Business news : Dorel Reports Bike Sales Declined in Third Quarter as Discounting Continued

Dorel Industries reported sales increased 1.2 percent at its Recreational/Leisure Segment in the third quarter, but only because sales at a recently acquired Brazilian bike maker offset a 6 percent decline in organic sales attributed to continued discounting of 2013 models in the wake of poor spring weather.

Revenue at the segment, which owns the Cannondale, Schwinn, GT, Mongoose, Ironhorse bike and Sugoi apparel brands, reached $231.6 million in the quarter ended Sept. 29.  Gross profits reached declined 2 percent to $54.2 million, or 23.4 percent or revenues, which was an 80 basis point decline from the third quarter of 2012.

Operating profit increase of 12.7 percent compared to the third quarter a year ago. Quarter-over-quarter, operating profit grew 283.2 percent to $14.1 million from $3.7 million thanks in part to the Aug. 22 acquisition of a 70 percent interest in Caloi, Brazil's largest bicycle brand.

"Furthermore we have seen an improvement since the second quarter in Recreational/Leisure's operating profit. We are taking measures to improve this business," stated Dorel President and CEO Martin Schwartz.

Despite the global decrease in the bicycle market versus 2012, some market indicators are pointing to stabilization in the bicycle market in the months ahead. Cannondale Sports Group sales rebounded slightly in the quarter due to new model year introductions. Sales at Pacific Cycle, which sells to Walmart and other mass retailers, were affected by a timing shift that will move some shipments into the fourth quarter. The segment's cost containment program which began during the last quarter is on track.

"As expected, Recreational/Leisure rebounded from a disappointing second quarter, and with the contribution of Caloi, exceeded prior year results in the third quarter. We expect the same in the fourth quarter and earnings for the fourth quarter should exceed prior year," said Schwartz. "However, the independent bike dealers channel is being cautious on pre-season inventory purchases given their experience with the poor spring 2013 weather.We are not satisfied with these results and we are actively working on many fronts to improve the business and its value for our shareholders. We have demonstrated this with our Caloi acquisition."

Recreational/Leisure Segment

Third Quarters Ended September 30
	2013		2012
	$	% of rev.	$	% of rev.	Change %
Total revenue	231,591		228,953		1.2%
Gross profit	54,185	23.4%	55,295	24.2%	(2.0%)
Operating profit	14,105	6.1%	12,516	5.5%	12.7%
Nine Months Ended September 30
	2013		2012
	$	% of rev.	$	% of rev.	Change %
Total revenue	673,279		701,782		(4.1%)
Gross profit	160,024	23.8%	176,918	25.2%	(9.5%)
Operating profit	27,327	4.1%	55,502	7.9%	(50.8%)

By press release through sportsonesource