MONTREAL, Quebec (BRAIN)—Dorel’s IBD brands were a bright spot in the company’s bike division during the first quarter of 2009, posting 8 percent organic growth during the first three months of the year.
Dorel’s IBD brands include Cannondale, GT, some models of Schwinn and Mongoose and Sugoi apparel. The recreation and leisure segment also includes mass market brands like Pacific Cycle and PTI.
The segment reported revenue growth of 14.9 percent in the first quarter, from $140 million in 2008 to $161 million this year, according to earnings figures released on Thursday.
Sugoi reported 9 percent organic growth in the first quarter. The 2009 results reflect the first three months of the year, while 2008 numbers only include February and March since Dorel didn’t acquire Cannondale and Sugoi until early February.
Revenue from the mass market brands was down about 2 percent for the quarter as retail customers were slow to start buying, said Jeffrey Schwartz, chief financial officer for Dorel.
“We didn’t see the gates open in January. It was much more into February before ordering patterns normalized,” Schwartz said.
The first quarter results are a reversal from the fourth quarter of 2008, when the mass market side of Dorel’s bike business saw 10 percent organic growth while the IBD side stayed flat.
Gross margin in recreation and leisure decreased 170 basis points as consumers shifted to a lower pricepoint product, which carries a lower margin than more expensive bikes, Schwartz said.
Dorel chief executive officer Martin Schwartz said the company made significant progress in reducing inventory in the first quarter by selling 90 million excess products (this includes the company’s juvenile and home furnishing segments, as well as bike).
In March, Dorel said it was sitting on $122 million worth of excess inventory, the bulk of which was from Pacific Cycle—the result of retailers putting the brakes on ordering in the fourth quarter due to the economic slowdown.
At that time, Jeffrey Schwartz said the company intended to sell the product at full margin.
Overall, Dorel’s revenue was down 5.5 percent for the first quarter, from $556 million in 2008 to $525 million for the first three months of 2009.
For more on Dorel, including details on a new licensing agreement for Schwinn motor scooters, and what the company is hearing from dealers about its recent announcement to move its frame manufacturing to Taiwan, read the June 1 issue of Bicycle Retailer and Industry News.
—Nicole Formosa
