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Dorel’s Bike Business Prospers in Q1

Published May 6, 2010

MONTREAL, Quebec (BRAIN)—Revenue and profit grew in Dorel Industries’ bike division during the first quarter of the year as early spring weather and rebounding consumer confidence drove sales at independent bike shops and mass merchants, according to first quarter earnings results released by the company on Thursday.

Dorel also added a record number of new IBDs during the first quarter in key markets such as Los Angeles, Northern California and Colorado.

Revenue in Dorel’s Recreation and Leisure segment, which includes its Cycling Sports Group IBD division, its mass brands and its apparel and footwear segment, increased by 12.5 percent in the first quarter—from $161.4 million in 2009 to $181.6 million this year.

Gross profit increased nearly 25 percent, from $37 million in 2009 to $46.1 million this year, and earnings from operations rose 51.3 percent to $15.1 million during the first quarter of 2010 from $9.9 million for the same time period last year.

About 5 percent of the revenue increase was organic due to strong sales of children’s bikes and an increased demand for adult bikes at the mass level, which is recovering from a challenging 2009.

However, organic revenue was up in all three segments—mass, IBD and apparel, said Jeffrey Schwartz, chief operating officer for Dorel, during a conference call with analysts on Thursday.

“We had particular growth in the mass section, but very strong demand in the IBD," he said. "We were able to satisfy a lot of that demand, but not all of it as it was above and beyond our expectations and our customers’ expectations. We are sitting at a larger backlog at this point, significantly larger than we had last year in our IBD business.”

Schwartz declined to give a specific backlog number, but said both Dorel and retailers underestimated demand of some of the new bike models.

“We actually wish we had more inventory to put into the channel because POS is running ahead of our sales. I don’t believe they’re in stock as they’d like to be, the retailers,” he said.

He said Dorel is trying to make up some of that backlog, but that it’s difficult “to press a button and increase your product that fast,” particularly given the seasonality of the bike business.

Dorel’s recreation and leisure brands include Cannondale, GT, Schwinn, Mongoose, Pacific Cycle, Iron Horse and Sugoi.

—Nicole Formosa

Topics associated with this article: Earnings/Financial Reports

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