High inventory levels continue to hit Fox Factory results
The first six months of 2023 saw Fox Factory’s SSG (Specialty Sports Division) see a net sales decline of 35.6% compared with the prior year fiscal period. Likewise, Q2 net sales were down 41% for SSG.
Partially offset by Fox Factory’s other divisions – Powered Vehicles Group (PVG) and Aftermarket Applications Group (AAG) – the continued lull, now stretching from 2022 Q4 to 2023 Q2, was driven by high inventory levels in the market.
Overall gross margin was 33.1% in the first six months of fiscal 2023, a 40-basis point decrease, compared to gross margin of 33.5% in the first six months of fiscal 2022.
Fox Factory’s cycle related brands include Fox, Marzocchi, RaceFace and Easton.
As always, it’s worth noting the sizeable declines are in comparison with a record year, when Fox Factory saw a 17.6% increase for its bicycle goods segment across 2022.
“Strong sales growth in PVG and AAG coupled with continued efficiency gains in our North American facilities enabled us to deliver on net sales and to exceed our expectations on adjusted EBITDA and adjusted EBITDA Margin,” said Mike Dennison, FOX’s CEO.
“Our solid cash flow generation and strong balance sheet place us in a position of strength heading into the second half of the year as we advance our organic growth strategy, address softness in SSG and continue to evaluate various acquisition targets that would be accretive to our brands and our financial performance.”
The jury is out on how long it will take the cycling industry’s high inventory levels – largely a result of the huge disruption Covid and lockdowns imposed on the market coupled with less disposal cash for consumers – to return close to normal.
