Dorel Industries, which owns triathlon related brands such as Cannondale, GT, SUGOI Performance Apparel and Schwinn, has reported a solid first quarter 2009 considering a tough economic environment.
Total group first quarter revenues were US$525.2 million, down 5.5% year on year. However, within Dorel’s Recreational/Leisure division revenue was up 14.9% for the first quarter. Organic revenue experienced a decline, but was concentrated at mass merchant customers which were slower to replenish their inventory levels in bikes as compared to other segments. Sales through the independent bike dealer (IBD) channel and SUGOI experienced organic growth of 8% and 9% respectively.
Gross margins decreased by 170 basis points due principally to a less profitable product mix, as consumers shifted to lower price point products. Expenses increased considerably as the segment continued to invest in its infrastructure and in product innovation. Yet, given the current environment Dorel is keenly aware of the importance of cutting costs wherever possible and is actively reducing spending as needed.
As part of that programme, last month, Dorel announced a multi-faceted Worldwide Centres of Excellence programme in a continuation of its strategy to become the global innovation leader in the recreation and leisure markets. A major component of the plan is the expansion of the Bethel, Connecticut facility into a world-class innovation centre. All North American product development, marketing and business management for the Cannondale, Schwinn, GT and Mongoose brands sold to the IBD channel is being consolidated at Bethel. The centre for the development of bicycles for the mass market remains in Madison, Wisconsin.
Dorel CEO and President Martin Schwartz said, “We reached and surpassed several important internal objectives which had been established for the quarter. Our earnings are ahead of plan and we have reduced our record level of inventory by US$90 million, exceeding our expectations as we made significant progress in reducing these high levels created by retailers drastically cutting their in-stock levels last year. This will translate into a much improved cash flow as we move through 2009.
“The situation in bikes remains unpredictable as consumer buying patterns have been inconsistent. Meanwhile we have made important investments in this segment for the future, while at the same time being highly prudent with expenses. One exception, however, is in product development, particularly with Recreation/Leisure’s new Worldwide Centres of Excellence strategy.”
