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SRAM Feeling Recession's Pinch

Published October 30, 2009

CHICAGO, IL (BRAIN)—SRAM’S Stan Day said that the global recession has taken a bite out of the company’s business, reflecting a similar fall off in sales as its competitor Shimano.

“You’ve got Shimano saying they’re down 25 percent or so, and I’d echo a number in that same ballpark,” said Day, SRAM’s CEO and one of the company’s founders. Unlike Shimano, SRAM is privately held and doesn’t announce its financial performance.

Still, it’s been a challenging year for the Chicago company with a number of product introductions launched in the middle of what Day calls an “economic storm.” But bicycle production could pickup soon, he added. “I think we’ll see a reasonable March and June quarter in terms of bike production,” he predicted.

“The OE biz has been down significantly...but what I hear from dealers is that retail is off only 5 to 10 percent,” he said. And while industry suppliers and manufacturers face a tough market, particularly at the upper middle and high end, retailers—in general—are handling the consumer pullback reasonably well.

“Here’s my view of what’s occurred in the last nine months: On the OE side, bicycle production has been cut more than retail sales,” he said, noting that aftermarket sales of SRAM’s products have done reasonably well since they reflect retail activity.

"Through the September quarter of last year, bike production was running hot,” Day said. “When the financial markets crashed last September, everyone scrambled to cut model year 2010 production, but the pipeline didn’t get ratcheted down until January." That left inventory levels high as this year’s season opened.

With retail sales off in the 5 to 10 percent range, bicycle production got cut much more to bring inventory levels down. “Going forward, even if manufacturers maintain a stable level of inventory, production will go up because we are moving beyond the inventory shrinkage stage. And if we rebuild inventory levels, there could be a turbo-boost in OE production,” he added.

As retailers move through held over 2009 bikes and a limited supply of 2010 models, retailers could see 2011 bikes from some suppliers hit their showroom floors as early as June. Some early model-year introductions would be a likely tactic as part of a bike brand’s inventory management, Day added.

—Marc Sani

Topics associated with this article: Earnings/Financial Reports

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