By Thomas J. Ryan
Dorel Industries Inc. reported third-quarter revenue at Dorel Sports increased 14.2 percent, to $250.3 million. The gains were driven by revenue growth across all three divisions, driven by strong performances at the Cycling Sports Group (CSG).
Excluding foreign exchange rate fluctuations year-over-year and the impact of the divestment of the performance apparel line of business (SUGOI), adjusted organic revenue increased 15.7 percent.
Dorel Sports includes Cannondale, Schwinn, GT, Mongoose, Caloi, and IronHorse.
“We remain very enthused with Dorel Sports,” said Martin Schwartz, president and CEO, on a conference call with analysts. “Bikes are selling well across all channels. All three divisions posted strong top-line growth with solid performances by CSG and Caloi. Revenue grew double-digits for the first time in five years. POS was up at Pacific Cycle; however, operating profits declined due to tariff-related issues, which impacted margins, primarily due to a shift to lower price point bikes.”
CSG’s third-quarter growth was driven by continued excitement and increased sales of the model-year 2020 lineups. CSG margins remained strong as a result of increased in-line, full-margin sales and solid retail POS levels continue to trend upwards. Year-to-date, CSG’s independent bike dealer (IBD) business continues to outpace the rest of the industry.
CSG’s growth in Europe was primarily driven by the e-bike category, which doubled sales with e-mountain bike launches such as the Moterra and Habit Neo.
Caloi, its Brazilian bike business, delivered strong double-digit revenue growth with increased volume due to success with Brazil’s Yellow Bike Sharing program and a better mix. Caloi is also experiencing improved results from increased Cannondale brand marketing efforts.
POS levels were solid at Pacific Cycle; however, the division was negatively impacted by margin compression. In addition, key retailers delayed holiday pipeline shipments to the current fourth quarter. Said Schwartz, “Holiday shipments to some key mass retailers, traditionally in September, were delayed until October, this resulted in a large shift in sales and profits from Q3 to Q4 and much higher inventories and the associated warehousing costs until recently.”
Operating profits for the quarter slipped to $6.0 million compared to $7.0 million a year ago. The adjusted operating profit was $5.6 million compared to $7.5 million last year. The Pacific Cycle issues, plus related additional warehouse storage, were solely responsible for the decreased operating profit.
Nine-month revenues for Dorel Sports increased 3.9 percent, to $675.9 million. Nine-month operating profits were $20.6 million compared to $2.9 million in 2018. Adjusted operating profits were $20.2 million versus $14.7 million.
Looking ahead, Schwartz said the positive momentum in Cycling Sports Group’s IBD business is expected to continue. He added, “With the shift of orders at Pacific Cycle from the third to the fourth quarter, this provides the confidence that the segment will deliver a solid fourth quarter versus the prior year in both sales and adjusted operating profits.”
Photo courtesy IronHorse