Cannondale results are not reported per se; they are part of Dorel Industries’ Sports segment, along with other brands (Pacific Cycle, among others). Q3 2020, the last reported quarter, does show a 24% increase year-over-year in revenue for the sector, gross margin improving by 5% of sales, and operating profit improving from 2.2% of sales to 7.9%. Operating profit did go up roughly 4x, again in same-quarter year-over-year comparison.
Comparing the first 9 months of 2020 to the same period in 2019 does not yield the same view, since this period includes the slow delivery portion of 2020, when production was halted. This comparison yields a 15% increase in sales, 2% improvement in gross profit as % of sales, and operating profit going from 3% of sales to 6%. They did well, but not as well as Q3 stand-alone. They saw an increase in operating costs to manage supply chain issues, and a marked increase in accounts receivables writeoffs as resellers went under. And the other sectors of Dorel, Home and Juvenile, didn’t fare that well however.
Yes they did. Demand outstripping supply means higher prices. Same thing is happening in construction materials, as people replace traveling by home remodeling.
Giant and Merida numbers you are reporting are based on being a factory, not brands or a supplier. So when you ask what “Spesh’s” numbers are, you are comparing Apples & Oranges.
As for Cannondale, read deeper into how their numbers improved…it was NOT through raising their prices. That article is from August 2020 and price increases had largely not been implemented by then.
The quote you have above lays it all out…they kept costs down, held discretionary spending, reduced their selling expenses and had almost zero inventory holding costs (because there was no inventory).
When you reduce your epenses, elimnate your inventory and dramatically increase sales. your profitability goes up significantly. There is nothing nefarious about it…it is Business 101.
As noted, those are their factory numbers, not their branded business. Their branded business is likely included, but their companies are primarily factories, not being a distributor / supplier.
I stated that they had a record breaking year and yet still increased prices. I did not imply that their prices drove profits. Actually that’s the point of discussion.
On this thread it was argued a docent times that the price increases were a mere consequence of the shift in cost. This I consider to be not the case. Hence my examples and sources.
It was argued here that those price hikes were a mere consequence of the increased supply chain costs and hence justified. Now the CEO of a key player states that they successfully decreased costs (opposite!) and saw record profits. Yet they still increased their prices by 8%.
This said, these two are not mutually exclusive. Reading Dorel’s Q3 statement does give some indication of this combined action. They did a number of actions to prevent a sharp dip in revenues in Q1, reduced costs, increased some go-to-market costs to stimulate sales (yeah, that’s stupid in hindsight, right?), and then sailed with these changes into the rebound.
You are missing what the discussion piece is about. To recap, it’s about the fact that some tried to justify the sharp price hikes with the sheer need to do so as their costs have skyrocketed.
There are more ways to “decrease costs” than just reducing your COGS. COGS are just one type of “cost”. Nowhere does the article state they they reduced their COGS.
I won’t speak for anyone else…but I never argued that the price increases were “a mere consequence” of supply chain costs. I said that those costs were a large factor in the increase, but never said they were the sole factor.
I’m sure there was a component of “hey demand is skyrocketing and our supply is low. Let the Laws of Supply & Demand reign”. Honestly, I’d be pretty damn suspect of a company that didn’t do that to some degree…basic economic theory.
But I also know how damn tight he margins are in the bike biz, so I don’t begrudge suppliers few extra bucks. But the wild-ass conjecture and conspiracy theories that have been posted are simply not in line with reality.
30 to 70 percent more profitability or quadrupling profits isn’t a few extra bucks. If raising that aspect is equal to a “wild-ass conjecture and a conspiracy theory” than I happily accept that. Though I would rather call it taking advantage of a pandemic by squeezing your customers.
I am convinced that a business increasing margins somewhere between 30-70% or also quadrupling profits does pretty well in terms of balancing their costs and revenue. When those businesses then yet still increase by 12 percent it’s a bit weird to say the least. You think different.
Agreed that made in USA is good and I’m all for more of it, but the only reason GG is able to make it all work is because their carbon layup process is mostly automated so they have a lot less overhead. They may be manufacturing frames here, but they really aren’t creating very many jobs. I’m not saying that this is a bad tactic but it still isn’t feasible for companies to use traditional manufacturing methods in the USA and remain competitive.
It’s a bit different from automotive as there are several proce tiers. You have distributors large and small, bike shops, and online sales, maybe also DTC. There are generally 3 or 4 people that touch every bike not sold at Walmart and they all have to make money. So when you see things like component costs increased a few bucks a bike, or shipping increased costs a few bucks a bike, or USD$100 has lost a few points of value compared to the Taiwan dollar, or when the steel and aluminum suppliers increase costs a buck or two per bike, or your forced to change to water based paints because China is cracking down on envi restrictions which raises the cost a buck or two a bike.
You seem like a smart guy so you can see that all of these bucks or two can really add up. And when your $300 bike that you sell for $1500 all of the sudden costs $325, guess what? The bike company takes that loss because they have already negotiated all of their different pricing tiers based on MSRP. They are nice enough to guarantee their dealers and distributors a price and they take any gains if costs go down and losses if costs go up. You can run the leanest company in the world and it will still happen. The only way to regain your margin is to increase MSRP.
You sit here and argue that because they may have sold a few more units and increased profits, they should leave their prices alone and accept a lower gross margin in Hope’s that next year they will sell even more units?
That’s pretty selfish, we have no idea what is going to happen in 2023 and if you were going to allow your gross margin to shrink by 10% because you think you will continue to sell 150% more volume, then that is a company that will not live to see 2025.
You obviously have everything figured out and know all the answers, seems you work in the automotive sector. Can you tell us all how much your production volume increased in 2020? Because I dont think it grew at all which is the real reason you have no idea what is happening in the bike industry right now.
The best thing you could do is smile and tell all the hard working people at Santa Cruz and Specialized “thanks you for working your ass off this year so I have a bike to ride instead of going crazy”
