Tuesday, 10 December 2024
News

Inventory build up in bike sector prompts Thule warning

Thule late last week issued a second mid-quarter trading update to its investor base, clarifying some detail on inventory build up in the bike sector and warning of a large dive in expected income.

A sharp decline in its onward sales is attributed to existing high inventory levels in the supply chain and a softening of consumer demand. As a result the CEO Magnus Weylander said that the “temporary slowdown” versus a record 2021 will affect near term results.

He said: “As we communicated already at the beginning of September, bike retailers around the world in general, in the current situation with very high inventory levels and a general concern among consumers, have chosen to be extremely restrained with new orders for bikes and bike accessories. We still believe that it is a temporary slowdown in the bike industry compared to the record year 2021 and the extremely strong pre-season in the first quarter of 2022, which will affect Thule Groups results in the near term. Underlying positive bicycle trends with large investments in infrastructure for both bike commuting and biking as a leisure activity, as well as consumers’ positive view of the bike as a means of transport, remain.”

The company will trim its resources and output in order to balance the situation, with 34 management, product development and manufacturing staff expected to leave the business in the Americas. There are around 450 staff in the America Division.

Speaking to BR&IN, Hilary Hartley, President for Thule Group’s Region America arm, said that the product development positions will be moved from Connecticut back to Thule’s home of Sweden where the global development centre is found.

On the manufacturing side, Connecticut will also lose jobs. The staff reductions come on the back of a launch of new bike carriers, which will now lean on more automated production.

The mid-quarter trading update’s figures put the business’s third quarter trading down 25%, while operating income will decrease by 72%. The bike retail sector’s high stock levels are making further sales harder, said the CEO.

According to Thule, sales for the third quarter of 2022 are estimated to amount to approximately SEK 2.1 billion (SEK 2.8 billion, Q3 2021). Operating profit during the third quarter has been negatively affected above all by the reduced turnover of bike-related high-margin products, as well as maintained large investments in the company’s important product development, as well as costs for products launches for upcoming new product categories.

The operating profit is estimated to amount to approximately SEK 190 million (SEK 670 million, Q3 2021).