Posted by Editoress on 02/6/14
Dorel Industries Inc. (TSX: DII.B DII.A) today stated that 2013 fourth quarter Recreational/Leisure earnings will be substantially below prior year levels due to top line weakness and a poorer product mix. As such, the Company's consolidated results for the quarter and full year will be below 2012.
Sales volumes to Pacific Cycle's mass merchant customers were lower during the fourth quarter than last year as retailers in general experienced fewer consumer visits during the holiday period and curtailed orders. Cycling Sports Group (CSG) sales to the IBD channel were more profoundly affected as dealers were reluctant to increase inventories going into the new year. Industry discounting continued to be a market reality and the number of 2013 model year bicycles sold carrying lower margins was more than anticipated. In addition, supply for firm customer orders for more than US$10 million of CSG 2014 models did not arrive in time for fourth quarter delivery and are being shipped during the current first quarter. Another negative factor during the quarter was unfavourable foreign exchange.
"We had felt that things were improving at the end of the third quarter but the issues outlined above had more of an impact than originally expected. With January completed, normally the quietest month of the year and barring any disasters in weather, Recreational/Leisure earnings for the first quarter should improve by at least 20% to 25% over the corresponding quarter last year. There are now several positive trends working in our favour. Dealer orders are being driven by a firming consumer demand with new models selling at full margins, new SKUs at some of our largest customers, increased licensing revenue, strict cost controls and foreign exchange benefits," said Martin Schwartz, Dorel President and CEO.
"Management at the Recreational/Leisure segment is invigorated and is confident about the year ahead. To be clear, the restructuring and associated charge announced last month was not related to the fourth quarter's poor performance but was undertaken to enhance our competitiveness in the bicycle industry. This will improve profit through 2014 and 2015," concluded Mr. Schwartz.
Dorel will announce year-end results on March 4, 2014.
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