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Dorel warns poor weather dinging bike sales

File photo of Martin Schwartz, president and chief executive officer of Dorel Industries Inc.

CHRISTINNE MUSCHI/REUTERS

Dorel Industries Inc. says continued poor weather in North America and Europe is putting a greater-than-expected dent in bicycle sales and forcing major cost-cutting measures.

The maker of Cannondale, Schwinn and other brands has revised its second-quarter guidance for bicycles, warning that full-year earnings in that segment won't beat 2012 levels as previously forecast.

Montreal-based Dorel said on Thursday that the bad weather experienced in the first quarter has not let up and that widespread bicycle industry discounting is exacerbating the problem.

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"As a result of the soft first half, full year earnings in bicycles will not, as previously indicated, exceed 2012 levels," the company said in a news release.

The performance of Dorel's two other segments, home furnishings and juvenile, remain on track for improved performance this year, said the company.

Across-the-board cost reductions are under way in the bicycle division, including a reduction of about 5 per cent of the workforce – about 50 jobs.

Dorel expects to book a second-quarter one-time charge of about $2-million (U.S.) in severance costs, it said.

"These issues in bicycles are mainly related to matters beyond our control. Our bicycle products are proven and our brands remain very strong," Dorel president and chief executive officer Martin Schwartz said in a statement.

"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 digit over last year."

Second quarter results are scheduled to be disclosed Aug. 9.

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About the Author
Quebec Business Correspondent

Bertrand has been covering Quebec business and finance since 2000. Before joining The Globe and Mail in 2000, he was the Toronto-based national business correspondent for Southam News. He has a B.A. from McGill University and a Bachelor of Applied Arts from Ryerson. More

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