Cannondale owner Dorel Industries Inc has reported that total revenue for Q4 2011 increased 4.1% to US$561.6 million, up from US$539.5 million a year ago. Revenue for the full year grew 2.2% to US$2.4 billion as compared to US$2.3 billion in 2010.
In its Recreational/Leisure division, under which the company’s bike business operates, fourth quarter revenue declined by US$3.5 million, or -1.7%, to reach US$202.4 million. In the mass market retail channel, sales declined in the low single digits. In the independent bicycle dealer (IBD) channel, sales were down less than 1% year on year as there was a shift of some orders from the fourth quarter to the preceding third quarter.
Dorel’s Recreational/Leisure division includes the following brands
- Cannondale
- GT
- SUGOI
- Schwinn
- Mongoose
- Iron Horse
- InSTEP
Despite the revenue decline, gross margin dollars for Recreational/Leisure were consistent with the prior year. Operating profit for the quarter increased by US$1.0 million as operating expenses were lower in 2011. This was mostly due to the timing of a promotional campaign in the fourth quarter of 2010 that did not re-occur in 2011.
Full year revenue for Recreational/Leisure saw an increase of 11.2% to US$861.8 million. This was due mainly to a sales improvement of over 25% in the IBD distribution channel. According to Dorel, this growth was driven by new products that were exceptionally well received by the marketplace.
Full year sales also benefited from strong marketing, improvements in supply chain and distribution, and enhanced dealer support.
Cycling Sports Group (CSG) sales were up in all markets, with most of the growth outside North America, which comprises over 50% of CSG revenue. Sales of Pacific Cycle products, servicing the mass merchant and sporting goods channels, were relatively flat with the prior year.
Supporting the revenue and gross margin dollar increase in the year was enhanced spending in selling and marketing; and as a result, selling expenses increased in the year. Despite the increase, both selling and general and administrative expenses declined in 2011 by a combined 30 basis points.
Earnings were also affected by a decline in profitability of approximately US$3 million at the segment’s apparel division which markets the SUGOI brand. The decrease was due mainly to a write-down of excess inventory from prior model years and costs of US$1.8 million related to the strategic decision to outsource the ‘custom manufacturing’ business to a third party.
Commenting on the results, Dorel CEO and President, Martin Schwartz said, “In Recreational/Leisure, a shift in the timing of the introduction of new model year bikes meant sales for the quarter were down slightly versus last year, but this business remains very solid in both the IBD and mass market channels.
“A clear indication of the success of our R&D efforts was the recognition by ‘Tour’, a prestigious German bicycle trade magazine, of the Cannondale Super Six Evo Ultimate. It was awarded the top score in a review of ‘The Best Road Bikes in the World over the Past Ten Years’. This is the first time this magazine has given this award which was based on ten years of reviews of over 2000 bikes.”
