Dorel Industries Inc. reported revenues at its Recreational/Leisure segment, which owns the Cannondale, Schwinn and Sugoi cycling brands, rose 18.8% to $172.5 million in the third quarter. The business was the only one of Dorel’s three segments not to experience a decline in demand in the period. For the first nine months of the year, segment revenues were up 12.5% to $569.1 million.


Excluding the impact of new business acquisitions and foreign exchange variations, the segment's organic revenue increase was approximately 13% for the quarter and 8% year-to-date. That included gains in both North America and Europe and the mass market and IBD channels, where new models and innovation continue to drive growth. Executives said that while they’ve seen U.S. demand soften in their ready-to-assemble furniture and baby products businesses -and subsequent discounting by mass merchants – demand and pricing remains stable in its bicycle business.


The company will resume later this month a new marketing campaign with a strong editorial component that has driven gains for Schwinn. The company’s GT brand is adding new dealers abroad and Cannondale's new models, which are typically introduced in the fourth quarter, are selling in well. Those include Cannondale’s first ever e-bike – the E-Series electric bike developed with the European electronics and appliance giant Bosch, the Super X cyclocross and the CAAD 10 road bike. The Jekyll mountain bike, which is available in a carbon fiber frame version that Cannondale promotes as the world’s lightest mountain bike, is also selling well.


“Our demand at the end of Q3, particularly at the Cannondale side, was extremely high,” said Jeffrey Schwartz, Dorel EVP and CFO.


Gross profits in the Recreational/Leisure segment reached $39.4 million, or 22.8% of revenues, down 50 basis points from the third quarter of 2009. The decline was attributed in part to a lower proportion of revenues from licensed brand sales and commission income on the Pacific Cycle, or mass merchant, end of the business.


Dorel has been phasing out that part of its bicycle business since its 2008 acquisition of one of its largest licensees, PTI Sports, which licenses Pacific and other Dorel brand names for a line of cycling accessories. The company also bought the Sugoi clothing line that year as part of its acquisition of Cannondale Bicycle Corporation. While licensed and commissioned sales have better margins, their low volume has negligible impact on segment profits, the company said.


Earnings from Recreational/Leisure operations for the quarter improved 96.1% to $9.5 million. For the first nine months of the year, operational earnings increased  35.2% to $41.7 million.