MONTREAL (BRAIN) — Dorel reported an increase of 8.3 percent, or 18.8 million, in fourth-quarter revenue across its recreational and leisure division. However, product discounting, late deliveries and restructuring costs incurred during the quarter led to an operating loss of $5.4 million, compared to an operating profit of $16.5 million in 2012.
Fourth-quarter revenue in the recreation and leisure segment, which includes Cannondale, GT, Mongoose, Schwinn, Sugoi, Brazilian bike brand Caloi acquired last year, and Dorel’s mass-market bike brands, totaled $245.4 million in 2013, up from $226.6 million in 2012. But gross profit and operating profit for the quarter were down 8.2 and 133 percent, respectively.
Dorel blamed the profit declines on a global bike market slowdown, a sluggish start to the holiday season in both IBD and mass channels, and an unfavorable product mix. The Canadian company also pointed to discounting that continued through the quarter, with more 2013 model year bikes sold at a lower margin than anticipated. More than $10 million worth of 2014 bike inventory intended for the IBD channel didn’t arrive in time for fourth-quarter delivery.
In addition, Dorel incurred $13.5 million in restructuring costs associated with the closure of an assembly and testing facility in Bedford, Pennsylvania, during the quarter.
For the full year, Dorel’s bike division posted $918.7 million in revenue, down from $928.4 million. Gross profits were down 9.2 percent, from $233.4 million to $211.8 million, while operating profits were down 70 percent, from $72 million to $22 million.
“Operating profit in all of the segment’s divisions, with the exception of Caloi, was down as increased price discounting was prevalent through the year. Unfavorable product and customer mix was also a major contributor to the reduced gross profit,” Dorel said in a press release.
The company said that organic sales only decreased 2 percent, however, removing the impact of foreign exchange and acquisitions. For the full year, Dorel incurred a total of $15.4 million in restructuring charges, which included the closure of the Bedford facility and $2 million in severance pay for layoffs in its bike division last summer.
Martin Schwartz, president and CEO of Dorel Industries, said due to cost-cutting measures taken and currently underway, he expects a rebound in the bike division during the first quarter of 2014. “Earnings should improve by at least 20 to 25 percent over last year,” he stated.
Overall revenue at Dorel, including its home furnishings and juvenile businesses, totaled $633.5 million in the fourth quarter, up from $622.6 million. For the full year, it reported $2.4 billion in revenue down from 2012’s $2.5 billion.
Dorel is traded on the Toronto Stock Exchange under the symbols DII.B and DII.A. Its stock performance is tracked on BRAIN’s Industry Stock chart.
