Thule reports ‘rapidly declining’ demand for bike-related products in third quarter

Thule Group has published its interim report for July to September 2022, reporting a 23% decline in third-quarter sales year-on-year.

Net sales for the quarter amounted to SEK 2,139m. Adjusted for exchange rate fluctuations, sales declined 29.4%. Net sales for the first nine months of the year amounted to SEK 8,487m, corresponding to a decrease of 0.6%. Adjusted for exchange rate fluctuations, sales declined 7.1%.

Thule Group’s CEO and president Magnus Welander said the company saw ‘rapidly declining’ demand for bike-related products in the third quarter, as global bike stores cut back their purchases due to high inventory levels. In the report for the second quarter, the company indicated concern for high inventory levels at its customers, but Welander said the slowdown was ‘considerably more substantial than expected’.

The gross margin in the quarter was 33.9% and was negatively impacted primarily by a decline in sales of bike-related high-margin products, Welander said. Higher shipping costs for bulky product groups with good growth, such as roof boxes and awnings for RVs, had a negative impact. The general increase in the share of sales in the packs, bags and luggage and RV products categories, with typically lower gross margins, also negatively impacted the gross margin.

Welander said: “Investments in product development continued according to plan since our view of the future long-term market trend remains unchanged. Product development, as a share of sales, was 6.7% for the quarter, compared with 3.8% in the year-earlier quarter. The relatively high level is also a result of our resumed work with development projects that we chose to postpone the completion of in 2021, in order to secure an efficient and reliable delivery chain for manufacturing these new products.

“We are taking the same long-term view on marketing costs since we believe in a long-term continued favorable sales trend for our product categories. We are therefore continuing to secure and strengthen our market positions, and added investments ahead of the important launch of car seats that will reach European retail in autumn 2023.”

The EBIT margin sank to 9%, which was lower than the third quarter of 2021, 24.2%. Inventory amounted to SEK 3,140m, down SEK 117m after currency adjustment compared with the end of the second quarter.

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Welander continued: “The coming quarters, as already communicated, we will be facing a challenged market with a greater uncertainty in regards to how consumers’ purchasing desire is impacted in an uncertain world as well as retailers that will strive to keep inventory levels low.

“Our long-term strategy and ambitious targets remain firm, as we are convinced that the trend of living active lives close to home will remain strong in the long term. At the same time we have already taken actions, thanks to our flexible operations model, to ensure that we have the right staffing levels and have adjusted our capacity related investment levels in our assembly facilities.

“We will continue to monitor the market development closely. In 2023, we will also begin an exciting growth journey in the child car seats and dog transport solutions product areas. With a clear focus and high energy, we take on a challenged time over the coming quarters. At the same time, we look forward to next spring with many of our new products in stores across the world.”