Dorel Industries Inc. said 25% sales growth at its Cycling Sports Group, which focuses on providing independent bicycle dealers (IBDs) with premium brands including Cannondale bikes and Sugoi, helped drive an 11.3% increase in revenues at its Recreational/Leisure segment in the fourth quarter ended Dec. 30, 2009.
Segment revenues, which also include sales of Mongoose, Schwinn and Iron Horse bikes to mass merchandisers, increased by $17.8 million to $175.7 million.
Approximately two-thirds of the increase was from new businesses acquired during the second half of the year with the balance from the segment’s IBD business serviced by the Cycling Sports Group (CSG), which designs and sells Cannondale, Sugoi and other bicycle brands. Excluding acquisitions and driven by successful new products, CSG posted sales gains of over 25% versus last year. These increases were partially offset by lower sales by Pacific Cycle to the segment’s mass merchant customers.
IBD sales did include a greater volume of less expensive, lower margin bicycles which dampened earnings within the CSG division. Despite the lower sales to mass merchants, Pacific Cycle posted improved earnings for the quarter as did the segment’s CSG and Apparel Footwear Group (AFG) divisions. The overall significant year-over-year improvement was a clear sign that newer models, particularly in the CSG division, are being well accepted by dealers.
Full-year revenues at the Recreation/Leisure segment increased 3.8% to $681.4 million in 2009 compared to $656.6 million a year ago. This was due to sales growth within the CSG division as well as incremental revenues derived through the business acquisitions completed. Partially offsetting these increases was a sales drop to the segment’s mass merchant customers. As a result, the overall segment organic sales decline for the year was just over 3%.
Earnings declined despite a greater proportion of sales by CSG to the company’s IBD and sporting goods customers. With the recession, consumers purchased less high end products, trading down to lower priced items, which carry lower margins. In addition, some of the segment’s competitors chose to discount their lines early in the year, resulting in an erosion of overall industry profitability.
“As we entered 2009 we were cautious, yet confident about Dorel’s prospects, said Dorel CEO and President, Martin Schwartz. While we were prudent and focused on cost containment, we did not reduce in any way our commitment to new product development as we recognize that this remains a key driver for us. Despite the downturn, we have continued to allocate funds to business acquisitions and research and development, as we invest for the future. This resulted in the introduction of a number of excellent new products in 2009 which has further strengthened our competitive position in our core Juvenile and Recreational/Leisure segments.
Looking ahead, Schwartz sees good opportunities for organic growth through the opening of new geographic markets and new products.
Dealer reaction to new model bicycles continues to be excellent, particularly in the Cycling Sports Group division, he said. Significant changes and investment in our Apparel Footwear Group bode well for the future with an expansion into custom branded apparel.”
Dorel Industries Inc.
Recreational/Leisure Segment
Fourth Quarters Ended December 30
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2009 2008
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$ % of rev. $ % of rev. Change %
Revenues 175,670 157,894 11.3%
Gross Profit 38,688 22.0% 33,691 21.3% 14.8%
Earnings from
operations 8,989 5.1% 3,172 2.0% 183.4%
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For The Years Ended December 30
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2009 2008
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$ % of rev. $ % of rev. Change %
Revenues 681,366 656,613 3.8%
Gross Profit 153,739 22.6% 150,804 23.0% 1.9%
Earnings from
operations 39,837 5.8% 41,874 6.4% -4.9%
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