The long-term effects of Covid-19 on the bike industry remain to be seen, but every brand has been impacted. The Q1 financial reports are out now, and there are some notable takeaways there.
Keep in mind that the global pandemic is
shifting a lot of timelines, as brands rush to fix disrupted supply chains and adjust their product offerings in response.
Shimano's Bike Sales Down 15%Shimano reported last week that its year-on-year sales in its bike division had fallen 15.4% in Q1 while its revenue slid 26.1%. Sales across the whole company were down 12.3% with revenue down 22.3%. Total sales for Shimano across the quarter were 76,920 million yen ($724M USD) with 58,868 million ($552M USD) of that coming from the bike division.
Shimano noted that sales in Europe and North and South America took a dive from mid-March onwards, while in China they were down throughout the quarter.
Shimano said: "Corporate activities have been impacted due to factors including partial stoppages of production activities at overseas production bases as well as in-store sales and movement restrictions enacted by governments in countries where the company’s products are sold."
Despite those challenges, it looks like Shimano's introduction of a
new Deore drivetrain this week is well timed to satisfy
increased demand for entry level bikes in response to Covid-19.
Shimano's full summary can be found,
here.
Fox's Bike Division Slips 1.8%Fox saw a total increased sales of 14% for the quarter up to a record $184.4 million. However, digging down into the figures, that record comes from a 24.6% increase in its powered vehicle division, while its bicycle division slipped 1.8%. Its bicycle division includes Fox, Marzocchi, Race Face and Easton, and they credit the decline to "a shift in timing of OEM orders".
Even though they've recently launched
a host of new products, the virus appears to have affected Fox's B2B operation as their OEM partners' bike launches and deliveries are pushed back.
Read more,
here.
Smart Trainers Enjoy Boom, Peloton and Garmin Reports Increased RevenueAs people are keeping indoors due to the pandemic, smart trainers have seen increased popularity, for example, Sigma Sports has reported a 440% increase week on week in sales while the new Wahoo Kickr sold out within hours of being released.
BikeBiz is also reporting that Zwift has seen a "200% increase of miles cycled per day."
In February last year, Garmin acquired TacX, which allowed it to enter the smart trainer market and, in the midst of this smart trainer boom, it has reported a 12% increase in revenue that includes a 24% increase in smart trainer sales. Garmin is also reporting strong sales in wearables such as its Vivofit smartwatch.
Cliff Pemble, president and chief executive officer of Garmin Ltd, said: "The first quarter of 2020 was remarkably strong continuing the momentum from last year. The economic uncertainty and impact on consumer behaviour caused by the COVID-19 pandemic affects every business, and we are no exception. Accordingly, we are withdrawing our fiscal 2020 guidance. However, we are optimistic for the long term because the markets we serve and the products we offer are well positioned to thrive in the future.”
More information,
here.
Peloton has described itself as "COVID-proof" as its revenues rose by 66% in Q1. Peloton is reporting that its total membership grew to 2.6 million as people hope to replicate exercise classes in their own homes. In the past six weeks alone, 1.1 million people have downloaded the company's app that offers a 90 day trial and does not require the specific bike ($2,245) or treadmill ($4,295).
More info,
here.
MIPS Sales Up 25%Bicycle Retailer is reporting that net sales for Swedish rotational protection brand MIPS have increased by 25% year-on-year for Q1 despite some Coronavirus disruption. The brand reported sales of SEK 56 million and a profit of SEK 16 million, which amounts to a 38% increase year on year.
Max Strandwitz, president and CEO, said: “Initially, we noticed an impact on our supply chain as a large part of the world’s helmets is produced in China. The Chinese subcontractors and helmet manufacturers with which we cooperate resumed production later than planned after the Chinese New Year and have gradually returned to normal production capacity during February and March. I am glad to say we have successfully navigated us through the production challenges and at the same time been able to deliver growth despite the prevailing circumstances during the first quarter.”
#balancebikesrock
I got to say that this comment about porn hub, premium being free, and your user name of freeridejerk is like the starts aligning. Lol
MIPS retains control of the quality of their product and integrity of their brand while possibly being able to produce the MIPS bits cheaper through a dedicated facility.
Or not.
That kind of parasitic company that sits on a patent and wait for the royalties to flow in.
last I checked a basic helmet with MIPS is pretty standard these days. With all of the overpriced crap you can buy in the MTB market, a decent helmet equipped with MIPS is a no brainer.
I know of a few small brands too that are currently seeing record sales numbers - combination of online supply during a period when people are more homebound and a potential reduction of options - stuffs selling out and many cant get hold of new stock as its all from Taiwan / China with demand, time scales and delivery charges all changing for the worst.
The cheapest fox38 I found in european online shops costs the equivalent of 1500 dollars and that is before any taxes. Including taxes it's 1800 dollars. A fox 38 is exactly twice the price of a lyrik ultimate rc2 2021.
So if Shimano sold less product but more of it was the product that had less mark up then revenue is reduced more. Also a lot of companies are facing additional costs during COVID19: additional cleaning, paying staff full salty even though production is down, etc. So that could also lead to the difference in profits vs sales.
"Revenue is the income a company generates before any expenses are subtracted from the calculation (...) Some companies inaccurately use the term "sales" and "revenue" interchangeably. However, while sales might be considered to be revenue, all revenue doesn’t necessarily derive from sales."
www.investopedia.com/ask/answers/122214/what-difference-between-revenue-and-sales.asp
This from near the bottom of page 2 of Shimano's quarterly report (the same one that's linked above):
> As a result, net sales from this segment decreased 15.4% from the same period of the previous year to 58,868 million yen, and operating income decreased 26.1% to 10,298 million yen.
Quick definitions:
Net Sales = All sales - Cost of Goods Sold (COGS). COGS are usually understood as the direct cost of fulfilling those sales.
Operating Income = Net Sales - Fixed Costs. Where Fixed costs are (almost) all the other costs, like stationary, wages, rent, marketing, utilities. Operating Income is the same sort of idea as Net Profit (actually it's slightly closer to EBIT: Earnings Before Interest and Tax). See this non-tech summary from Investopedia www.investopedia.com/terms/o/operatingincome.asp
Example:
If I sell a 1000 XT brakes to Trek for USD40 each and it costs USD30 to produce, then my Net Sales = USD10 * 1000 = USD10,000. If all my Fixed Costs (from selling those XT brakes to Trek) were USD9,500, then my Operating Income (think: Net Profit) was USD500. It's that amount that I'd have to pay tax (etc...) on.
You'd expect the Net Sales to fall at least a bit (ie 2020 vs 2019) because while COVID wrecks businesses lots of sales contracts from Q1 will have been agreed in 2019. However, you'd expect Operating Income to fall by more, because the fixed costs can't be adjusted as fast as Sales change.
So translating the terms @jamessmurthwaite uses (above):
> Shimano reported last week that its year-on-year [Net] Sales in its bike division had fallen 15.4% in Q1 while its [Operating Income (like Net Profit)] slid 26.1%. [Net] Sales across the whole company were down 12.3% with [Operating Income] was down 22.3%.
Or change from a marketing driven industry for a real one that invest in R&D and give us real products not the same shit year after year.
So unless you consider the ship timing of Shimano prior year launches and the pipeline movement of current launches comparing a 13wk window vs the same window year ago can be very misleading.
Fox has also recently announced major overhauls to many of their MTB offerings and without precise understanding of how and when they’re releasing these, when they tried or will try to flush existing inventory... you just don’t know what these figures actually mean.
Revenue also means very little about the health of a company and industry. EBITDA, net income and operating profit are far indicative of what’s going on... not to mention CASH and receivables. Manufacturers can give incentive to sales to boost top line but actually decrease profitability, they may recognize a sale but not yet receive the cash (normally not an issue in these companies but it is in today’s economy).
Essentially quarterlies are a blip in time. Far too short term. A point is not a trend.
From an investment stance there’s a whole other discussion about the long term impact on company health by being quarterly focussed.
The numbers are curious given the pandemic. But, beyond that, they don’t mean squat.