company outlined the conditions that led to the year-end results:
- "In Europe, bad weather in early spring greatly undermined retail sales of complete bicycles, resulting in a continuing high level of distributor inventories. However, thanks to good weather from July onward, sales became brisk. As a result, distributor inventories were adjusted to an appropriate level."
- "In North America, retail sales of complete bicycles were slightly less than in the previous year. However, distributor inventories of bicycles, which had been high since the beginning of 2016, were adjusted to a lower level than in the previous year."
- "In China, lackluster retail sales of sports bicycles persisted from the previous year owing to the economic slowdown and bad weather, and were below the previous year’s level. On the other hand, distributor inventories, which remained at a high level, started to stabilize."
- "As regards other major emerging markets, retail sales of sports bicycles in Southeast Asia, which had been robust, were at a level lower than the previous year. Sales in South America continued to be soft because of the economic slowdown and weak currencies."
- "In the Japanese market, retail sales of sports bicycles, which had been robust until the previous year, were lower than the previous year’s level and distributor inventories were somewhat high. Retail sales of community bicycles remained weak, continuing from the previous year."
Bike-related sales make up ab out 80 percent of Shimano's business. The company's fishing division saw net sales decline 1.7 percent from the previous year to 63,143 million yen, and operating income increased 27.4 percent to 6,842 million yen.
The company is forecasting a modest increase in net sales of 2.2 percent in its fiscal 2017, and a 1.75 percent increase in sales int he bike division. It noted that Brexit negotiations in the U.K and general elections in France, Germany, and other countries could effect economic recovery in Europe. It said personal consumption is expected to grow in the U.S. due to increased employment. However, Shimano noted, "specific policies of the new administration and their feasibility may have an impact on economic performance."
The company also announced impairment charges triggered by lower-than-forecast sales at Pearl Izumi USA. Shimano wrote down an impairment for that division of 685 million yen (about $6 million) in 2016 and 242 million yen in 2015. It also recorded an impairment of 120 million yen for the Shimano-Pearl Izumi softgoods division in Europe for 2015.
The company said it would work to further manufacturing efficiency and product development and said it was adding two international members to its board of directors to better position itself to deal with an increasingly global market.
As medium- to long-term strategies, the company identified:
1 Strengthening core competence and focus on the market
Continue to refine the ability to conceive outstanding ideas, technical ability, design ability, and manufacturing ability to commercialize actual products and implement marketing by setting clear targets.
2 Creating new bicycle and fishing cultures and enhance the brand power
Position cycling and fishing as aspects of culture offering values that enrich people's lifestyle, rather than hobbies or sporty leisure pursuits, and work to raise the social recognition of cycling and fishing. This will lead to an increase presence of Shimano and enhancement of the value of Shimano brand.
3 Increasing corporate value
Maintain a positive cycle of ever higher corporate value for all stakeholders, including shareholders, customers, and Team Shimano members through continuous offering of captivating products.