Dorel Industries Inc. said independent bike dealers, or IBDs, are embracing its GT and Schwinn brands alongside its prestigious Cannondale brand. The bike maker said it signed up IBDs at a record clip in the first quarter on the way to record profits and sales in its Recreational/Leisure segment.

 

Management said they see the momentum continuing in Q2 as the company catches up with stronger than anticipated demand and a $5-million-dollar print and television advertising campaign kicks in to support the Schwinn brand.  “We were able to satisfy a lot of that demand, but not all of it, as it was above and beyond our expectations and our customers' expectations,” said Jeffrey Schwartz, Dorel’s CFO. “We are sitting at a larger backlog at this point — significantly larger than we had last year in our IBD business.”

 

Dorel’s Recreation/Leisure segment consists of three businesses; Pacific Cycle, Cycling Sports Group and a Footwear/Apparel Group. Pacific focuses on selling private label, lower end Schwinn and Iron Horse bikes to warehouse clubs, full-line sporting goods chains and other mass merchants, while Cycling Sports Group produces Cannondale, high-end Schwinn, GT and Mongoose bikes and Sugoi performance apparel for the IBD channel. The IBD business has been built largely on Dorel’s 2008 acquisition of Cannondale Bicycle Corporation. The Footwear/Apparel group is being built on the Sugoi Performance Apparel business acquired with Cannondale.

 

Dorel’s Recreation/Leisure segment revenues reached $181.7 million in the first quarter, up 12.5% from $161.4 million in Q1 2009. Gross profit margin rose 250 basis points to 25.4% of revenue. Earnings from operations rose 51.3% to $15.1 million, or 8.3% of revenue.

 

The figures jibe with recent reports from other manufacturers. Last week, Shimano Inc. said its first quarter bicycle component sales rose 13%, while Europe’s Accell Group advised investors that sales growth was accelerating from last year’s 6% pace. The Taiwan Bicycle Exporters’ Association, meanwhile, recently reported that first quarter exports to Europe rose 21.6%. 

 

Dorel said most of the growth in its bike business came from the mass merchant business, where favorable spring weather boosted spring sales. However, the results also reflect growth in the IBD channel.  

 

“Sales increased and a significant number of new dealers were added across the U.S., with strong additions in key markets such as Los Angeles, Northern California, and Colorado,” said company President & CEO Martin Schwartz . The Schwartzes issued a bullish outlook for the balance of the year, noting that consumer confidence has risen in many markets, including in most of Europe. They also noted that the company’s concentration on opening to mid-price points was attracting consumers. However, Jeffrey Schwartz cautioned that margins could be affected by rising commodity and freight costs and sales by the falling euro.