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Dorel Outlines Plans for Iron Horse

Published August 12, 2009

MONTREAL, Quebec (BRAIN)—The chief executive officer of Dorel Industries said on Wednesday that the company would sell Iron Horse branded bicycles in the sporting goods channel starting next year.

“We’re talking to several of sporting goods chains who are working very closely with us. We’re working with a couple chains in Canada. We’re very optimistic about this Iron Horse project,” said Martin Schwartz, CEO of Dorel Industries, during a conference call Wednesday afternoon with analysts to discuss the company’s second quarter earnings.

Schwartz said Dorel has redesigned Iron Horse bikes and is currently showing new product to customers. The bikes will sell at a mid-range pricepoint, he said.

Dorel Industries bought Iron Horse for $5.2 million on July 13 off the auction block in bankruptcy court.

For the first six months of the year Dorel’s bike division, which includes Cannondale, GT, Mongoose, Schwinn, Sugoi, Pacific Cycle and PTI, reported revenue of $335.5 million, up 7.4 percent from the same period last year. Excluding the impact of foreign exchange variations and the acquisition of PTI, organic revenue dipped 4 percent year-to-date.

Earnings from operations declined 19 percent. Gross margin was down 140 basis points due to a less profitable product mix as consumer shifted to lower pricepoint products.

Sales fell in the Cycling Sports Group, home to the company’s IBD brands, as consumers purchased fewer high-end bikes. As a result, inventory levels are heavy, but bikes are moving, said Jeffrey Schwartz, chief financial officer for Dorel.

“We’re carrying a lot of bikes now given it’s the end of summer. So is the whole industry. We’re watching that and trying to deal with that,” Jeffrey Schwartz said.

Although 2009 has been a challenging year, Dorel expects the high-end bike business to pick up next year, particularly with the positive publicity garnered from two Liquigas riders finishing the Tour de France in the top 10.

“As we approach the 2010 model year, early reaction to our new IBD product line has been outstanding and our pre-delivery order level is up significantly from last year at this time. Based on the feedback we have received thus far, we believe we will increase our bike sales next year to the IBD retail chain, regardless of the economic situation,” Martin Schwartz said.

—Nicole Formosa

Topics associated with this article: Earnings/Financial Reports

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