Dorel Industries Gets Boost from Cannondale and GT Growth

 

Dorel said that while unemployment and high gas prices seem to be hurting sales of its infant car seats and ready-to-assemble furniture to mass merchants and their customers, demand for more expensive bikes is building.

It’s funny, remarked Dorel Industries President and CEO Martin Schwartz. The mass market is tough out there, but if we have any luxury goods in Dorel industries, I would think it would be the IBD bike brands, and those seem to be performing quite well. So it’s an interesting comment on the general economy.

 

Dorel reported sales in its Recreational/Leisure segment, which includes Cannondale, Schwinn, GT, Mongoose and Sugoi, increased 10.3 percent to US$200.4 million in the first quarter ended March 31.

The growth was entirely organic, came primarily from higher unit sales and was led by the IBD channel, where revenues rose 25 percent as demand for the companys 2011 bicycles and apparel carried over into the quarter.

Sales growth was strongest for the Cannondale and GT brands in Europe and Australia. Dorel said the Cannondale dealer base continues to grow and that higher priced Cannondale bikes were selling better than last year. By contrast, sales in the segment’s mass merchant category declined mid-single-digits, due in part to slightly heavier retail inventories, poor weather and the late Easter holiday. Sales in this channel, which includes warehouse club and discount stores, have since improved and a national TV advertising campaign for Schwinn is expected to further boost sales in coming weeks.

Gross margins in the segment were flat at 25.4 percent of sales. General, selling and administrative expenses reached 16.7 percent of revenues, up 60 basis points. The increase reflects heightened investment in product development, team sponsorships and a TV advertising campaign for Schwinn. Operating profits grew 17.9 percent to $17.8 million from $15.1 million in Q1 2010.

The segment ended the quarter with much higher inventories than a year earlier as it prepared for the peak second quarter shipping period in marked contrast to a year earlier when it allowed inventories to fall to below normal levels while dealers cleared out excess inventory.

Dorel’s consolidated revenues, which include in the Juvenile and Home Furnishings segments, grew 1.9 percent to $607.8 million from $596.3 million. Consolidated net income declined to $31.2 million, or 94 cents per share, compared to last year’s $38.2 million, or $1.15 per share.

Dorel CEO and President Martin Schwartz said improved earnings in the Recreational/Leisure segment were offset by a challenging retail environment for its U.S. juvenile business, where consumers are shifting to no-name, off-price car seats and other products for infants and toddlers.
Executives expect Recreational/Leisure sales this year to surpass last year thanks to a growing network of IBDs and improving sales in the mass channel.