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Dorel Exec Talks Bikes with Investors

Published June 7, 2010

MONTREAL, Quebec (BRAIN)—Dorel Industries’ top bike executive spoke to investors for about 45 minutes during a recent investor relations meeting, highlighting the company’s strategy for growth in the year ahead.

Bob Baird, president of Dorel’s recreation and leisure segment, told investors that Dorel’s $680 million bike business is poised for future growth after executives spent the past year simplifying operations in order to shave costs.

The largest and most high-profile change was the decision to end manufacturing at Cannondale’s Beford, Pennsylvania, factory, moving production of 230,000 frames to Asia.

“The economics are just staggering there, so it was a good decision,” Baird said. Other changes, like saving $75,000 by changing the corporate credit card carrier, have been smaller scale.

Dorel has also streamlined operations, for example winnowing Sugoi’s 29 apparel suppliers in 20 different countries and Cannondale apparel’s 20 suppliers across 11 countries to just seven core suppliers.

Another move was to de-risk the supplier network by making sure two factories can produce a given bike model instead of just one.

Dorel’s bike brands include Cannondale, GT, Mongoose, Schwinn, Pacific Cycle and Iron Horse. The company also owns Sugoi apparel and several international bike distributors.

The bike segment is off to a solid start this year, posting $181 million in sales in the first quarter—up 12.5 percent year-over-year—and a 51 percent increase in profit.

Mass market business represents about 80 percent of the units sold and 40 percent of the dollars, while the IBD network is about half the dollars.

Even with the progress, Baird said there is more work to be done.

“We are still a little too complex. We have got to root that out. Anything that is cost that is not driving R&D, marketing and selling is evil. So we are trying to drive that out of the system day in, day out,” he said.

Looking ahead, Dorel will focus on growing its IBD network, particularly in regards to crossover between brands. In the past year, it’s increased its cross branded dealers by 137 and seen a 7 percent increase in both Cannondale dealers and GT, Schwinn and Mongoose dealers.

The company will also give some much-needed TLC to GT, once a $250 million brand that’s now closer to $100 million.

Another Dorel strategy is to better control distribution in key international markets. In the past year, Dorel has purchased distributors in Australia and the U.K.and recently formed CSG Asia-Pacific to handle operations in that region.

To listen to the complete webcast from Dorel’s investor relations day, click on the link above.

—Nicole Formosa

Topics associated with this article: Earnings/Financial Reports

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