Cannondale owner Dorel Sports sees ‘surge in business’ as consumers turn to bicycles

Dorel Sports, owner of Cycling Sports Group, Cannondale, GT, Schwinn, Mongoose and Caloi, saw its Q1 financials negatively affected by the Covid-19 outbreak, due in part to how it affected its route to market, but the group has noted a “surge in business” in recent weeks with consumers increasingly turning to bicycles to exercise and get around during the pandemic lockdowns in various nations.

Dorel also noted a spike in demand for bikes ahead of the lockdowns around the globe, but while demand remained strong, sales were partially derailed by lockeddown retail operations in some regions. Some of the larger sporting goods outlets closed, although Dorel Sports noted e-commerce sales made up for the lack of bricks and mortar sales.

By the end of April, many dealers that had been closed in Northern Europe had reopened while most of the dealers in the Southern countries remained closed.

Dorel confirmed the reports that the bicycle industry has seen a surge in business in recent weeks: “Many people are getting out for fresh air and exercise, while others are using bicycles as a mode of transportation to avoid public transport during the Coronavirus crisis. The desire for physical and mental health wellness, outdoor fun and fitness, while remaining safely isolated, are all driving factors for the significant increase in bike demand. This has been helped by the breaking, warm Spring weather in many regions.

“Cities around the world are closing additional traffic lanes to give cyclists and pedestrians more space and some are temporarily or permanently expanding cycling infrastructure in response to COVID-19.”

Q2 sales, therefore, are expected to remain strong where consumers can access bikes, including mass retailers and e-commerce, two channels experiencing an exponential increase, Dorel saud.

Through April, PCG customer POS has increased significantly versus prior year. CSG’s North American business is expected to deliver sales growth while European revenues are expected to decline due to ongoing lockdowns across Southern Europe. It is anticipated that Caloi sales will decline as many of its key customers are expected to remain closed through the quarter.

Even though short-term supply will be an issue due to the high demand, and store closures will affect distribution, a return to profitability is expected for the second quarter.

The numbers

Dorel Sports Q1 saw the fourth consecutive quarter of revenue growth for Dorel Sports, at US$188.2 million, an increase of US$3.6 million (2%, like-for-like).

However, operating loss was US$0.6 million (2019: Q1 operating profit was US$4.5 million). The coronavirus reduced Q1 operating profit by over US$6.0 million through a combination of reduced sales in the second half of March due to lockdowns, unfavourable foreign exchange due to the strength of the US dollar and an increased impairment loss on trade accounts receivable considering the economic impact of the COVID-19 pandemic.

Sales improvements at Cycling Sports Group (CSG) and Pacific Cycle (PCG) were partially offset by weakness at Caloi. PCG saw strong retail point-of-sale with growth accelerating particularly in the last two weeks of March as consumer demand for bikes spiked amid the pandemic lockdowns, and ahead of the Easter holiday period. Caloi’s decline was attributed to lower demand due to price increases aimed at offsetting devaluation of the Brazilian Real and the Coronavirus which forced many retailers to close towards the end of the quarter.

Dorel also noted that many bicycle factories in Asia were forced to close for four to six weeks, reducing supply.