Margins down on discounted IBD sales in the US

Cannondale owner Dorel sees revenue down in Q1

Dorel Sports – including Cycling Sports Group, Cannondale, GT, Schwinn and Sugoi – saw revenue fall in Q1.

Revenue was down by US$12.4 million or 5.4 per cent to US$216.5 million (US$228.9 million last year).

Taking account of foreign exchange rates, organic revenue was down around three per cent. However the shortfall was due in part to early shipping of 2016 model year bikes – in December 2015 rather than Q1 2016 – which skewed the figures, Dorel Sports said.

European dealers stocked up back in March 2015, the group said, to offset a currency-led anticipated price rise in April 2015, leading to less restocking by those dealers in Q1 2016.

On the positive side, there were big sales to US mass market customers through Pacific Cycle, mostly for the Schwinn and Mongoose brands, with an early Easter and favourable weather boosting March sales.

Operating profit decreased to US$5.3 million from US$11.6 million due to decreased sales and also from lower margins from discounting on IBD sales in the US "in order to maintain market share as key competition executed price decreases to reduce their excess inventory".

Martin Schwartz, Dorel President & CEO, said: "The Pacific Cycle division will continue to grow modestly through the year and will surpass 2015 in both sales and earnings. The Schwinn brand has strong traction with consumers and this has been translated into a solid first quarter in the mass channel. Despite the situation in Brazil, Caloi is on target to meet its earnings objectives, although sales will be down year-over-year.

“Price competition in the IBD sector is making for a challenging first half and demand for premium bicycles is uncertain. We foresee improvement during the second half as Dorel’s line of model year 2017 bikes is compelling and there has been good reaction to the recently introduced Quick and Scalpel models. Additional models will be introduced later this year. We will continue to be proactive in CSG and we will closely monitor the situation throughout the year.

"However, despite the slow start, Dorel Sports is expected to exceed 2015’s performance."

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