SCOTTS VALLEY, Calif. (BRAIN) — "Alternative logistics" helped Fox Factory exceed its sales expectations for the first quarter, despite the West Coast port shutdowns.
The suspension company's sales were up over 20 percent in the first quarter, compared to the same period last year, while net earnings were down.
"We are very pleased our team was able to meet customer demand that we originally scheduled for the second quarter of 2015, notwithstanding the ports issue, by utilizing alternative logistics methods," said Larry L. Enterline, Fox's CEO. The company used alternative ports, trucking and air freight to deliver products despite the West Coast shut-down.
"While this did impact our gross margin during the quarter, we felt it was important to maintain customer satisfaction. Looking ahead, we continue to believe Fox's expanded and diversified product offerings, combined with positive industry dynamics, position us well for growth in sales and profitability long-term."
Fox saw a 5.7 percent increase in sales of bike products — due to the inclusion of sales from Race Face and Easton Cycling. The company said bike suspension sales were down in the quarter.
In the quarter, sales increased 20.8 percent to $67.8 million compared to $56.1 million in the same period last fiscal year. Gross margin decreased 260 basis points to 27.7 percent compared to 30.3% in the same period last fiscal year. Net income was $0.8 million, or $0.02 per diluted share, compared to $2.9 million, or $0.08 per diluted share in the same period last fiscal year.
The sales increase was largely due to 43.5 percent growth in sales of powered vehicle products, but Fox also saw a 5.7 percent increase in sales of bike products — an increase due to the inclusion of sales from Race Face and Easton Cycling, which Fox bought early December. Enterline said both of the company's new bicycle brands are "performing nicely." In an investors' conference call on Wednesday, Fox CFO Zvi Glasman declined to be specific about bike sales, for competitive reasons. He did say that the new brands were achieving a single-digit percentage sales increase as expected. The company said bike suspension sales were down in the quarter due to competitive pressures and weaker sales of remaining 2015 model year products.
Operating expenses related to the acquisition of those companies contributed to total operating expenses of $17.2 million, or 25.4 percent of sales, for the first quarter of fiscal 2015, compared to $12.3 million, or 21.9 percent of sales, in the first quarter of the prior fiscal year.
Enterline said Fox is still on track to transition 85 percent of its bike fork production to its Taichung, Taiwan, factory by the end of the year. All North American OE and aftermarket forks will continue to be made in California. Fox also recently began making bike shocks in Taichung, with the goal of producing 80 to 85 percent of shocks there by the end of this year.
The company said it expected to begin shipping a new suspension product in the second half of next year that will hit a lower price point than Fox has traditionally served.
Fox Factory was split off from Compass Diversified in a 2013 IPO. It acquired Race Face and Easton Cycling in December 2014. The company’s stock is traded on NASDAQ under the FOXF symbol and its stock performance is tracked on BRAIN’s stock page.
