Dorel Industries reported that third quarter revenue in its Recreational/Leisure Segment decreased 33.7% to $70.8 million compared to last year's $106.8 million. Earnings from operations dropped 57.4% to $6.3 million compared to $14.7 million last year.

During a conference call with analysts and the media, Dorel CEO Martin Schwartz said that sales increased in several core product categories and brands but the strong Sting-Ray sales experienced last year were not repeated this year. The company is working with its customers “to keep the Sting-Ray alive.” However, Pacific’s management said it still “sells quite well” and expects roughly 250,000 to be sold at retail this year, roughly half of last year’s sales.

Pacific did see a non-Sting-Ray sales decline of about 3% in the quarter and management stated that, contrary to recent media reports about record bicycle sales spurred by higher gas prices, Pacific is not seeing any increase through their distribution channels. However, Mr. Schwartz did say “perhaps at the…independent bicycle dealers” there was an increase.

The drastic decline in operating profit within the bicycle division was said to be “virtually entirely related to Sting-Rays and the volume that the Sting-Rays gave [their] business.” Management said that if Sting-Ray sales were removed from the equation, last year’s operating margin would be closer to 10%, versus the 9% this year. Margins in the R&L business declined from 22.4% last year to 20.6% this year. This was also entirely due to the higher margins from Sting- Ray sales and the company feeling no margin pressure from its retailers.

DIIB said sales of Schwinn branded motor scooters are building rapidly. Key dealers are reordering because of successful sell-through. Some, in various parts of the country, are on their third reorder. Pacific had a significant customer win as they opened a number one power sports dealer in the U.S.

Mr. Schwartz did say that the company is watching labor and raw material costs in China and has developed a plan B if prices begin to escalate significantly. Currently, he said that Dorel’s vendors are keeping prices stable, and in some cases reducing them. Contrary to other media reports, Dorel is not moving operations out of China. Mr. Schwartz said, “The stories that have come out this week in the paper indicate that we are having pricing problems in China so we must move to other countries. That is totally false and I just wanted to correct the situation because the people who I guess were there and listened took these two statements totally out of context.