Dorel Industries Inc. reported operating profits nearly tripled at its Q2 segment in the second quarter as sales rose 18.5 percent. The segment includes Cannondale, Schwinn, GT, Mongoose, Caloi and IronHorse.
All figures are in U.S. dollars for the Montreal-based company.
Dorel said the Dorel Sports segment maintained its positive momentum with the fifth consecutive quarter of growth with record profitability. Revenue was $285.6 million, up $44.6 million, or 18.5 percent, from last year. Excluding the impact of varying foreign exchange rates, organic revenue improved approximately 21.1 percent. The strong performance was at the Cycling Sports Group (CSG) and Pacific Cycle divisions, offset by declines at Caloi as revenue decreased primarily due to prolonged COVID-19 imposed store closures in Brazil.
There was a spike in demand for all types of bicycles which rose dramatically and was maintained throughout the quarter as consumers sought a healthy escape from weeks of COVID-19 lockdowns. Online sales were particularly strong with purchasing activities shifting to e-commerce at the height of the pandemic. Sales were limited by a lack of supply of certain models despite Asian suppliers re-opening in February. As a consequence, on-hand inventory dropped considerably, contributing to Dorel’s overall inventory reduction in the quarter. Six-month revenue was $473.8 million, an increase of $48.3 million, or 11.3 percent, from prior year.
Operating profit was $26.8 million compared to $10.1 million last year. Excluding restructuring costs, adjusted operating profit was $27.1 million, an increase of $17.1 million, or 168.9 percent, from prior year. Operating profit for both CSG and Pacific Cycle was up strongly, driven by the increased demand in bicycles while Caloi registered an operating loss due to a number of factors, including sustained store closures and the shut down of its factory through April and May. Six-month operating profit was $26.2 million compared to $14.6 million a year ago. Excluding restructuring costs, adjusted operating profit was $26.6 million, up $12.0 million, or 82.4 percent, from last year.
Based on current trends, demand for bicycles is expected to remain strong through the summer season. On-going supply constraints will limit sales, but expectations are that third quarter revenues and adjusted operating profit will continue to be strong. The current volatility in the bicycle industry caused by the pandemic, changes in current demand levels and possibly in the seasonality of bicycle sales, is making visibility beyond the third quarter more difficult to determine.
Overall, Dorel’s second-quarter revenue was $724.0 million, compared to $670.0 million, up 8.1 percent from the same period a year ago. Reported net income was $11.1 million or $0.34 per diluted share, compared to $2.8 million or $0.09 per diluted share last year. Adjusted net income1 was $15.6 million or $0.48 per diluted share, compared to $6.3 million or $0.19 per diluted share last year.
In its other segments, Dorel Home posted its best quarter ever, with both record revenue and adjusted operating profit. Revenue for the second quarter rose to $260.7 million, an increase of $53.2 million or 25.7 percent. Dorel Home posted its best quarter ever, with both record revenue and adjusted operating profit. Revenue for the second quarter rose to $260.7 million, an increase of $53.2 million or 25.7 percent
Second quarter revenue at the Dorel Juvenile segment was $177.6 million, down $43.9 million, or 19.8 percent, from last year. Excluding the impact of varying foreign exchange rates, organic revenue decreased approximately 16.8 percent. The operating loss for the quarter was $1.2 million compared to an operating profit of $2.4 million last year. Excluding restructuring costs, adjusted operating profit was $1.0 million, down $5.6 million, or 85.6 percent, from prior year.
“Dorel’s overall revenues have recovered sharply from the initial negative effects of COVID-19 with strong performances in two of our three segments. Dorel Sports and Dorel Home benefitted from increased demand for its products as consumers sought bicycles and home furnishing products during the prolonged lockdown periods. Increased sales of in-stock items allowed both segments to reduce inventory to record low levels. Dorel Juvenile remained challenged through the first half of the quarter, hurt by continuing store closures in many of its markets, a situation which began reversing as more stores reopened during the latter part of the period. Our divisions did an excellent job of reducing costs and holding discretionary spending and as a result, selling expenses were down considerably. Our balance sheet has improved significantly from year-end with significant reductions in inventories and overall debt. I am extremely grateful to our employees worldwide who demonstrated their clear commitment to Dorel by directly contributing to our lower costs in the second quarter and who continued working at our facilities under enhanced safety protocols,” commented Dorel President and CEO, Martin Schwartz.
Outlook
“Two of our three business segments have benefitted financially during the impact of the COVID-19 pandemic. Consumers have chosen Dorel for its bicycle and home furnishing purchases, selecting our leading brands and outstanding product value. Our advanced capabilities in e-commerce have allowed us to reliably and efficiently deliver to our end consumers in all three of our segments,” commented Schwartz. “In the short-term this should continue, but there are many unknowns and risks going forward. The impact of the slowing economy and higher unemployment and how this will impact our consumers is difficult to measure at this time. The possibility of worsening economic conditions brought on by a second Coronavirus wave means current shopping habits could change yet again.”
“Finally, I want to re-iterate to all our employees how grateful we are to them during this period. We continue to place employee safety as our top priority,” concluded Schwartz.
Photo courtesy Cannondale
