Dorel Industries, the parent company to the Pacific Cycle and Schwinn brands, reported that its first quarter Recreational/Leisure division revenues increased 7.6% to $87.9 million compared to last year's $81.7 million.
Management said that Pacific's main customers experienced strong sell-through. Sales to independent bicycle dealers were described as solid, with same store sales up for the quarter. The InStep brand also had a good first quarter with its trailers and strollers. Mitigating these gains was the decrease in the international licensing income.
During a conference call with analysts Martin Schwartz, Dorel Industries president & CEO, said that the company is now ready to begin looking for acquisitions again, particularly in the Recreational/Leisure division.
“Simply from a logical standpoint and rational standpoint, what we need to strengthen – something that is complementary to what we are doing at Pacific right now – a stronger brand in the IBD level that will allow us to penetrate the IBD. When we talk about focus, if at the end of the day there's something that comes on the table that is complementary to that and will allow us to strengthen our position in the IBD, that would be definitely a welcome opportunity and something we would analyze, as long as it fits with us and as long as the pricing is reasonable,” he said.
Gross profit for the Recreational/Leisure division fell 110 basis points to 19.4% versus 20.5% last year. However, excluding licensing and commission, gross profit was actually flat at 16.9% this year versus 17% last year. Selling expense as a percentage of sales in the division decreased from 11.1% to 10.6% due to greater sales volumes.
Earnings from operations were down 2.8% to $7.2 million from $7.4 million. The decline in gross margins and earnings in the quarter were the result of a decrease in international licensing income. This decline offset the additional margin dollars generated on domestic sales in the U.S.
