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Dorel's bike business continues to recover in Q3

Published November 2, 2018

MONTRÉAL (BRAIN) — Dorel Industries announced Friday that revenue in its sports division, which includes the company's portfolio of mass and IBD bike brands, rose 6.6 percent in the third quarter, to $219.1 million from $205.5 in the same period a year earlier. The result is the second consecutive quarter of growth for the bike business.

During an earnings call Friday, Dorel president and CEO Martin Schwartz said, "Several new product launches at Dorel Sports benefited all three divisions: CSG, Pacific Cycle and Caloi. ... The Cycling Sports Group had an excellent sales meeting this summer, and dealer reaction was most enthusiastic. Several new Cannondale and GT models in various categories were launched during the quarter, and all have been very well received.

"Pacific Cycle had a very solid quarter. Among the drivers were customers building up inventory in advance of the approaching holiday season, improved parts and accessories shipments, continued growth in the Mongoose scooter line, and strong sales of battery-powered ride-ons," Schwartz added.

Caloi, Dorel's Brazilian bike brand, also had a strong quarter, but its results were undercut by foreign-exchange impacts, the company noted.

"Business there is improving. We've seen some improvement in the real since the end of the third quarter, and we are hoping that continues as well now that they have their election behind them," CFO Jeffrey Schwartz said.

Company officials said they expect the momentum in bike to continue into the fourth quarter.

"We've got a lot of holiday product still shipping at the Pacific level, and on the CSG side we've got a lot of new models that we weren't able to ship in Q3 that are shipping in Q4. Some of them are sold out, and we continue to try to pull orders forward. So we're looking a lot more optimistic on our bike business than let's say we were earlier this year," Jeffrey Schwartz said, adding that the latest iteration of Cannondale's Habit trail bike and the brand's new Topstone gravel model were garnering strong orders from IBDs.

Overall, Dorel's third-quarter revenue rose 4.3 percent to $670.4 million from $642.6 million a year earlier. The company's home division posted record revenue of $221.6 million during the quarter, up 10 percent from a year earlier. That contrasted with its juvenile division, where revenue fell 2.5 percent to $229.7 million due to unfavorable foreign-exchange rates and a lack of new product introduced in key categories for the European market.

Addressing the potential impact of the Trump administration's tariffs on goods imported from China., the company said all of Pacific's bikes for the mass market will be affected, as will some lower-end Cannondale product.

"A substantial number of our imports from China into the U.S. are now subject to new 10 percent U.S. tariffs, which primarily affect our Dorel Home and Dorel Sports segments," Martin Schwartz said. "We have informed our customers of the impending price increase necessitated by these tariffs. The rate of imposition is currently scheduled to increase to 25 percent on January 1, 2019, and at that level, these increases could impact consumer demand in the longer term."

 

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