Dorel Industries Inc. reported sales at its Dorel Sports cycling segment rose 13.8 percent in the fourth quarter. Demand for bikes remains strong, with the gains held back by supply chain constraints limiting component availability.

Dorel Sports brands include Cannondale, Schwinn, GT, Mongoose, Caloi, and IronHorse.

Fourth-quarter revenue increased to US$265.3 million, an increase of US$32.2 million, or 13.8 percent, from last year. Excluding the impact of foreign exchange rates year-over-year, organic revenue improved by approximately 15.9 percent. Segment revenue grew for the seventh consecutive quarter with improvement in all divisions. Consumer demand for bicycles remained high. Both the Cycling Sports Group (CSG) and Pacific Cycle posted gains, which would have been greater; however, supply constraints resulted in inventory shortages, limiting growth and creating significant backlog heading into 2021. The change in CSG’s model year to the fiscal year also impacted the quarter, shifting orders from the fall-winter period to spring/summer. Caloi recorded a record volume of orders, driven by the loosening of COVID-19 restrictions, and Caloi’s revenue increased double-digits in local currency. For the year, Dorel Sports’ revenue rose to US$1.04 billion, up US$135.8 million, or 14.9 percent, from US$909.0 million last year.

Fourth-quarter operating profit at Dorel Sports was US$1.9 million, compared with US$9.8 million last year. Operating profit was impacted by product mix, limited container and component availability, higher container costs, and the inability to fill all orders, all of which combined to pressure margins. As well, last year’s fourth quarter included a significant adjustment on import costs of bicycles. Excluding restructuring costs, adjusted operating profit was US$3.4 million, down US$10.2 million, or 75.3 percent, compared to US$13.6 million a year ago. For the year, operating profit increased to US$52.3 million compared to US$30.3 million in 2019. Adjusted operating profit1 was US$57.7 million, up US$24.0 million, or 70.9 percent from last year.

Dorel Industries Fourth Quarter And 2020 Results
Companywide, revenue for the fourth quarter was US$704.4 million, up 7.8 percent from US$653.4 million a year ago. Dorel Home’s fourth-quarter revenue was US$234.1 million, up US$22.7 million, or 10.7 percent, from US$211.4 million last year. Dorel Juvenile’s fourth-quarter revenue was US$204.9 million, down US$3.9 million, or 1.9 percent, from last year.

Reported net loss for the quarter was US$22.9 million or US$0.70 per diluted share compared to US$0.6 million or US$0.02 per diluted share a year ago. Adjusted net loss was US$18.0 million or US$0.55 per diluted share compared to an adjusted net income1 of US$2.3 million or US$0.07 per diluted share in the fourth quarter a year ago. The net loss for the quarter was impacted by the reversal of an accrued tax benefit.

Revenue for the full year was US$2.76 billion, up 4.9 percent from US$2.63 billion the previous year. Reported net loss was US$43.4 million or US$1.34 per diluted share, compared to US$10.5 million or US$0.32 per diluted share the previous year. Adjusted net income for the year was US$12.8 million or US$0.38 per diluted share, compared to US$16.8 million or US$0.51 per diluted share last year.

“Our segments’ performance for the quarter was in line with our prior guidance, with overall adjusted operating profit similar to prior year. Strong demand for Dorel Sports product offering continued throughout the quarter with supply chain constraints being a significant limitation on our performance. Similarly, in Home, a lack of product availability meant lost sales opportunities, particularly in e-commerce. Dorel Juvenile continued its improvement from the first half; however, the second wave of COVID-19 in most markets slowed sales and earnings momentum, particularly in Europe. Results for the fourth quarter include US$7.5 million of costs incurred in connection with the company’s privatization process that was terminated by the mutual agreement of Dorel and the buyer group in February. Its rejection by a majority of our independent shareholders sent a clear message of their belief in the long-term potential for the company as a public entity. As a management team, we are committed to rewarding our shareholders for their confidence in Dorel,” commented Dorel President & CEO, Martin Schwartz.

“As we enter a new fiscal year, the conditions of 2020 are continuing into 2021 in many respects. COVID-19 continues to have an impact on consumer behavior and while our Sports and Home segments are benefitting from higher demand, container availability and cost, increasing commodity costs and a stronger Chinese Yuan (RMB) are combining to disrupt our supply chain and increase the costs of our products. At Juvenile, we are poised to deliver adjusted earnings improvements versus the past several years, but store closures in some markets, lower demand in mobility categories and recent evidence of lowering birth rates mean that this segment is the one being most negatively affected by the pandemic in the short-term,” commented Schwartz.

“Specifically, regarding our segments, in Sports, demand continues to be very strong in all markets, and despite the industry-wide reality of component availability limiting production and higher costs, the year is starting very strongly. For the quarter, expectations are for revenue to increase significantly versus the prior year’s first quarter and for adjusted operating profit to be much better than both the prior year and the fourth quarter of 2020.

“Dorel Home continues to benefit from the heightened demand for products for the home, with branded sales such as Little Seeds, Cosmo and Novogratz expected to continue to grow in popularity through 2021. However, similar to Sports, supply is challenged by a lack of container availability and a spike in cost. Overall, we expect the Home segment to continue to deliver revenue growth, but with some volatility in operating earnings.”

“Dorel Juvenile was hampered by COVID-19 in 2020 and as we enter 2021, the situation remains difficult. We remain positive about our longer-term prospects based on our strategic direction, our best-ever product portfolio, advanced e-commerce capabilities, and a return to more normal shopping conditions. However, the first quarter will be difficult due to a number of short-term challenges described above. This, coupled with increased input costs, is expected to decrease adjusted operating profit from the fourth quarter and be more in line with last year’s first quarter comparative.

“As always, I want to thank all of our employees worldwide for their contributions in 2020. We recognize that our success of the past year is directly attributable to all of your hard work and we all look forward to even better days ahead,” concluded Schwartz.

Photo courtesy Doral Sports/Cannondale