Dorel Industries named Peter Woods president and CEO of its Recreational/Leisure segment last week after crediting him for a dramatic first quarter turnaround at the business, which sells bikes to both independent bike dealers and mass merchants such as Wal-Mart Stores Inc.



Woods had been serving as interim group president and CEO at Dorel’s Recreational/Leisure segment since December, 2013, when Dorel announced Robert Baird had resigned from the position. Prior to the interim post, Woods had served as CFO for the segment.

 

 

“Over the past four months he has distinguished himself by leading the Rec teams through significant change, which has resulted in a profound turn around in our bicycle business,” said said Dorel President and CEO, Martin Schwartz.


 

Dorel reported sales at the segment rebounded more strongly than anticipated in the first quarter ended March 31, rising 18.1 percent to $240.3 million. Gross profit jumped 17.8 percent to $60.4 million, or 25.1 percent of revenue, down 10 basis points (bps) from the first quarter of 2013.

 

Operating profit soared 71.0 percent to $16.3 million, or 6.8 percent of revenue, up 210 bps from the year earlier quarter. Included in the first quarter is a restructuring charge of $500,000 as part of the segment's overall plan to enhance its competitiveness. It is expected that an additional $2.6 million will be taken in restructuring charges through 2014.

 

The segment designs and markets Cannondale, Schwinn, GT, Mongoose, Caloi, IronHorse and Sugoi cycling brands to the independent bike dealer (IBD) channel through Cannondale Sports Group (CSG) and lower cost bikes to the mass channel through Pacific Cycles.

 

Sales rebounded at CSG and Pacific Cycle and were driven by a strong demand in Europe and the United Kingdom, where spring sprang early. The appreciation of the euro also boosted results. That growth was moderated by the late spring in North America, where sales exceeded year ago levels, but were still below first quarter 2012 level. Calois, which is Brazil’s largest domestic bicycle company, dragged down earnings due to its usual first quarter loss.

 


Dorel acquired Calois in 2013. The company began making Schwinn, Mongoose and Cannondale products at its factory in Manaus April 1. It’s sales typically peak in the third quarter as Brazil enters spring and prepares for summer. 

 

 

Sales increased by approximately 8 percent when excluding the effect of acquisitions and exchange rates. After excluding restructuring costs, gross margin on those sales stayed steady at 25.2 percent.

 

 

Despite the unfavorable weather, Schwartz was upbeat about a turnaround in North America, because retail inventories are lower than they were a year ago.

 

 

“We haven't seen very much discounting, yet; and, hopefully, we won't see it for a while,” he said. “And by this time last year, there was heavy discounting going on, since people had bought significant inventory. So, we remain optimistic for the rest of this year.”

 

 

“As we look to the full year, we believe the rebound will continue not just in Europe but also in North America in both the IBD and mass channels,” said Schwartz. “In the second half we are also going to see the full benefit of our Caloi acquisition, so we remain confident about our return to much higher levels of profitability.”
Mongoose sales are expected to accelerate in the United Kingdom, where the 300-door Halfords chain has begun carrying the bikes.

 

Under Wood, the Rec/Leisure business will remain focused on improving operations and margins for the foreseeable future, making acquisitions unlikely, according to EVP and CFO Jeffrey Schwartz.