Bicycle producers continue to struggle in Q1

The financial results for the first 3 months of 2024 were not easy reading for many major players in the bicycle industry. The high inventory issue of 2023 has rolled into the new season despite counter-measures including heavily discounted prices. With flooded markets and weak purchasing sentiment from consumers economic woes continue as revenues drop. However, with predictions of market recovery in Q3/Q4 of 2024 small indications of a market turnaround can be found.

Sign of turnaround in Giant Group's revenue decline

Monthly financial overviews showed that Giant Group didn't make a good start in 2024. The Giant Group reported a consolidated sales decline of 20.2% to TWD 16.06 billion (€459.5 million) between January and March compared with Q1-2023. However, the April figures suggest something more positive.

The recent popularity of cycling in China resulted in rising bicycle sales in this country, but it was not enough to compensate for the ongoing inventory reduction in both Europe and North America as well as order adjustments from OEM customers. As a result, Giant Group reported a year-on-year reduction of its net profit after tax by 37.8% to TWD 520 million (€14.9 million). Giant Group also reduced the earnings per share (EPS) to TWD 1.33 (€0.038).

Following a slow market performance in January-March, April 2024 suddenly shows much better results. While the sales performance was still down by double digits in the first three months of the year, April could mark a change: year-on-year sales in this month was only down 1.75%. Total revenue for this month ended at TWD 6,9 billion (€197.4 million). Whether this is the new trend for the upcoming months or just a temporary hike, is too early to say.

In terms of its own brand sales performance, bicycle sales in China in the first quarter remained strong, the company writes in a statement. “This is mainly due to an increasing trend in sports and recreation which supported the sales of mid to high end bicycles in China. With the launch of new models, we expect to see continue sales growth in this market.”

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Merida Q1 figures drop as over supply continues

Compared to the first sales quarter of the previous year, Taiwan's second-largest bicycle manufacturer Merida Industry Co., Ltd. has had to digest a hefty 29.8% sales drop to TWD 5.86 billion (€167.78 million) in the first three months of the current 2024 financial year.

Notoriously sparse in giving out information, Taiwan’s second largest bicycle manufacturer only publishes information on the stock exchange that it is obliged to publish as a listed company in Taiwan. Across 2023 as a whole, Merida reported total sales of TWD 27.16 billion (€798 million), a double-digit 26.4% drop compared to the previous year. These double-digit drops have continued into Q1 of 2024.

At TWD 1.11 billion (€31.78 million), gross profit was 29.7% lower than in the first three months of the previous year. At TWD 531.73 million (€15.22 million), the operating result was even down 45%. As a result, profit before tax of TWD 609.53 million (€17.45 million) was 27.8% below that of Q1 2023. Profit after tax of TWD 432.73 million (€12.39 million) was also double-digit 31% below that of the same period in the previous year.

Merida is not providing an outlook for the second quarter of the year or for 2024 as a whole. What is definitely true, however, is that the immense surplus of goods in the global bicycle industry has still not been digested. At the time of writing, it is impossible to predict whether the situation for producers will change or improve at all by the end of the year, despite the gradual reduction of goods in the core markets.

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Fox Factory Q1 bicycle sales drop partially offset by acquisition

In view of the current problems in the global market, Fox Factory Holding Corp.'s Q1 net sales met expectations; a 16.6% drop to USD 333.47 million (€309.91 million) compared with 2023. Bicycle product sales under the Specialty Sports Group (SSG) umbrella couldn't stop the downward trend but were nearly offset by the sales integration of recently acquired Marucci Sports.

The single-digit SSG 4.5% sales drop is primarily rooted in a USD 65 million (€60.41 million) bicycle product sales decline due to ongoing channel recalibration and, to a lesser extent, lower end-user demand. SSG is the umbrella for the bicycle brands Easton Cycling, Fox Suspension, Marzocchi, Race Face and sports brand Marucci Sports which was acquired last year. In November 2023 the parent of (handlebar)grip brand Lizard Skins was taken over by Fox Factory.

SSG’s bicycle sales decline was almost offset by the inclusion of Marucci's turnover of USD 59.6 million (€ 55.39 million). As the Marucci acquisition also affected the cost side, the adjusted 1Q EBITDA of USD 40.4 million (€37.55 million) was much lower than the USD 79.2 million (€73.61 million) of Q1 2023. The adjusted EBITDA margin was 12.1%. This led to a final Q1 USD 3.50 million (€3.25 million) net loss. In Q1 of the previous year, it was still a net profit of USD 41.78 million (€38.85 million).

For the current Q2, the US company is forecasting net sales of between USD340-360 million (€315.08 to €334.57 million). For the full year 2024, Fox Factory expects total net sales of between USD 1.53 and USD 1.61 billion (€1.42 to €1.50 billion).

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Online retailer Bike24 slowly returning to growth in 2024

Encouragement can be found in German e-commerce bike, running and swimming sports retailer Bike24 Holding AG's Q1 results. Here, an expected return to growth with improved profitability as well as an impressive growth in Bike24's relatively young Benelux country markets can be seen.

"In the current macroeconomic environment, we have made a satisfactory start to 2024. We have reduced our promotional activities and were thus able to significantly improve our profitability in most product segments. We are also seeing rising end market prices again, particularly for parts, accessories and clothing," reports Bike24 co-founder and MD Andrés Martin-Birner. As of March 31, 2024, inventories remained stable at €71.0 million compared to €71.3 million as of December 31, 2023. This is despite “the usual build-up of seasonal goods in the first quarter," Martin-Birner confirms.

The preliminary first quarter sales of 2024 slipped by 11% to €49.27 million, compared to the first quarter of 2023. On the one hand this decline is due to a significant reduction in promotional activities, but above all due to the continued subdued consumer sentiment. Despite the sales decline, EBITDA improved by €1.1 million to minus €1.5 million (in Q1 2023 this was minus €2.6 million). At €8.50 million, the final quarterly profit before tax was 19.8% lower than in the same period of the previous year. Bike24 expects demand to recover, particularly in the second half of 2024, and margins to increase. The online retailer is forecasting sales growth of between 1-5% for 2024 as a whole.