Accell Group’s Results Charged Up By E-Bikes

By Thomas J. Ryan

Accell Group N.V. reported sales rose 9.7 percent in its first half ended June 30, to €629.7 million ($690.5 million), boosted by sales of electronic bikes. Profits expanded 6.6 percent to €34.0 million ($37.3 million).

“The market conditions for the specialist retail sector were not particularly easy in the first six months of this year, as weather conditions had a negative impact on bicycle sales in many countries,” said Chairman, René Takens.

However, Accell Group is benefitting from strong demand for its electric bikes, which currently account for about 43 percent of its revenues. E-performance bikes doubled in sales in the last six months. Sales from bicycle parts and accessories were also higher in Europe, but a slight drop was seen in the segment overall due to the sale of its North American operations.

Profit growth was challenged by lower margins on the sales of older bike ranges and extra costs incurred in connection with the bankruptcies of retail chains in North America, officials said.

“These bankruptcies are a clear sign of the far-reaching changes in consumer purchasing behavior, changes that we are seeing to a lesser or greater degree in many countries,” Takens said . “We therefore devoted a great deal of attention in the first half of the year to tightening our strategy, and we will be giving consumers in many of the countries in which we are active a much more prominent role in this strategy.”

Takens noted that in the first half of the year, Accell Group managed to sharply reduce working capital, helping free-cash flow come in about €40 million higher than in the same period of last year.

Sales in the bicycle segment rose 13.3 percent to €490.3 million ($537.6 million). Electric bikes were up 39 percent, largely driven by the strong growth in the sales of Accell’s German brands. Sales from traditional bikes fell 15 percent, while turnover from sports bikes was stable. Accell Group noted that the large drop in traditional bikes could be because consumers frequently purchase electric bikes to replace their traditional or sports bike. The average sales price in bikes rose 23.2 percent to €541 ($593.2) per bike due to electric bikes and more expensive sports bikes accounted for a greater proportion of sales.

Operating profits from the bicycle segment rose 7.3 percent to €49.6 million ($54.4 million).

By region, sales in the Netherlands came in at the same level as the year-earlier period, supporting higher sales of e-bikes. Bicycle sales in Germany were up 26 percent compared with the first half of 2015, largely due to the healthy sales of Haibike and Ghost performance e-bikes. Revenues in the Rest of Europe were up 24 percent, again due to interest in electric bikes.

North American revenues fell 3 percent. The Diamondback brand was challenged by U.S. retail bankruptcies, which led to $2 million in direct costs. In addition, the company faced indirect costs as a result of the loss of sales to the two chains and the price pressure in the market resulting from the liquidation sales of inventories, officials said. The Ghost brand, which was launched in North America last year, recorded an increase in sales, while sales from Raleigh bikes sold to specialty channels were down, due in part to competitive pressures and difficult conditions in the North American IBD sector.

Accell Group has taken the first steps towards omni-channel sales at the Raleigh brand, which has traditionally only delivered to bike dealers. This will enable consumers to order bikes directly from the Raleigh website. The bikes will be delivered via bike dealers, who will receive a fee for the service. Sales in the electric bikes launched this year have increased, but the North American market is still small for Accell Group, in terms of revenue and profit, officials siad.

Sales of bikes in other countries outside Europe rose 8 percent and accounted for 4 percent of total sales.

In its bicycle parts & accessories segment, sales were down 1.2 percent to $139.4 million ($152.9 million). Sales were higher when adjusted for the sale of Accell Group’s North American bicycle parts and accessories activities.

The segment’s operating profits fell 19.4 percent to €8.3 million ($9.1 million), due to margin pressure in Europe and the transfer of the North American operations. In North America, Accell Group sold its parts & accessories operations effective April 1, following which the North American business only offers a limited range of replacement parts and accessories for the Raleigh and Diamondback bike brands.

Looking ahead, Accell Group said it believes it would be able to realize continued growth in sales in the second half on the back of a strong range of bicycles and its leading position in electric bicycles. The company cautioned that that “may be necessary if inventories are still higher than average in September due to continued bad summer weather.” But it also said the “underlying market trends remain positive” and forecasts an increase in both sales and profits for the second half.

Lead photo courtesy Haibike/Accell Group