BRASELTON, Ga. (BRAIN) — Fox Factory’s sales in the bike market continue steady growth, up 11.3% in the fourth quarter and 6.3% for the full year. Full year sales were $ 299 million in the bike market, where the company sells products under the Fox, Marzocchi, Race Face and Easton brands.
The company said the bike growth was due to ” new product introductions and strong sell-through with certain higher growth OEMs.”
In a conference call with analysts, CEO Mike Dennison said the mountain bike market remains a “modest growth business.” Relatively speaking Fox’s results bear that out: The bike growth was dwarfed by 34% annual growth in Fox’s powered vehicle product division. Power vehicle products are now 60% of Fox’s business and growing.
In the bike world, Fox is seeing the most growth at the premium end of the mountain bike market and Dennison said as upscale e-MTB sales grow the category will present “a phenomenal opportunity” for Fox to supply more sophisticated suspension products for the bikes.
“Initially e-bikes really weren’t much for the mountain bike category, they were more city bikes and things like that,” he told analysts. “As that transitions to the mountain bike — and the premium mountain bike at that — we think that’s a phenomenal opportunity for us, so we are focused on that in 2020 and beyond.
“I think e-bikes extend the demographic that you can sell a mountain bike into, and a premium mountain bike into. I believe it allows people to do more biking and mountain biking than they would have otherwise. I think on the long term basis it’s a real significant lever for us.”
As for non-electric bikes, Dennison said the overall market is seeing modest growth but that Fox’s growth there is due to taking market share and introducing new products. “When there’s a market where you are one of two players at the premium end of the business, it’s a give and take each year to some extent. But we continue to win awards and win races so that tells you were are holding our own and doing a little better than holding our own.”
He said the gravel bike category is “interesting for us. It’s not necessarily a huge category, but one that is growing and one where we think there could be interest in a dampening system of some kind.”
While powered vehicle products outpaced the bike business, Dennison told an analyst the company has a soft spot for bikes.
“We think there’s a lot there; we really love that industry. I know it doesn’t grow as fast as others but the way we feel about it is: We are number 1 or number 2 in that space and we love that positioning,” he said.
Dennison also said Fox has experienced little impact due to the COVID-19 outbreak. “The impact on our supply chain is very minimal. We’ve seen a few things moved out slightly within the quarter, but nothing that would be a material change … on the end-customer demand, so far we’ve got strong signals from all our customers that things continue, if not as normal, as close to normal as you can be under these circumstances, so we feel pretty good about it. As the virus spreads globally there could be some implications from that, but as things stand today we think it’s pretty minimal.”
Dennison said Fox’s Chinese suppliers are open and its factories are getting supplied as needed. And he said Fox does very few sales in the Chinese domestic market so any decline in consumer spending there would have little effect.
Fox’s company-wide sales for the fiscal year that ended Jan. 3 were $751.0 million, an increase of 21.3% compared to fiscal 2018. Gross margin for the fiscal year was 32.3%, a 90 basis point decrease compared to 33.2% in the prior year. Earnings per diluted share for fiscal 2019 was $2.38, compared to $2.16 in fiscal 2018.