Dorel Inc. reported fourth-quater revenues in its Dorel Sports segment decreased US$18.4 million, or 7.3 percent to US$235.3 million. Organic revenue declined approximately 14.6 percent when removing currency rate fluctuations and the revenue gross-up generated by the transition of Cycling Sports Group (CSG) International business from a licensing model to a distribution platform.
Since this year’s third quarter, CSG International’s shipments have been recognized as net sales and associated expenses in cost of sales. Previously these were recognized on a net basis in licensing and commission income.
The quarter’s revenue decline was due primarily to the change in North American CSG dealers’ purchasing habits to reduce their inventory prior to the cycling season which is expected to move fourth quarter orders to the first half of 2017. CSG inventories are now at appropriate levels. December 2016 Bicycle Products Supplier Association (BPSA) data indicates U.S. supplier inventories are down 24.0 percent and retailer inventory levels down 6.3 percent.
Full year revenue declined US$61.2 million, or 6.1 percent to US$939.0 million and organic revenue declined by approximately 8.4 percent when removing currency rate fluctuations and the above-mentioned revenue recognition change impact. The main causes were the change in dealers’ purchasing patterns, industry-wide discounting due to excess inventories at suppliers and retailers during the first half of 2016 and a generally soft global bike market overall.
Fourth quarter operating profit declined US$3.5 million to US$5.0 million and adjusted operating profit increased US$1.0 million, or 10.8 percent to US$10.2 million when excluding restructuring and other costs. Margin improvements and cost controls offset the reduced sales impact to exceed the prior year’s fourth quarter.
Year-to-date operating loss was US$33.9 million compared to an operating profit of US$10.9 million in 2015.
Excluding impairment losses, restructuring and other costs, adjusted operating profit declined US$10.5 million, or 24.9 percent to US$31.5 million mainly from lower demand and reduced margins from discounting during the first half of 2016. Pacific Cycle had a good year, in part, due to improved supply chain efficiencies. Strategic pricing, cost controls as well as a better product mix allowed Caloi to increase its profitability.
Commencing this year, restructuring actions are expected to result in annualized savings of US$5.0 million. The goal is to refocus the business to deliver enhanced profitability during all business conditions.
The segment’s brands include Cannondale, Schwinn, Mongoose, GT, Caloi and SUGOI.
