Dorel Industries Inc. said sales growth of 25% at its independent bike dealers (IBD) business helped drive an 11.3% increase in revenues at its Recreational/Leisure segment in the fourth quarter ended December 30.
Earnings at the business declined, however, as the recession caused consumers in the IBD channel to trade down to less expensive bikes with lower margins. Early discounting by rival cycling brands, meanwhile, also eroded profitability in the division, which sells bikes and cycling apparel and footwear to both the IDB and mass merchant channels.
Dorels Recreational/Leisure segment includes three divisions. Pacific Cycle sells Schwinn, Mongoose and Iron Horse branded bikes to the mass merchant channel; Cycling Sports Group sells Cannondale, GT and high-end Schwinn bikes to the IDB channel and the Apparel Footwear Group sells Sugoi apparel. Overall segment revenues increased by $17.8 million to $175.7 million, with approximately two-thirds of the growth coming from businesses acquired during the second half of the year.
The balance came from CSG, where organic sales grew 25% over the year earlier quarter largely on sales of new products.
All three of the segments divisions posted improved earnings despite the higher mix of lower priced product at CSG and a decline in Pacifics sales to mass merchants.
For the full year, segment revenues rose 3.8% to $681.4 million in 2009, compared to $656.6 million a year ago. Again, this was due primarily to growth within the CSG division and acquisitions, which were partially offset by declining sales to mass merchants. Organic sales for the segment as a whole declined just over 3% for the year. Earnings also declined despite a greater proportion of sales by CSG to the company’s IBD and sporting goods customers.
Looking ahead, Dorel CEO and President, Martin Schwartz said organic growth could resume this year as the company moves to open new geographic markets and launch 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.”