Dorel Industries will lay off 50 people worldwide across the recreational and leisure segment as a result of a soft first half, the company announced in a statement early Thursday. The segment includes Cannondale, Schwinn, GT, Mongoose, Iron Horse and Sugoi.?
Dorel indicated that it expects second-quarter earnings in recreation and leisure, recently renamed Cannondale Sports Unlimited, to be weaker than anticipated due to poor weather across the U.S., Canada and Europe that has hurt sales, particularly at independent bicycle dealers. This situation has been compounded by widespread discounting by competitors, the company stated.
The layoffs represent about 5 percent of the segment's workforce and are an effort to reduce costs. Dorel expects to pay out $2 million in severances during the second quarter.
As a result of a soft first half, full-year earnings across its bike division will not, as previously indicated, exceed 2012 levels, the company said.
"These issues in bicycles are mainly related to matters beyond our control," said Dorel president and CEO Martin Schwartz, in a press release. "Our bicycle products are proven and our brands remain very strong. Cannondale continues to attract both excitement and highly positive comments. The reality is that we are now into mid-June and the weather has not improved sufficiently, which means that we will be unable to make up the accumulated year-to-date sales shortfall. With the cost reductions being implemented, we are optimistic that bicycle earnings in the second half will increase double digits over last year."
Dorel said performance at the company's two other segments—juvenile and home furnishings—remains on track. It will announce second-quarter earnings on Aug. 9.
Dorel is traded on the Toronto Stock Exchange under the symbols DII.B and DII.A. Its stock performance is tracked on BRAIN's Industry Stock chart.
