Accell Group N.V. reported its sales in North America increased 16 percent in 2013, but that results came in below expectation due to deep discounting undertaken in the back half of the year to clear inventory.
The Dutch company said sales reached €129 million in North America, where it experienced its first full year of selling the Raleigh and Diamondback brands. Accell CEO René Takens said that while sales to independent bike dealers were strong, disappointing bicycle sales in the first half of 2013 resulted in high inventories which had to be sold at higher discounts at the end of the season. Sales of e-bikes, also increased but remain small and sales of bicycle parts & accessories (BP&A) declined.
While Accell does not break out operating results by geography, Takens said earnings results at its North American companies were lower than expected.
Accell is Europe’s largest bicycle vendor in terms of revenue and has dramatically increased its presence in North America since its 2012 acquisition of UK-based Raleigh Cycle Limited. Accell North America now includes Currie Technologies, a Simi Valley, CA designer and distributor of e-bikes; Raleigh America, which markets Raleigh and Diamondback bikes; Lapierre North America, which designs and markets the French bike brand; and Seattle Bike Supply (SBS), which distributes BP&A. Accell co-located Raleigh and Lapierre’s North American operations at SBS’s Kent, WA headquarters late last year and all three companies now fulfill through a single, online portal that enables dealers to view and order inventory from automated warehouses in Ohio, California and Washington.
Accell reported global bicycle sales rose 12 percent to €617 million ($819mm) with sales growing 2 percent to €210 million ($279mm) in Netherlands; 6 percent to €202 million ($268mm) sales in Germany, 16 percent to €270 million ($258mm)in the Rest of Europe and 19 percent to €38 million ($50mm) in Other Countries. Global Parts sales increased 6 percent to €211 million ($280mm). Fitness sales were flat at €21 million.
Unit sales of bicycle grew 14.3 percent to 1,835,000, but average unit price fell by 2.6 percent, to €336 ($446) as discounting and Raleigh's higher mix of lower priced bikes kicked in. Without Raleigh, average prices increased as sales of more expensive e-bikes increased 23 percent and reached 35 percent of total bicycle sales, compared with 32 percent in 2012. Sales of sports bikes were up 6 percent, while sales of traditional bikes were up 7 percent.
Total operating costs came in at €223 million in 2013, or 26.2 percent of sales, down from 27.2 percent in 2012. Still, gross margin declined 130 basis points to 30.6 as higher discounting more than offset higher sales.
Segment results, which represent income after SG&A expenses and restructuring charges but before debt payments, came in higher at €50.0 million ($66mm), from €48.8 million in 2012. Due to one-off reorganization charges of €3 million in the Netherlands and North America, higher financing charges and relatively higher tax charges, net profits fell 18.3 percent to €19.0 million.
While the discounting hurt margins, it helped Accell exit 2013 with 6.6 percent less inventory than a year earlier. The company expects total sales and profits to grow in 2014 and said it will be actively looking for acquisitions.
