Dorel Industries Inc. reported sales in the company’s Dorel Sports segment increased 7.4 percent to U.S. $224.5 million and 6.5 percent on a currency-neutral basis.
Dorel said the results were a “much better quarter than anticipated, surpassing the expectations indicated in the company’s first quarter results press release.” Dorel had warned that liquidation sales from the exit of Toys “R” Us and poor April weather in most markets would impact Dorel Sports’ results.
Six month revenue increased US$8.1 million, or 1.9 percent, to US$431.2 million, which is flat to prior year after removing the impact of varying foreign exchange rates year-over-year.
The segment rebounded from a difficult start to the year with improved second quarter adjusted operating profit versus first quarter. Compared to prior year, second quarter revenue growth was over 10 percent at both Cycling Sports Group (CSG) and Caloi. CSG recorded growth in all key regions with good momentum from recent product launches. Caloi continued to grow on new product innovation and was further aided by a gradual improvement in the Brazilian economy. Pacific Cycle experienced a modest revenue decline overall with the negative impact of the Toys “R” Us U.S. liquidation, but revenue to other key customers increased.
Dorel Sports sold its apparel business (Sugoi And Sombrio) in the second quarter to Louis Garneau Sports Inc. The transaction resulted in restructuring costs of US$11.2 million, of which US$9.2 million was non-cash. The primary components of the restructuring costs were a write-down of the Sugoi trademark and inventory markdowns. This divestiture will allow Dorel Sports to focus on its core strategic businesses of bikes, parts and accessories categories and electric ride-ons.
Second quarter operating loss for Dorel Sports was US$3.3 million compared to an operating profit of US$4.9 million a year ago due to restructuring costs mentioned above. Excluding restructuring and other costs, adjusted operating profit rose US$2.3 million, or 40.5 percent, to US$8.0 million from US$5.7 million last year. For the six months, operating loss was US$4.1 million compared to an operating profit of US$15.0 million in 2017. When excluding the US$6.6 million impairment loss on trade accounts receivable from Toys“R”Us U.S. recorded in the first quarter of 2018, adjusted operating profit for the six months was US$13.8 million compared to US$15.1 million a year ago which is mainly explained by the 70 basis points decrease in adjusted gross profit offset by higher revenue.
Dorel President & CEO Martin Schwartz. said in a statement, “Across our segments, Dorel Sports rebounded strongly after a tough start to the year, posting solid adjusted results.”
Looking ahead, Schwartz added, “Dorel Sports remains on track to significantly improve earnings over last year. The second quarter was slightly better than expectations, and our outlook remains positive with upcoming new products expected to drive improved sales and adjusted operating profit in both the third and fourth quarters.”
Dorel Sports brands include Cannondale, Schwinn, GT, Mongoose, Caloi and IronHorse.
