Dorel Sports saw third-quarter sales decrease by 5.9 percent over the year-ago quarter to $250.7 million, or by or 6.2 percent in currency-neutral terms. Organic revenues - which excludes the impact of changes in exchange rates and a change in accounting for overseas revenues - declined by 10.7 percent.
The Canadian group, whose brand portfolio includes Cannondale, Schwinn, Mongoose, GT, Caloi, and Sugoi, blamed a softer global bike market and changes in the North American independent bicycle dealer (IBD) environment. It said that the year started last January with U.S. vendors' inventories of bicycles swollen to 140.0 percent compared with January 2015, which prompted them to offer deep discounts in March to make room for incoming model year 2017 bikes. As a result, IBDs decided to take lower commitments for deliveries in the third quarter.
Despite these headwinds, Dorel Sports was able to boost its adjusted operating profit - which excludes impairment losses, restructuring and other costs - by 0.9 percent to $10.9 million compared with the third quarter of 2015. This was attributed to a program of cost-cutting and restructuring in the past months that resulted in margin improvement at all divisions. Pacific Cycle stood out, due to successful new product introductions and logistic efficiencies. By year-end, the division will relocate most of its distribution operations from Illinois to a larger facility operated by Dorel's ready-to-assemble furniture segment in Savannah. Dorel Sport's Brazilian company, Caloi, also contributed to the positive results thanks to price increases.
The company expects IBDs to move fourth-quarter orders to the first quarter of 2017, but feels that the positive trend on adjusted operating profit will continue in the fourth quarter, resulting in improved earnings.
Dorel Sports' parent, Dorel Industries, which also includes furnishings and juvenile products, reported total revenues of $671.3 million for the third quarter, down by 1.2 percent from a year ago. Adjusted net income jumped by 32.9 percent to $20.6 million. Reported net income of $15.9 million compared with a reported net loss of $8.8 million in the year-ago period.