Dorel Sports showed an operating loss of $611,000 due to the impact of COVID-19. The business showed its fourth consecutive quarter of revenue growth as April bicycle sales surged with stay-at-home families seeking exercise and alternatives to vacations.

The operating loss compared to earnings of $4.6 million a year ago. Figures are in U.S. dollars.

In a statement, Dorel Industries, the parent of Dorel Sports, said the coronavirus reduced first-quarter operating profit by over $6.0 million through a combination of reduced sales in the second half of March due to lockdowns, unfavorable foreign exchange due to the strength of the dollar and an increased impairment loss on trade accounts receivable considering the economic impact of the COVID-19 pandemic.

On an adjusted basis, the loss in the segment came to $528,000 against the same $4.5 million a year ago.

The first quarter was the fourth consecutive quarter of revenue growth, at $188.2 million, an increase of $3.6 million, or 2.0 percent, compared to a year ago. Sales improvements were at Cycling Sports Group (CSG) and Pacific Cycle (PCG), partially offset by weakness at Caloi. PCG saw strong retail point-of-sale (POS) with growth accelerating particularly in the last two weeks of March as consumer demand for bikes spiked amid the pandemic lockdowns, and ahead of the Easter holiday period. Caloi’s decline was attributed to lower demand due to price increases aimed at offsetting devaluation of the Brazilian Real and the Coronavir which forced many retailers to close towards the end of the quarter.

Gross margins eroded to 19.0 percent from 21.3 percent a year ago.

COVID-19 Impact
As noted above, the first quarter started strong but was derailed by the pandemic, which eroded approximately $6.0 million in operating profit. Many bicycle factories in Asia were forced to close for four to six weeks, reducing supply. Though demand remained strong, there were some constraints in the ability to realize sales as many countries locked down retail operations. A small percentage of PCG customers were closed and at CSG, the impact varied by region. Some of the larger sporting goods outlets closed although e-commerce sales are making up for the lack of brick and mortar sales. By the end of April, many dealers that had been closed in Northern Europe had reopened while most of the dealers in the Southern countries remained closed.

As reported in the media, the bicycle industry has seen a surge in business in recent weeks. Many people are getting out for fresh air and exercise, while others are ing bicycles as a mode of transportation to avoid public transport during the Coronavirus crisis. The desire for physical and mental health wellness, outdoor fun and fitness, while remaining safely isolated, are all driving factors for the significant increase in bike demand. This has been helped by the breaking, warm Spring weather in many regions. Cities around the world are closing additional traffic lanes to give cyclists and pedestrians more space and some are temporarily or permanently expanding cycling infrastructure in response to COVID-19.

Dorel Sports Outlook
Despite some constraints, second-quarter sales are expected to remain strong where consumers can access bikes, including mass retailers and e-commerce, two channels experiencing an exponential increase. Through April, PCG customer POS has increased significantly vers prior year. CSG’s North American business is expected to deliver sales growth while European revenues are expected to decline due to ongoing lockdowns across Southern Europe. It is anticipated that Caloi sales will decline as many of its key customers are expected to remain closed through the quarter. Even though short-term supply will be an issue due to the high demand, and store closures will affect distribution, a return to profitability is expected for the second quarter.

Photo courtesy Dorel Sports/Cannondale