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Full-Year Revenue Increases Modestly

Published February 1, 2008

BY MATT WIEBE AND MARC SANI

SAN DIEGO, CA—It appears the bicycle industry shrugged off Wall Street’s woes and a year-long drumbeat of sour economic news, posting respectable 4 percent growth in wholesale revenue last year.

That’s one conclusion from the Bicycle Product Suppliers Association’s annual report released last month at the Bicycle Leadership Conference. And despite worries over a recession, industry veterans are bullish on the upcoming season.

Bill Austin, chairman of Raleigh USA and head ofthe BPSA’s statistical committee, said this could be a very good year for dealers. “I think consumers will spend more time at home looking for recreation activities and cycling is one of them. I also think they’re very concerned over energy prices,” he said.

Austin, citing the annual report, pointed out that overall unit sales for 2007 were essentially flat while average wholesale prices led to robust revenue. And he noted several key trends to watch:

• Full-suspension mountain bike sales soared to new levels in 2007. They were up 9 percent in unit sales and 20 percent in dollars.

• Road bikes saw about a 3 percent decline in unit sales and in wholesale dollars. But suppliers maintained their average wholesale unit selling price at $794, almost unchanged from $798 in 2006.

• Hybrid sales were a major bright spot—up 6 percent in units and 12 percent in average wholesale price from $229 to $241 per unit.

As for road bikes, Scott USA’s bicycle division vice president Scott Montgomery said sales seem to still have some steam, but he’s less sure whether that will carry forward. “Our road sales were very strong, even the $7,000-plus market spec’d with Red. And the $2,000 road market was also solid. The mid-range $4,000 road bikes sold well, but I wonder how well this segment will sell into the future,” he said.

“If you’re super wealthy I don’t think you are as impacted by mortgage and fuel cost increases as the person looking at a $4,000 road bike. I think this mid-range price could be a tough category this year.”

Pat Cunnane, Fuji president and a BPSA board member, said his company’s sales last year were strong in road and BMX, especially the last quarter and into January. He predicts no let up in the road market for his company.

Suppliers, however, sensing a slowdown, lowered road inventory by 56 percent in December, entering the new year with 31,208,641 units on hand compared to the previous January’s 71,336,249.

Austin, a hawk on inventory control, said tight inventory going into this year is a boon for dealers. “That means they will have the dollars to buy what they need when they need it. They are not stuck with heavy inventories of unsellable product,” he said.

Adding luster to a generally positive report on 2007 sales, full-suspension mountain bikes posted the largest single sales gain in any category—up 20 percent over 2006. The category now comprises 15 percent of all bicycle sales. The average wholesale price also climbed 9 percent to $1,198 compared to $1,096 in 2006.

Scott USA’s Montgomery said this upward price trend for full-suspension mountain bikes will continue—in part because raw material and production costs are rising—but today’s high-end full-suspension bike is a compelling reason to replace the four-year-old rig hanging in the garage.

In other categories, juvenile bikes—19-inch and below, 20-inch, 24-inch and 20- and 24-inch BMX or freestyle—continue to pick up sales and market share. The 20- and 24-inch suppliers sold far more than ever, possibly reflecting an increase in high-end juvenile road and mountain bikes. The average wholesale price for a 24-inch bike climbed to $156 from $148 in 2006. Wholesale prices in the 20-inch category posted averages of $104, up from $99.

After years or lagging sales and falling prices, rigid mountain bikes posted a comeback with an 86 percent jump in wholesale pricing from $94 in 2006 to $175. Many in the industry predicted rigid mountain bikes would transition to an urban transportation alternative and it appears they were correct.

Topics associated with this article: Earnings/Financial Reports

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