By Charlie Lunan

Shimano Corp. expects sales to fall twice as fast this year than it did three months ago due to a global oversupply of bicycles.

The Japanese company reported high bicycle inventories in the United States, unfavorable weather in Europe and weak consumer spending in China contributed to significantly weaker results in the first half ended June 30 compared with a year earlier.

The results prompted the Japanese maker of bicycle components and fishing gear to significantly lower its sales and earnings forecast for the full year.

Shimano’s total sales for the six months ended June 30 reached ¥166.4 billion ($1.54 billion), down 15.3 percent from a year earlier. Gross margin was flat at 41.1 percent. Operating income declined 24.7 percent to ¥34.2 million ($317 million), while ordinary income was off 36.3 percent to ¥31.6 million ($293 million). Shimano reported net income of ¥22.9 billion ($21 million) a decline of 37.3 percent.

Bike Inventories High Everywhere
Net sales at the Bicycle Components segment decreased 18.6 percent from the same period of the previous year to ¥132.6 billion yen, while operating income decreased 28.5 percent to ¥30.6 billion yen.

In North America, retail sales of bicycles were somewhat weaker than the year earlier quarter and distributor inventories of bicycles remain high, Shimano reported. U.S. bike wholesalers held 18.9 percent more bikes in their inventory at the end of May compared with a year earlier, which marked a big improvement from the end of 2015, when inventory levels were estimated to be 44 percent higher than a year earlier, according to the Bicycle Product Suppliers Association (BPSA). The trade association has estimated U.S. bike sales declined 8.4 percent in May and were down 5.7 percent through the first five months of 2016.

In Europe, bad weather in March and April greatly undermined retail sales of bicycles, resulting in a higher level of distributor inventories. In China, distributor inventories began heading to an appropriate level despite continued weakness in retail sales of sports bicycles, which fell last year as the country economy slowed.

Shimano said retail sales of sports bicycles in Southeast Asia remained robust, while those in South America continued to be soft because of the economic slowdown and weak currencies.

In Japan, retail sales of sports bicycles, which had been robust until the previous year, lost momentum and distributor inventories have become somewhat high. Retail sales of community bicycles remained weak, continuing from the previous year.

Fishing Tackle Sales Flat
Net sales at Shimano’s fishing segment increased 0.6 percent from the same period of the previous year to ¥33.6 million, while operating income increased 37.2 percent to ¥3.66 billion yen.

Despite the negative impact of an earthquake in Kumamoto in April, sales in Japan exceeded the level of the same period of the previous year. Sales in the rest of Asia remained robust, led by South Korea and Taiwan in the East Asian market. Sales in North America, Europe, and Australia did not fully recover from the dip in the first quarter.

Slashing Expectations
Shimano ended the first half of the year with inventory valued at $53.6 billion, down 11.3 percent from a year earlier, with most of the decline coming from merchandise and finished goods.

The company’s adjusted forecast for 2016 calls for net sales to decline 14.2 percent, compared with a decline of 7.6 percent forecast April 26. Operating income and net income are forecast to fall 20.1 and 37.7 percent, compared to a previous forecast of -5.9 and -30.0 percent.

Lead photo courtesy Shimano