Dorel Sports revenue was off sharply in the second quarter as European IBDs looking to avoid price increases loaded up on model year 2015 bikes and mass retailers in the U.S. worked off their inventories, according to its parent company Dorel Industries Inc. of Canada.
The company reported revenues at the segment, which sells premium Cannondale bikes to independent bicycle dealers and is a major supplier to mass retailers, reported organic revenue declined by approximately 5 percent in the quarter and 2 percent year-to-date, after removing the impact of varying foreign exchange rates year over year.
The Brazilian based Caloi division had double digit organic revenue growth in local currency as that division rebounded from last year's soft second quarter due to the negative impact of World Cup events. Sales also increased organically in Japan and the UK. Offsetting this, was organic sales decline in the quarter in Europe as dealers purchased inventory in the first quarter ahead of price increases implemented in April and in anticipation of the launch of new model-year 2016 products in the third quarter. New pricing on model year 2016 bicycles is being announced and the introductions have received excellent reviews from retailers and media.
Sales decline in North America was due partly to a wet month of May as well as to mass customers reducing inventory levels in the sporting goods category.
Second quarter adjusted operating profit, excluding restructuring and other costs, decreased by $7.7 million, or 42.1 percent to $10.7 million, compared to $18.4 million a year ago. For the six months, adjusted operating profit was down $13.3 million, or 37.6 percent to $22.0 million, compared to $35.3 million in 2014. The US dollar appreciation against most of the currencies in Dorel's markets accounted for a net negative impact on the segment's operating profit of approximately $7 million during the second quarter and $14 million during the first six months.
| Second Quarters Ended June 30 | ||||||||
| 2015 | 2014 | |||||||
| $ | % of rev. | $ | % of rev. | Change % | ||||
| Total revenue | 251,087 | 286,249 | (12.3% | ) | ||||
| Adjusted gross profit | 56,627 | 22.6 | % | 67,839 | 23.7 | % | (16.5% | ) |
| Adjusted operating profit | 10,655 | 4.2 | % | 18,399 | 6.4 | % | (42.1% | ) |
| Six Months Ended June 30 | ||||||||
| 2015 | 2014 | |||||||
| $ | % of rev. | $ | % of rev. | Change % | ||||
| Total revenue | 480,016 | 526,597 | (8.8% | ) | ||||
| Adjusted gross profit | 110,087 | 22.9 | % | 128,461 | 24.4 | % | (14.3% | ) |
| Adjusted operating profit | 22,017 | 4.6 | % | 35,303 | 6.7 | % | (37.6% | ) |
Dorel Sports new product launches are expected to deliver better results in the second half versus last year, driven by the Cycling Sports Group, which focuses on the IBD channel, and Pacific Cycle, which serves the mass channel. Most of the benefit will be in the fourth quarter due to the seasonality of our business and the positive impact of the Christmas shopping season.
“Since the end of the quarter, most currencies have further declined against the US dollar. We therefore remain cautious in our outlook through 2015 for our Sports and Juvenile segments,” concluded Mr. Schwartz.
