MONTREAL (BRAIN) — Dorel Sports revenue was up 7.4% in the second quarter, to $241 million, according to a financial report Friday from Dorel Industries, the company's parent.
Dorel Sports contains the company's bike brands, Cannondale, Schwinn, Caloi, GT, Mongoose and KidTrax.
The company said that excluding foreign exchange rate fluctuations year-over-year and the sale of its Caloi and Sombio apparel businesses to Louis Garneau last year, organic revenue in Dorel Sports increased 11.1% in the quarter. Six-month revenue decreased $5.6 million, or 1.3%, to $425.6 million due to first quarter softness in its mass merchant business.
Its specialty retail division, Cycling Sports Group, posted high single-digit organic growth in part due to strong sales of e-bikes in Europe. The U.S. IBD channel saw "solid growth thanks to Cannondale launches such as the Treadwell, Topstone and EVO," the company said.
"Introductions of the model year (20) 20 lineup were earlier than prior years and have received exceptional reviews from both the bicycle media and riders. Caloi was solid with low double-digit organic growth on the back of success in sales to Brazil's bike sharing program and a better mix due to Cannondale's growth. Pacific Cycle reversed the first quarter sales decline with double-digit revenue growth due to a strong sales recovery at retail, both at brick and mortar and online," Dorel said.
Reported and adjusted operating profit for the quarter was $10.1 million compared to the prior year's operating loss of $3.3 million.
The company said U.S. tariffs on Chinese products dampened adjusted operating profit at Pacific Cycle, its mass market business. First half reported and adjusted operating profit was $14.6 million compared to a 2018 first half operating loss of $4.16 million and an adjusted operating profit of $7.2 million, excluding restructuring and other costs. The first quarter of 2018 included a $6.6 million impairment loss on trade accounts receivable from Toys"R"Us.
Dorel Industries overall posted quarterly net income of $2.8 million and revenue of $670 million in the period. Besides its bicycle divisions, Dorel is active in juvenile products and furniture.
“The organic revenue growth in the first half of the year is expected to continue into the second half, with year-over-year increases in all three of our segments," said Dorel's president and CEO, Martin Schwartz. "Dorel Home is in the process of improving gross margins. This, coupled with higher sales, is expected to result in higher second half adjusted operating profit. Dorel Juvenile’s steady progress is anticipated to continue through the year and should deliver improved adjusted operating profit versus prior year, with all major divisions contributing. Dorel Sports, led by strong revenue and earnings at CSG, is expected to deliver further sales and adjusted operating profit growth for the segment in the second half. Inventory management will be a key focus through the balance of the year with a targeted reduction of at least $50 million by year-end.”
Schwartz added, “The most significant risk going forward remains the impact of U.S. tariffs on certain Chinese made goods. This could have an impact on consumer demand, our retail customers’ purchasing behavior and the economy overall. A strengthening US dollar also remains a risk for Dorel Juvenile and Dorel Sports. We are diligently managing these issues.”
BRAIN will monitor a Dorel earnings call later Friday.
