MONTREAL (BRAIN)—Dorel Industries has outsourced the custom manufacturing division of Sugoi’s apparel business in a move to increase profitability in that division, Dorel executives said Thursday during a conference call to discuss the company’s third quarter earnings.
Sugoi’s earnings declined $2.5 million in the third quarter of this year, mainly due to write-downs of excess inventory from prior year models, as well as $800,000 in costs related to moving custom apparel manufacturing to a third party, according to a Dorel press release.
Dorel expects to spend another $1.5 million in the last quarter of the year primarily due to employee severances.
Last April, Sugoi moved into a new 70,000 square foot headquarters near Vancouver, British Columbia to support anticipated growth in custom apparel, anticipating that business would triple by 2015. Dorel invested in new digital equipment and sublimation machines specifically for custom apparel production.
But late last year, sales began sliding. Revenue declined $2 million in the fourth quarter due to late product deliveries, supply chain interruptions and a slowdown in production during the move to the new facility. Changes in the management team also affected business. Dorel CEO Martin Schwartz said on Thursday that preliminary orders for 2012 line are higher than last year, and although Sugoi represents just 5 percent of Dorel’s bike division, the company is focused on making it a revenue generator.