Cannondale owner Dorel Industries Inc has announced results for the third quarter ended 30 September 2011. Revenue for the period increased by US$6.3 million, or 1.1%, to US$575.8 million from US$569.5 million a year ago. Net income was US$23.1 million or US$0.71 per diluted share compared to US$30.6 million or US$0.92 per diluted share in 2010.
Total nine month revenue was up US$29.2 million, or 1.6%, to US$1.80 billion from US$1.77 billion in prior year. Net income was US$77.2 million or US$2.36 per diluted share compared to US$101.8 million or US$3.06 per diluted share for the year-to-date period in 2010.
Although the company was disappointed with the results of its Juvenile segment, Dorel President and CEO Martin Schwartz said, “In Recreational/Leisure we maintained our momentum as the Cannondale brand becomes increasingly synonymous with product innovation.”
Recreational/Leisure a go-go!
Dorel’s Recreational/Leisure division saw revenue in the third quarter increase by 21.6%, as ‘strong sales to the independent bicycle dealer (IBD) channel continued, driven by new product innovation and brand support.’ This was evidenced at September’s two major bike shows in Europe [Eurobike] and the US [Interbike], ‘where new products were enthusiastically received.’
In the mass merchant channel, sales for the quarter improved over last year. The segment’s organic revenue increase was approximately 18% for the quarter and is 13% in the year to-date.
SUGOI challenges
The stronger US dollar at the end of September did affect operating profit, reducing the gross margin percentage by approximately 1% in the quarter. Meanwhile, the Recreational/Leisure segment’s earnings in the quarter were hampered by a loss at its [SUGOI] apparel division, with earnings declining by approximately US$2.5 million from last year.
The decrease was due mainly to a write-down of excess inventory from prior model years and one-time costs of $US0.8 million related to a strategic decision to outsource the custom manufacturing part of this business. Principally for employee severance, it is anticipated that in the fourth quarter additional one-time costs of US$1.5 million will be incurred as part of this initiative.
Though less than 5% of the segment’s total revenues, improving profits at the apparel division remain a focus as management believes the SUGOI brand and its product offerings offer a substantial opportunity. Preliminary orders for spring 2012 are reportedly higher than they were a year ago at this time.
Excluding the decline in earnings at SUGOI, the operating profit in the Recreational/Leisure segment would have increased by over 35% for the quarter as opposed to the 9.8% recorded.
