Shimano Inc. reported that the impact of the global recession and the pressure to reduce inventories has caused its bicycle components business and fishing tackle business to suffer from lackluster sales for the first half of 2009 ended June 30. The company said the second quarter trend in the top-line worsened somewhat from first quarter and first half trends.
Second quarter consolidated revenues sank 25% to ¥45.0 billion ($462 mm). Second quarter sales declined most in Asia and Japan, while North America posted a double-digit increase for the quarter. Japan revenues decreased 32% to ¥28.1 billion ($288 mm) from ¥41.3 billion ($396 mm) in the year-ago quarter and Asia revenues fell 39% to ¥2.71 billion ($28 mm) in Q2 from ¥4.45 billion ($43 mm) in Q2 last year.
Europe was also down double-digits for the period, sinking 20% to ¥6.73 billion ($69 mm) in the second quarter from ¥8.39 billion ($80 mm) in the year-ago period. North America, which saw some upside from acquisitions, posted a 23% increase in revenues for the quarter to ¥6.62 billion ($68 mm). The business grew more than 31% when measured in U.S. dollar terms.
Second quarter consolidated gross margins fell 490 basis points to 31.7% of sales and net income plummeted 85% to ¥1.06 billion ($11 mm).
In the Bicycle Components business, Shimano cited a “significant drop in the demand” for bicycles in the “popular price zone” both in the Japanese market and in overseas markets, citing weak consumer confidence as reasons for double-digit declines for the both the first half and second quarter. The company said the decline in demand appears to have bottomed out. However, they said that since it will take some time to reduce inventories, shipments of the companys products in the popular price zone did not pick up.
Shimano said consumer demand for mid-range and high-end sports bicycles “remained firm” in Japan, the U.S. and Europe, “underpinned by worldwide interest in health and the environment.” They did indicate that there was a definite trend toward “inventory trimming” in the market and this took longer than initially anticipated. As a result, shipments of the companys mid-range and high-end products remained at relatively low levels.
First half sales in the Bicycle Components business declined 23% to ¥68.1 billion ($715 mm) and operating income fell 52% to ¥8.32 billion ($87 mm) for the segment. Second quarter trends worsened a bit from the first quarter, with revenues declining 28% to ¥32.8 billion ($337 mm). Operating income for the segment plummeted 71% to ¥2.61 billion ($27 mm) in the quarter.
In the Fishing Tackle business, Shimano said new products “boosted sales somewhat” in the Japanese market, but overall domestic sales were “slightly lower” than last year because the recessionary mood continued from the end of the previous year and retailers took steps to reduce inventories. In the non-domestic markets, sales of sophisticated, high-end products were “particularly sluggish” which the company attributed to the “rapid deterioration of the global economy.”
First half sales for the Fishing Tackle business were down 14% to ¥21.3 billion ($224 mm) and operating income fell 77% to ¥521 million ($5 mm). Second quarter trends improved a bit from the first quarter, with revenues declining 12% to ¥11.8 billion ($121 mm). Operating income for the segment still fell 76% to ¥420 million ($4 mm) in the quarter.
