22/02/2014

Netherlands, Accell Group Reports Double Digit Growth, Lower Margins in North America

Accell Group N.V. reported its sales increased 16 percent to €129 million ($170mm) in North America in 2013, or twice the pace of growth companywide. Earnings, however, came in below expectations due to heavy discounting in the back half of the year aimed at clearing inventory after wet cold weather resulted in disappointing spring sales.

The Dutch company said sales were particularly strong in the North American independent bicycle dealer, or IBD, channel. Sales of e-bikes were also up, although the North American market remains small compared to Europe's. Accell is the largest bicycle vendor in Europe in terms of revenue and has dramatically increased its presence in North America since its 2012 acquisition of the Raleigh and Diamondback brands. Sales of bicycle parts & accessories declined and the company began to phase out the sale of electric mini scooters.

Global BP&A sales up 10 percent

Accell said that growth in North America and strong demand for e-bikes in Europe drove global sales at its Bicycle/Bicycle parts & Accessories segment up 10 percent to €827.6 million ($1.1 bn), from €751.4 million in 2012. The number of bikes sold increased 14.3 percent to 1,835,000, but average price fell by €9 ($12), or 2.6 percent, to €336 ($446) due to the discounts and the 2012 acquisition of Raleigh, which sells a higher proportion of bikes in the mid-market segment.

Organically the average price increased as a result of a rise in market share of e-bikes. Sales of e-bikes increased by 23 percent and accounted for 35 percent of Accell Group’s total bicycle sales in 2013, compared with 32 percent in 2012. Sales of sports bikes was up 6 percent, while sales of traditional bikes was up 7 percent.

Total operating costs came in at €223 million in 2013, or 26.2 percent of turnover, down 100 basis points from 2013. Still, gross margin declined 130 basis points to 30.6 as higher discounting more than offset higher sales. Segment results, which include SG&A and restructuring charges but exclude borrowing costs, came in higher at €50.0 million ($66mm), from €48.8 million in 2012 and was largely realized in the first half of the year. Excluding one-off charges, full-year 2013 operating results rose 2 percent to €36.9 million.

Due to one-off reorganization charges of €3 million in the Netherlands and North America, higher financing charges and relatively higher tax charges net profits fell 18.3 percent to €19.0 million.

While the discounting hurt margins, it did help Accell exit 2013 with cleaner inventory than it entered. The company ended the year with inventory valued at €251.2 million, down 6.6 percent from 2012.

A challenging year

The year 2013 was a challenging one for Accell Group as we faced lower consumer spending and unfavorable cold weather in the spring," said Accell CEO Rene Takens. "Hence sales increased less than expected. Partly due to the continuing popularity of e-bikes, sales were higher in virtually all markets where Accell Group is active, also on an organic basis. Most markets were stable or showed a slight decline."

Takens noted that Accell Group focused primarily on consolidation and integration in 2013. In North America, it consolidated its Raliegh, Dimaondback and LaPierre brand operations with Seattle Bike Supply in Kent, WA and launched a new ecommerce portal dealers can use to order BP&As.

Accell North America completed the closing of Raleigh's production facility and mass bike business in Canada, where Accell will now focus solely on selling Raleigh bikes to independent bike dealers. In Europe, Accell recently announced it had sold the German brand Hercules so it could focus more resources on its other brands in Europe's largest bicycle market.

2014 outlook

Accell expects a slightly improved outlook for consumer spending, product innovations and long term trends in mobility will enable it to grow sales and profits in 2014. It will also be actively looking for acquisitions even as it continues to consolidate its operations.

By press release

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