The success of Cannondale’s latest innovations helped propel Cycling Sports Group (CSG) to 25 percent sales growth in 2011, despite a decline in fourth quarter sales caused largely by the decision to ship new models a quarter earlier than last year, Dorel Industries reported last week.

CSG, which distributes bicycling products to independent bicycle dealers (IDBs), helped drive sales at Dorel’s Leisure/Recreation segment to $861.8 million in the year ended Dec. 31, 2011, up 11.2 percent. CSG sales were up in all geographic markets, with most of the growth outside North America, which accounts for more than 50 percent of CSG revenue. By comparison, sales by the segment’s Pacific Cycle business, which caters to mass merchants and sporting goods channels, were relatively flat with the prior year.

Gross margin inched up 10 basis points to 23.8 percent, while operating profit reached $60.7 million, or 7.0 percent of sales, up 30 basis points from 2010.  Earnings were affected by a decline in profitability of approximately $3 million at the segment's apparel division which markets the SUGOI brand. The decrease was due mainly to a write-down of excess inventory from prior model years and costs of $1.8 million related to the strategic decision to outsource the manufacture of custom kits to a third party. Dorel hopes to turn around the Sugoi and overall apparel business with a program it launched last fall that places floor fixtures, mannequins and graphics into some dealers’ stores. 

The increase in sales at Dorel’s Leisure/Recreation segment in 2011
came even though fourth quarter sales slipped 1.7 percent to $202.4 million. Dorel attributed the decline to improvements in its supply chain that enabled it to ship new-year bike models in the third quarter this year in plenty of time for the holiday selling season. Supply chain issues had delayed arrival of new bikes until the fourth quarter in 2010. Pacific Cycle sales declined in the low-single digits during the quarter.

Gross margin increased 20 basis points to 22.9 percent during the fourth quarter, while operating profits reached $11.6 million, up 9.1 percent compared to the fourth quarter of 2010. Operating margin increased 50 basis points to 5.7 percent, mostly because the company did not repeat a multi-million dollar campaign to promote its Schwinn bikes. 

President and CEO Martin Schwartz attributed CSG’s continued growth to  Dorel’s commitment to R&D, which was validated when the German trade magazine Tour awarded the Cannondale Super Six Evo Ultimate the top score in a review of “The Best Road Bikes in the World over the Past Ten Years.” “This is the first time this magazine has given this award which was based on ten years of reviews of over 2,000 bikes,” Schwartz said.

Dorel recently opened a new European engineering and design facility in Fraberg, Germany and has been enhancing its North American, European, and Asian engineering and design teams.

Looking ahead to 2012, EVP and CFO Jeffrey Schwartz said Dorel’s biggest challenge in the bike business may be meeting demand.

“I think more of a challenge is going to be can we get enough bikes through the system quick enough, which again is a good problem to have,” he said. “Demand is there and we're trying to get as many bikes in as possible.”