Dorel Industries Inc.'s Recreational/Leisure segment posted record first quarter results thanks to continued strong sales of the Cannondale, GT and Mongoose brands to independent bike dealers, or IBDs. Demand for the brands remains strong in Europe and is poised to grow as the company builds out its fledgling IBD network in China.


 

Operating profits also set a record thanks in part to the continuing turnaround at its Apparel & Footwear Group, which includes the Sugoi brand.


Total revenue for the segment, which Dorel launched in 2004, increased 10.2 percent to $220.9 million. Dorel said its Cannondale, GT, and Mongoose brands did especially well with IBDs in Europe. The Canadian unit of Cycling Sports Group (CSG), which sells the Cannondale and high end Mongoose and Schwinn bikes to IBDs, also contributed to the sales growth with strong spring shipments. While more modest, Pacific Cycle’s sales of Dyno, Iron Horse, Mongoose and Schwinn bikes to mass merchants, also increased as unseasonably warm weather stimulated consumer interest in cycling. Pacific Cycle sells to Walmart and warehouse clubs and was recently named a 2011 vendor partner of the year by Target Corp.

Gross margin at the Recreational/Leisure segment increased 110 points to 26.5 percent and operating profit reached the highest levels in the segments eight-year history. The Apparel and Footwear Group division, which owns the Sugoi brand, was a positive contributor to earnings in the quarter and its turnaround is on track.


“Dorel's bicycle business continues to grow its revenues and earnings, and all indications are that this momentum will be maintained,” said CEO Martin Schwartz. “Sales improved from the fourth quarter and this positive trend should continue. While still a small part of the Recreational/Leisure segment, there has been substantial improvement in the AFG apparel division and this will also help earnings.”

Schwartz said CSG Asia will begin selling Cannondale and GT bikes direct to retailers in China this summer.


“We are building up our network of independent bike dealers – small chains – to carry Cannondale and GT brands,” said Schwartz, who witnessed dealer interviews while in Shanghai two weeks ago. “It will be very similar to the way we operate in North America and Europe and pricing will be in line with the rest of the world. If you’ve been to China, there are plenty of BMWs, Mercedes and Bentleys driving the streets and these are the same kinds of people who are buying our bikes.”