MONTRÉAL (BRAIN) — Dorel Industries said Friday that its bike business rebounded in the second quarter with revenue up $15.5 million or 7.4 percent to $224.5 million. Revenue through the first half of the year was up $8.1 million or 1.9 percent to $431.2 million, but remained flat compared to the previous year after removing the impact of foreign exchange rates.
Dorel owns Cannondale, Caloi, GT, Fabric, Schwinn, Mongoose and Charge.
“Dorel Sports rebounded strongly after a tough start to the year, posting solid adjusted results ... We overcame the impact of the Toys“R”Us bankruptcy earlier in the year. We are encouraged by the markets’ reaction to our new bicycle and juvenile products. Sell-through has been good over the past few months and more new products are set to launch through the second half, providing optimism for the balance of the year,” said Dorel president and CEO Martin Schwartz, in a statement.
The bike segment rebounded from a difficult start to the year with improved second-quarter adjusted operating profit compared with the first quarter. Compared to 2017, second-quarter revenue growth was more than 10 percent at both Cycling Sports Group (CSG), its IBD brands, and Caloi.
The company said CSG recorded growth in all key regions with good momentum from recent product launches. Caloi continued to grow on new product innovation and was further aided by a gradual improvement in the Brazilian economy. Pacific Cycle experienced a modest revenue decline overall with the negative impact of the Toys“R”Us U.S. liquidation, but revenue to other key customers increased.
Dorel Sports sold its apparel business in the second quarter to Louis Garneau Sports, and the transaction resulted in restructuring costs of $11.2 million of which $9.2 million was noncash, due to a write-down of the Sugoi trademark and inventory markdowns. The company said the divestiture will allow Dorel Sports to focus on its core strategic businesses of bikes, parts and accessories categories and electric ride-ons.
Second quarter operating loss was $3.3 million compared to an operating profit of $4.9 million a year ago due to these restructuring costs. Excluding restructuring and other costs, adjusted operating profit rose $2.3 million, or 40.5 percent, to $8 million from $5.7 million last year.
Through the first half, operating loss was $4.1 million compared to an operating profit of $15 million in 2017. When excluding the $6.6 million impairment loss on trade accounts receivable from Toys“R”Us recorded in the first quarter, adjusted operating profit for the six months was $13.8 million compared to $15.1 million a year ago.
“In all three of our segments, proposed tariffs recently announced in the U.S. would impact a significant number of our product categories, and is creating business uncertainty. However, our competition will be similarly affected as we will all be required to adjust pricing upwards and higher costs will ultimately be passed on to consumers,” Schwartz said.
Dorel is holding an earnings call at 12 p.m. Eastern to discuss its results.
