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Fox Factory grows sales in 2014 despite dip in bike business

Published March 4, 2015
Port slowdown has little effect on fiscal-year earnings but is expected to have an adverse impact in early 2015.

SCOTTS VALLEY, Calif. (BRAIN) — Fox Factory Holding Corp.’s sales rose 12.5 percent last year to $306.7 million despite a 1 percent decline in mountain bike product sales as the company’s first-quarter acquisition of aftermarket suspension distributor Sport Truck contributed to a 39 percent surge in sales of powered vehicle products for the full year.

Fox attributed the flagging mountain bike sales in part to industry supply chain issues, increased competition in certain categories and weaker sell-through than in previous years.

“While we are very pleased our mountain bike sales increased 2.3 percent in the fourth quarter, we believe competitive pressure will continue to hamper our current-model-year sales well into the second quarter,” CEO Larry Enterline said. “We are looking forward to the launch of our model year 2016 product line in the spring. Our Factory 36 all-mountain suspension fork, which we believe has been very well received by our customers as well as the trade media, continues to give us confidence that we are well positioned to see improvements in our mountain bike business when our model year 2016 begins shipping in volume.”

Although Fox was largely able to mitigate negative impacts from the West Coast port slowdown during the fourth quarter of 2014, the worsening labor situation affected the company’s ability to manufacture and transport its products internationally in the first quarter of 2015, Enterline noted.

“While we certainly are pleased the parties have reached a tentative agreement, the slowdown and subsequent clearing of the port congestion will have a negative impact on our operations in the early part of this year,” he said.

The shift of Fox’s fork manufacturing from California to its Taichung, Taiwan, factory continued apace in 2014, with 44 percent of forks manufactured on the island during the year. The full transition remains on track to be completed in fiscal 2015, reducing lead times and production costs and shortening the supply chain, Enterline said.

Fox also began producing some of its rear shocks in Taiwan during the fourth quarter, and expects to manufacture 80 to 85 percent of its shocks there by the end of 2015.

Looking ahead, Enterline highlighted Fox’s acquisition of wheel and component maker Race Face/Easton, completed in December, as a potential new driver of growth in Fox’s bike business. “We had identified wheels as a target-adjacent product category, and are very pleased to be working with the team at Race Face/Easton,” he said.

Fox Factory president Mario Galasso noted that the 2016 suspension line has been well received by OE customers, and that Fox has ratcheted up its marketing timeline to get media members on 2016 product well ahead of the seasonal kickoff at next month’s Sea Otter Classic.

The continuing proliferation of wheel sizes — not only the shift away from 26-inch to 27.5-inch but also the growth of fat bike sales and emergence of what Galasso termed “semi-fat bike” wheels and tires — presents new opportunities for Fox, he said.

“We see these as positive dynamics for bike sales in the mid- to long term as it opens up the addressable market and provides an incentive for the current enthusiast to continue to add to their quiver in bicycles,” said Galasso.

Topics associated with this article: Earnings/Financial Reports

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