MONTREAL (BRAIN)—Third quarter revenue dropped 11 percent in Dorel Industries’ recreational and leisure segment, which includes its bike business, but for the year, the division remains up 1.4 percent.
Revenue fell from $163.1 million in the third quarter of 2008 to $145.1 million for the same period this year. At $505.5 million, 2009 year-to-date revenue is slightly above 2008’s $498.7 million.
The third-quarter decline was primarily due to a reduction in sales at the mass merchant level. Sales in the Cycling Sports Group, home of Dorel’s IBD brands, increased over last year’s third quarter. Even so, consumers are buying less of CSG’s high-end product and are trading down to lower priced, lower margin bikes, the company said on Thursday.
Part of the increase in CSG could be that in the third quarter of 2008 supply issues slowed sales of Cannondale bikes, “but also in the Cycling Sports Group, they have done a very, very good job at opening up more and more dealers, both in North America and Europe, so that’s helping gain from the Cannondale sales,” said Martin Schwartz, chief executive officer of Dorel during an earnings conference call on Thursday.
“As well as the new 2010 product line. That was favorably received, and a number of dealers are ordering more of that product than they did in 2008,” Schwart continued.
Dorel acquired three businesses during the third quarter and into October—Iron Horse Bicycle Company and distributors in Australia and the UK.
On the Iron Horse side, a new product line has been developed for the sporting goods channel and is being presented to select customers.
“Thus far the reaction has been most positive. We are also looking in to an expansion of the Iron Horse brand outside bikes, and in to high-margin parts and accessories, as well as bike apparel,” Schwartz said.
Dorel is also investing resources into Sugoi’s custom apparel business with a new 70,000-square-foot facility in Vancouver, B.C., which is scheduled to open in January. The new building will use high-speed equipment to allow for increased capacity and lead times well below industry standards, Schwartz said.
“We have barely scratched the surface in this expanding market and expect Sugoi to triple its Custom Apparel business within five years,” he said.
Companywide, Dorel’s third quarter revenue was down 6.1 percent—from $552.2 million in 2008 to $518.4 million this year—but net income was up 11.1 percent, marking the most profitable third quarter ever for the company.