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Dorel Beats Q4 Woes to Report Record Year

Published March 11, 2009

MONTREAL (BRAIN)—Dorel Industries said on Wednesday it had its best ever year in 2008 despite economic challenges in the fourth quarter that left the company sitting on millions of dollars worth of inventory.

Revenue for the year rose 20.3 percent to $2.2 billion. Organic revenue growth was 6 percent. In the fourth quarter, revenue increased 4.6 percent to $479.9 million.

Dorel’s Recreation and Leisure segment, which includes Cannondale, GT, Mongoose, Schwinn, Sugoi, Pacific Cycle and PTI, performed below expectations in the fourth quarter, but still realized organic growth of 10 percent from the mass merchant brands.

There was virtually no organic growth among the IBD brands, said Jeffrey Schwartz, chief financial officer for Dorel.

“Q4 is not a big quarter for that group. With the earthquake we had in the economy, IBD retailers weren’t looking at stocking up inventory until they knew what was going on,” Schwartz said.

Still, revenue in the segment grew 71.8 percent in 2008, in large part because of the acquisitions of Cannondale, Sugoi and PTI, said Martin Schwartz, president and chief executive officer of Dorel.

Inventory levels rose to record highs in the fourth quarter as retailers cut back significantly on orders due to the economic crisis, Schwartz said.

The company is sitting on about $122 million worth of inventory, most of which is from Pacific Cycle, Jeffrey Schwartz said. Schwartz said Dorel intends to be back at optimal inventory levels by the third quarter and that the product has already started to move.

Dorel won’t be blowing out the product, but rather selling it at full margin because retailers are ordering it, Schwartz added.

Reducing inventory levels is a major focus for Dorel in the short term, he said.

“We are taking that as probably our most significant task in the next six months and we’ve made great progress in that area,” Schwartz said. “We are going to see sizable portion of that, maybe up to half of it, reduced in first quarter.”

The company will hold an annual investors’ day on March 25, at which time executives expect to discuss more in depth the progress it’s made in integrating its IBD brands into one group (Cannondale Sports Group).

For details on that meeting, read the April 1 edition of Bicycle Retailer and Industry News.

—Nicole Formosa

Topics associated with this article: Earnings/Financial Reports

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