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Dorel's bike business down in second quarter, first half

Published August 6, 2015
Decline in sales in Europe and North America, and foreign exchange losses impact earnings.

MONTREAL (BRAIN) — Dorel Industries reported that second-quarter revenue for its bike business, Dorel Sports, was down $35.2 million or 12.3 percent compared to the same quarter last year. Revenue totaled $251.1 million compared to last year's $286.2 million for the segment.

Dorel Sports brands include Cannondale, Schwinn, GT, Mongoose, Caloi, IronHorse and Sugoi.

Revenue for the first half for the bike division was also off 8.8 percent or $46.6 million to $480 million from $526.6 million a year ago. Organic revenue declined about 5 percent in the quarter and 2 percent year to date, after removing the impact of foreign exchange rates year over year.

Dorel said that the Brazilian-based Caloi division had double-digit organic revenue growth in local currency. Sales also increased organically in Japan and the UK. But offsetting both of these positives was organic sales decline in Europe where dealers purchased inventory in the first quarter ahead of price increases in April and before the launch of model-year 2016 products in the third quarter.

Sales also declined in North America, which Dorel attributed to rainy May weather and to mass customers reducing inventory levels in the sporting goods category.

New pricing on model-year 2016 bicycles is being announced, and executives said introductions have received good reviews from retailers and media.

Adjusted operating profit in the second quarter, excluding restructuring and other costs, decreased $7.7 million, or 42.1 percent to $10.7 million, compared to $18.4 million a year ago. For the six months, adjusted operating profit was down $13.3 million, or 37.6 percent to $22 million, compared to $35.3 million in 2014.

The U.S. dollar appreciation against most of the currencies in Dorel's markets accounted for a net negative impact on the bike division's operating profit of about $7 million during the second quarter and $14 million during the first six months, the company said.

Companywide, accounting for its home furnishing and juvenile divisions, Dorel Industries posted $669.6 million in revenue for the second quarter, up 2.1 percent from $655.8 million for the same period last year. Adjusted net income was $16.6 million compared to $19.8 million for the quarter a year ago.

Revenue for the six months increased 2.4 percent to $1.34 billion compared to $1.30 billion last year. First half adjusted net income reached $28.4 million, compared to adjusted net income of $49.2 million last year.

Its home furnishings business had a breakout year with revenues increasing nearly 30 percent in the quarter and 23 percent year to date. Dorel's juvenile segment, consisting of children's car seat and furniture, also had a good quarter with a 5.4 percent increase in revenue. For the first half, juvenile was up 3.7 percent.

"Dorel's juvenile and sports segments continue to operate in an environment of challenging foreign exchange rates as the U.S. dollar remains strong against practically all currencies," said Martin Schwartz, Dorel's president and CEO. "This had a significant effect on our earnings, impacting operating profit in the two segments combined by a net negative amount of approximately $12 million in the second quarter alone. We have done a good job mitigating this impact with selective price increases and other proactive measures and our results reflect that."

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