Specialized says exchange rates and inflation are forcing midseason price increases

MORGAN HILL, Calif. (BRAIN) — Specialized will increase wholesale and suggested retail prices on select 2018 model year bikes starting on April 15. The company announced the change in a recent letter emailed to its dealers.

The increases range from 1 to 12 percent. Models affected include fitness, youth, e-bike, mountain and road categories, as well as various price points.

Specialized pointed to a devaluation of the U.S. dollar against Asian currencies over the past 12 months, which has inflated costs for its products. And it can no longer continue to absorb the costs entirely, the company said.

"To be precise, the dollar has weakened by 8 percent against the Japanese Yen, the New Taiwan Dollar, and the Chinese Renminbi since January 2017 and is forecasted to weaken further. Our teams have worked very hard to defer the negative impact on U.S. market pricing, and up till now, Specialized has absorbed the entire impact of these higher costs," the letter said.

"However, from next month forward, we will begin to pass on part of the increased costs by increasing both wholesale and retail prices on bikes. We will minimize the impact by including only select 2018 models of bikes and by only passing on a part of the increased price to you and the rider now."

The company said it expects the dollar to continue to weaken through 2018, and that inflation will result in higher prices for model year 2019 bikes across the industry.

In a call with BRAIN, Jeff McGuane, who heads the U.S. business for Specialized and emailed the dealer letter, said models that will see the price increase were carefully selected. They are bikes with a longer life cycle and that will carry over into 2019. He said the assortment is limited and represents less than 20 percent of Specialized's total range.

"On average it's a 6 percent increase so not a major lift," he said. "And many of these bikes, a lot of them carry forward. It's always an inconvenience to change prices in season. We apologize for the inconvenience. But up to this point we've really taken the cost increase, which has been significant."

McGuane anticipated that other bike brands may need to address the dollar's impact on their pricing soon.

"Everyone sources from different countries and currencies change. How individual businesses deal with that and whether they pass it on or not, that's at the discretion of each brand," he added. "But it's economics. Prices are going to have to go up."

McGuane said that margins and MAP pricing will go up accordingly, so Specialized retailers' margin structure should not be affected negatively.

"If anything they should be extending their margin with inventory purchased at a lower price," he said.