Despite challenging market conditions, lifestyle and sporting goods giant Dorel Industries reported that overall sales grew 20% in 2008 to US$2.2 billion (€1.6 billion). Net income rose 29% to US$113 million (€83 million).
According to Dorel CEO and President, Martin Schwartz, “Dorel’s 2008 performance is the best ever achieved despite challenges which intensified as the year progressed. Rapidly rising commodity prices were a major factor for a good part of the year, affecting the majority of the company’s operating divisions.
“We were successful in passing some of these higher input costs on to retailers without significantly weakening consumer demand of Dorel products at store level. Despite the deepening global economic crisis through the second half of the year, Dorel’s products continued to demonstrate that they are in demand even in times when retail sales as a whole decline.”
In the fourth quarter Dorel’s Recreational/Leisure division saw revenues increase by 79.2%, largely due to the acquisitions of Cannondale, SUGOI and PTI Sports. Separating out these acquisitions, however, Dorel reports that organic sales growth was also strong, at 8%.
The division’s sales increase was driven by the core bicycle business with revenue gains at the majority of the company’s mass merchants. Gross margins increased to 23.4% from 19.5% in the prior year. This was primarily due to the contribution of higher margin products sold by Cannondale and SUGOI. The parts and accessories now sold through Pacific Cycle also attract higher margins for the business.
Looking forwards into 2009, at current exchange rates, Dorel will be negatively impacted this year compared to 2008. A large portion of the company’s earnings are generated outside the US and the impact of a stronger US dollar will lower earnings both operationally and upon translation of results to the US dollar, Dorel’s reporting currency.
Despite the current economic environment, Dorel expects to benefit from a range of factors, from a stronger cash flow, through to lower interest rates. The company also expects to bolster its market share through strong retailer relationships in 2009. The stable to lower input costs being seen thus far in 2009 are also expected to materially benefit the company.
“The new management structure put in place in mid 2008 has had positive benefits and we have already seen results,” added Schwartz. “Programmes are being developed more rapidly. The structure also provides the ability to focus on all three of Dorel’s segments simultaneously and sets the stage for a new important chapter in Dorel’s evolution. We do not anticipate that 2009 will be as profitable as 2008, but nor do we expect it to be anywhere nearly as negative as current market conditions suggest. Our recession resilient product line and the other factors outlined above place Dorel in an admirable position as we face 2009.”
