SCOTTS VALLEY, Calif. (BRAIN) — Fox Factory Holding Corp. said sales in its bike product division, which includes Fox, Marzocchi, Race Face and Easton Cycling, were up 10.3 percent in the first quarter, which ended March 30. The company said original equipment orders drove the sales increase.
The company's bike-related sales totaled $57.7 million in the quarter, up from $52.3 million last year.
Across the bike and powered-vehicle businesses, Fox saw a 22.1 percent sales increase in the quarter, to $129.8 million, compared to $106.3 million in the same period last year. Gross margin increased 40 basis points to 32.1 percent compared to 31.7 percent in the same period last fiscal year.
"We started the year with record quarterly sales driven by strength in both our powered vehicle and bike offerings resulting in sales and profitability above our expectations," said Larry L. Enterline, Fox's CEO. "Looking ahead, our team remains committed to further building Fox's brand presence in our existing powered vehicle and bike categories and we believe Fox's differentiated market position will continue to fuel our expansion in the diverse end markets we serve."
The increase in sales of powered vehicle products was partly due to the inclusion of the company's recent acquisition of Tuscany Motor Company, a truck modification company.
In an investor conference call later Wednesday, Fox CFO Zvi Glasman said the bike segment's growth rate exceeded Fox's long-range growth target for the segment, which remains in the high single digits.
In response to an investor question, Fox's president, Mario Galasso, said Fox will continue to expand its Rhythm family of forks, which is an OE-only line that hits lower price points than Fox typically offers.
"It's going well," he said. "We continue to round out the Rhythm offerings and the products continue to be very well received. Also there's a little Rhythm inside the new Marzocchi products, so by what of that, (Rhythm) is carrying even a little further into the product line," he added, referring to the use of the Fit Grip damper, originally designed for the Rhythm forks, in the new Marzocchi forks that Fox introduced last month. The Marzocchi forks are only sold in the aftermarket.
Galasso said that the plan since Fox's acquisition of Marzocchi was to position the brand as an entry level offering below the Fox-branded offerings. "We are seeing it all come together now," he said.
Fox said it incurred legal fees of about $800,000 in the quarter primarily due to its ongoing litigation with SRAM.
SRAM's lawsuit against Fox's RaceFace subsidiary is stayed while the U. S. Patent and Trademark Appeals Board rules on Fox's request for a review of some of SRAM's relevant patents. The PTAB issued a ruling last month in favor of SRAM and Fox said it is "currently evaluating strategic next steps" in that case. Meanwhile Fox's suit against SRAM, which was moved from California to Colorado last year, is proceeding.
