Dorel Sports profits up 73% in Q1 like-for-like, price increases lock in

Cannondale parent Dorel Sports has recorded a 72.8% rise in gross profits taking Q1 2021 against the prior year’s opening quarter.

Year-over-year revenues for the group rose nearly 44% on the back of strong and steady demand for cycles and e-Bikes and “The demand for bicycles continued unabated,” according to a statement issued Friday afternoon.

European sales declined slightly from prior year as some regions re-entered lockdowns which limited sales at traditional retail. This was partially offset by increased e-commerce sales. In the UK, new boss Nikki Hawyes recently told CI.N that her focus in the early days has been speaking with a handful of retail accounts each week in order to understand their needs, simultaneously pledging CSG UK’s support for the indie bike retailer network.

“Our solid quarter is a tribute to our teams who did an excellent job of mitigating severe supply chain difficulties. Continuing cost increases in all segments for freight and commodities, as well as ocean container availability, will continue to create significant pressures. We will have to offset this with price increases through the rest of this year,” stated Dorel President & CEO, Martin Schwartz.

Gross margins were pressured and aside form shipping price increases, raw material costs an the impact of a weakening USD against the Chinese Yuan were also cited as headwinds for profitability. That said, gross profit margins did improve y 390 basis points to 22.9% from 19.0% in 2020 due to the favorable volume absorption on the increase in units shipped and positive foreign exchange impacts in international markets.

The quarter represented the eight consecutive period of growth for all three of Dorel’s divisions, with overall first quarter revenue topping US$270.3 million, an increase of US$82.1 million. Dorel Sports made a loss in Q1 of 2020.

The cycle segment is said to have overcome supply chain challenges, which have been characterised by a lack of shipping availability out of Asia and shortages of bicycle components; major headwinds that will continue going forward.

Cycling Sports Group’s gains were driven by significant double-digit growth in almost all countries as demand for Cannondale models was unprecedented.

Pacific Cycle’s revenues increased in line with retail POS throughout the quarter but saw contraction in core margins due to ongoing cost headwinds. Demand was strong for Caloi in all channels with product mix improvement and growth in both IBD sales and e-commerce. However, supply shortages resulted in a slight sales decline in Brazil.

“In the first quarter, we overcame significant headwinds and each of our three segments outperformed our expectations upon which our guidance was issued at the end of fiscal 2020. Strong sales of our products offset supply chain challenges out of Asia and we delivered substantial earnings improvement. However, looking forward, higher input costs and supply chain issues are expected to pressure earnings for all our businesses,” added Martin Schwartz.

“Dorel Sports’ sales remain very strong and the second quarter is expected to be similar in earnings to prior year. Demand remains high, and sales are expected to be at a record level. Bike component availability will remain an on-going issue.

“The combination of supply chain challenges and cost increases are an issue for all industries worldwide and are unprecedented in the history of Dorel. Though we believe we can overcome most of these challenges through a combination of higher sales, cost reductions and price increases, they do pose a risk to our earnings going forward,” concluded Mr. Schwartz.