May 6/16 12:49 pm - Dorel Bike Sales Down in Q1 2016

Posted by Editoress on 05/6/16
 

Dorel Industries Inc. (TSX:DII.B)(TSX:DII.A) has released results for the first quarter ended March 31, 2016. Total revenue was US$645.9 million, down 2.9% from US$665.5 million a year ago. Adjusted net income for the quarter was up 66.7% to US$19.7 million or US$0.60 per diluted share from US$11.8 million, or US$0.36 per diluted share in 2015. Reported net income increased 43.9% to US$16.7 million, or US$0.51 per diluted share, compared to US$11.6 million or US$0.36 per diluted share in the first quarter of 2015.

"We are pleased with the positive start to the year. Dorel Home Furnishings delivered another record quarter and has evolved into a growth company with opportunity for further expansion with its on-line customers. Newly introduced Dorel Juvenile products are resonating well with consumers and improved pricing has resulted in better gross margins in the majority of our markets," commented Martin Schwartz, Dorel President & CEO.

Dorel Sports revenue decreased by US$12.4 million or 5.4% to US$216.5 million compared to US$228.9 million last year. After removing the impact of varying year-over-year foreign exchange rates, organic revenue declined by approximately 3%. Part of the shortfall was due to shipments of 2016 model year bicycles in the Cycling Sports Group (CSG) occurring in December 2015 as opposed to in the first quarter of 2016. This was made possible by improvements in on-time delivery.

The lower revenue was also due to the non-recurrence of higher sales to European dealers who stocked up in March 2015 in advance of an expected April 2015 price increase triggered by currency pressures. Partly offsetting this were strong bicycle sales by Pacific Cycle to U.S. mass market customers, mostly for the Schwinn and Mongoose brands, as the favourable weather and earlier Easter holiday benefitted March sales.

Operating profit decreased to US$5.3 million from US$11.6 million due to the decreased sales as explained above and lower margins from discounting on the independent bike dealers (IBD) sales in the U.S. in order to maintain market share as key competition executed price decreases to reduce their excess inventory.

"The Pacific Cycle division will continue to grow modestly through the year and will surpass 2015 in both sales and earnings. The Schwinn brand has strong traction with consumers and this has been translated into a solid first quarter in the mass channel. Despite the situation in Brazil, Caloi is on target to meet its earnings objectives, although sales will be down year-over-year. Price competition in the IBD sector is making for a challenging first half and demand for premium bicycles is uncertain. We foresee improvement during the second half as Dorel's line of model year 2017 bikes is compelling and there has been good reaction to the recently introduced Quick and Scalpel models. Additional models will be introduced later this year. We will continue to be proactive in CSG and we will closely monitor the situation throughout the year. However, despite the slow start, Dorel Sports is expected to exceed 2015's performance," stated Schwartz.