THE HPS JUNE LETTER: A LOOK AT THE LATEST BUSINESS TRENDS

5/2/23 Bed Bath & Beyond Claims Ocean Carrier Owes It $32 Million, Sourcing Journal: Bankrupt Bed Bath & Beyond wants at least $31.7 million from container shipping company OOCL. According to the complaint the New Jersey-based home goods retailer filed with the Federal Maritime Commission (FMC), the Cosco Shipping subsidiary failed to meet minimum quantity commitments (MQCs) under its 2020 and 2021 service contracts. The retailer also claims said that OOCL charged $6.4 million in demurrage and detention fees from August 2021 to June 2022, which were “not reasonable or fair” given the pandemic port congestion and labor disputes on top of policies that interfered with the handling of ocean freight and social distancing regulations. Another bone of contention in Bed Bath & Beyond’s complaint alleges that OOCL tried to “coerce premium pricing” by strong-arming the chain into premium rate contracts as a precondition to carry ”just a fraction” of the quantity to which it had previously committed. Bed Bath & Beyond says it paid a premium of $12.6 million to OOCL, which could have been avoided if the shipping company fulfilled its service commitments. “Respondent’s practices were knowing and deliberate, and were not due to an absence of available cargo space or necessitated by any other circumstances outside of Respondent’s control,” the claim said. The retailer called out OOCL for having “profited greatly” from the conduct, citing the carrier’s $7.4 billion in 2021 operating profit, a 642 percent increase from the previous year. HPS Analysis: The frustration with ocean carriers’ container rates charged during the pandemic runs deep and wide in the bicycle business. While building and adding more container ships and shipping containers to increased sailings between the American and Chinese ports to accommodate surging demand and volume from early 2020 through the end of 2023, the ocean shippers increased rates to record highs that some brands passed along as surcharges that were expected to be passed on to consumers in retail pricing. Ocean shippers invested the increased profits they made in buying port facilities, warehouses, trucking lines and airplanes. It took the bankruptcy of Bed Bath & Beyond to trigger the $32 million in claims against OOCL, but so far the higher ocean freight costs paid by the American bicycle business are included in the landed cost of goods that have contributed to the inflated retail prices of bicycles that are now being discounted to unload excess inventory. If the Bed Bath & Beyond lawsuit is successful, we may eventually see one or more large bicycle business importers bring claims against the ocean freight carriers.

5/8/23 Foot Traffic in Free Fall Meets Dialed-Up Discounts, Sourcing Journal: Foot traffic started to pick up in April on the Easter holiday, but not enough to offset slower March trends. Unfortunately, traffic deceleration in the U.S. worsened for the week ending April 29. A UBS report from retail analyst Jay Sole said the decline was 27 percent from the prior week, with foot traffic decreasing 29 percent at specialty doors, and down 22 percent at department stores. The prior week’s foot traffic rate was down for both channels at 14 percent and 13 percent, respectively. He noted that even foot traffic at off-price retailers was down 15 percent from the prior week when this segment showed a one percent growth rate. Stubbornly high inventory spurred many retailers to roll out discounts and promotions in April. In a research note, Wells Fargo retail analyst Ike Boruchow noted conservative wholesale order books for spring and summer. On the big-picture front, these trends are likely to extend into the second quarter, which could mean the first half won’t be anything to brag about. April markdowns worsened from March, continuing the promo trend that emerged in November, Boruchow wrote. Inflation, lower tax returns, and cuts to the U.S. federal government’s Supplemental Nutrition Assistance Program benefits will create consumer spending problems for retail, he added. HPS Analysis: This headline covers all U.S. retailing, and sums up what has been happening in the specialty bicycle retail channels of trade, including outdoor retailers and bike shops. Public companies like Giant and Shimano expressed the hope after the first quarter of the year that the second quarter would bring spring business to clear inventory and set the stage for returning to some form of “normal” in the second quarter. That hasn’t happened. Management by hope is not a good thing, and it’s something HPS warns its clients about. Facts and good data are among the tools planners need to employ in crafting and directing good planning. Identifying and analyzing truth and reality, and reporting it in a timely fashion, isn’t being negative. It is being realistic and responsible.  

5/8/23 Consumers Reveal What Will Impact Memorial Day Shopping Choices, Chain Store Age: A new survey sheds light on the drivers of Memorial Day purchase behavior. About half (51 percent) of respondents do not plan on shopping for Memorial Day this year, according to a recent survey of over 1,000 U.S. adult consumers from Vibenomics, a Mood Media company. Of respondents who have or will shop for Memorial Day, 19 percent are waiting, and will begin the third week in May. About three-quarters (74 percent) of respondents who are shopping for Memorial Day will search for sales. Popular methods to find Memorial Day sales include in-store discounts, coupons, and special offers (80 percent), retailer membership programs (61 percent), rewards programs (50 percent), and bulk or discount coupons (34 percent). HPS Analysis:  Inflation has taken its toll on shoppers, and more than half (53 percent) planning to shop during the Memorial Day weekend say inflation will cause them to purchase slightly to much less, and four in 10 (39 percent) said inflation will have no impact on their holiday purchases. However, fear about inflation among surveyed U.S. shoppers is at the lowest level since October 2022, thought still high at 65 percent concerned. Overall, 32 percent of respondents believe inflation at its current high level will end in 10 months or less, and 28 percent think it will last one to two years. When asked how they feel about their finances, roughly six in 10 (62 percent) of respondents are neutral, and about one in five (21 percent) feel uncomfortable.

5/9/23 Cargo Data Confirms Second-Half Slowdown Fears, Sourcing Journal: After hitting a three-year low in February, import cargo volumes at U.S. ports have increased, according to new data. The number of containers traveling to U.S. shores is likely to remain well below 2022 levels heading into the fall peak season, according to the Global Port Tracker report released May 8 by the National Retail Federation (NRF) and Hackett Associates. A revised first-half forecast, previously projected at 10.8 million twenty-foot-equivalent (TEU) containers entering at U.S. ports, now expects 10.4 million TEU for January-through-June 2023, 22.8 percent lower than the first half of last year. Global Port Tracker has not released its projections for the full 2023 year, but the third quarter will likely see about 6 million TEU, 7.2 percent less than 2022. The first nine months of 2023 is projected at 16.5 million, down 17.8 percent year over year. HPS Analysis: Like the bicycle business, the U.S. ports held out hope during the first quarter that second half import volume would increase with the shipments to support the Back to School, Halloween, and Christmas holiday selling seasons. Congestion and delays have gone away as import levels have fallen with consumer demand. While West Coast dock worker labor contracts have not yet been finalized and signed, work stoppages no longer loom as problems because consumer demand has declined to the point where there is sufficient inventory on-hand and in-transit to adequately cover fulfilment at the point-of-purchase. It is highly probable that second half 2023, U.S. container volume will be below 2022 levels. Barring geopolitical issues, there will be no delays in shipments of bicycles or related products to and through U.S. ports the rest of this year.   

5/10/23 India is Making a Concerted Push to be the Top Manufacturing Destination for Western Companies Looking for a Backup to China as the World’s Factory Floor, The Wall Street Journal Logistics Report: The country has scored several coups recently in its effort to gain from a supply-chain strategy widely termed “China plus one.” The WSJ’s Philip Wenh, Vibhuti Agarwal and Greg Ip report that moves ranging from Apple’s decision to significantly expand iPhone production in India, to the 2021 choice by Denmark’s Vestas to place two wind-turbine plants in the country, have expanded India’s industrial base. India faces competition from other countries, and it must overcome entrenched problems that have kept it a bit player in global supply chains. But India is the only nation with a labor force and an internal market comparable in size to China’s, and decisions by big manufacturers like Vestas are drawing in more suppliers, helping establish supply-chain ecosystems. HPS Analysis: Many professionals in the bicycle business have traveled in India, and investigated the bicycle and e-bike manufacturing infrastructure and OEM capabilities. The largest Indian bicycle e-bike manufacturer, Hero, has established manufacturing and distribution in Europe, and continues to expand its presence. Several years ago Hero opened a representative office in the U.S., but to date has not managed to attract an appreciable customer base. One of the HPS partners has visited bicycle, e-bike and component manufacturers in India, and highly recommends their manufacturing and design engineering, as well as the up-to-date computerized (CAD/CAM) manufacturing. Port logistics and facilities are adequate. The problems are found in the bureaucracy and under-the-table bribes demanded by officials to do business and move goods. Bigs like Apple and Walmart have either figured it out, or have included this aspect of doing business in India in their cost of goods. In either case, this is still a problem for mid-to-small enterprises.

5/12/23 PeopleForBikes Board of Directors Approves Ambitious Infrastructure, Electric Bicycle, and Education Programs, Bicycle Retailer and Industry News: The PeopleForBikes (PFB) Coalition Board of Directors, composed of 20 of the bicycle industry’s top leaders, met in person for their semi-annual gathering on May 10. The board’s main topic of discussion was reviewing progress on the organization’s objectives for 2023 centered around PeopleForBikes’ vision: Transforming America into the best place to ride a bike in the world through infrastructure, policy, and participation. PeopleForBikes’ president and CEO Jenn Dice, vice president of marketing Jose Maldonado, and senior director for infrastructure Dave Snyder, walked the board through the organization’s upcoming campaign to make that vision a reality by engaging local communities to build 1,000 bike projects across the U.S. They also explored how to get the greater bike industry, everyday riders, and non-endemic partners, involved to support and fund the campaign. HPS Analysis: HPS is a member of PeopleForBikes and has signed the PFB Membership Agreement. However, HPS is concerned that PFB has not paid appropriate attention to analyzing bicycle industry and business data beyond 2016, and inclusive of the last five decades, for the data we know and need to understand. There is also the data we do not know, including sales of e-bikes. PFB has identified the e-bike category as the most important growth potential for the future, and is dedicating its upcoming SHIFT23 to everything electric. Yet it, as well as the rest of us, does not have reliable, accurate data on e-bike sales or imports into the U.S. HPS recently suggested at the NBDA Retail Summit that PFB aggressively pursue and advocate for immediate reform of the Harmonized Tariff Schedule (HTS) numbers, as well as the customs process and procedures specific to the importation of e-bikes and related components into the U.S. In addition, PFB and the industry at-large is blind to most of the DTC imports of e-bikes, and specifically all of the e-bike and lithium-ion battery and charger imports under the de-minimis loophole. HPS urges PFB to substantially increase its efforts to bring visibility to this blind spot and close this loophole this year.

5/12/23 In China, the Police Came for the Consultants. Now the C.E.O.s Are Alarmed, The New York Times: The China Development Forum, a high-profile, government-hosted conference with a who’s who of international executives in attendance, was a moment for Beijing to renew its efforts to win over foreign businesses. Businesses from outside China “are not foreigners, but family,” said Wang Wentao, China’s commerce minister. State media reported that the chief executives of Apple, Pfizer, and Procter & Gamble were at the forum, held in late March. Many of the dozens of business leaders there were on their first trip to China since the country had closed its markets to the world and derailed its economy with harsh COVID policies. Wang pledged to remove obstacles preventing firms from investing more. 2023, he declared, was “invest in China year.” The good will did not last long. The recent targeting of consulting and advisory firms with foreign ties through raids, detainments and arrests, has reignited concerns about doing business in China. Executives, whether at midsize manufacturers or large corporations, are exploring how to reduce the threats to their businesses and protect their employees. HPS Analysis: Western companies investing in China need the consulting and advisory firms to perform due diligence before they sign contracts and commit funding and long-term investment. By conducting raids, detaining and arresting the employees, including both Chinese and foreign workers, and confiscating computers and digital files of consulting and advisor firms operating inside China, the government is scaring off Western investors, including the European and Asian Bigs in the bicycle and e-bike business. HPS considers this to be shooting themselves in the foot and encouraging near-shoring, friend-shoring and re-shoring.

5/15/23 Vosper: 2023 is Shaping Up to be the Year of the Double Whammy, Bicycle Retailer and Industry News. In this article, Rick Vosper wrote: “Let’s face it. The first couple months of 2023 were some of the worst the industry has seen in years, if not ever. Sales were down, inventory was up, and even heavily-discounted product wasn’t moving off retailers’ floors. To give you an idea of the significance of the situation, let’s start by looking at a chart [see article with charts here] showing wholesale sell-in versus wholesale inventory, courtesy of PeopleForBikes and based on data from its participating wholesaler members, compiled by Circana (formerly NPD Group). Yes, you read that right. At the close of Q1, the wholesale side of the industry was sitting on more than three-quarters of a billion dollars ($765 million) in inventory. PFB senior research manager Patrick Hogan confirms that’s 181% of the inventory in February of 2018, and the highest inventory valuation since the organization (and formerly the old Bicycle Product Suppliers Association) began keeping records in 2016. It’s also nearly double the number of units, up 95% over February 2018 to 1.45 million bikes. As an industry old-timer going back to the early 1980s, I can’t recall a time when the industry was carrying anywhere near this level of product, ever.” HPS Analysis: We have been surprised by the number of folks in the industry who have had to go back and re-read this Op Ed by Rick Vosper. Not just because of the “…181% of the inventory in February 2018,” but also because of the 2023 retail sell through numbers “… lowest we have ever measured, going back to January and February of 2016.” The Spotlight State of the Industry panel at the recent NBDA Retail Summit included responses to the question: where are we now, and how should we look to the future? The answers were honest and blunt. The bottom line: it will take two to three years for the bicycle business to fully recover from the shakeout of 2023. HPS wonders if the NBDA objective of focusing on how the bicycle business survives and thrives over the next three years should be moved ahead of transforming America into the best place to ride a bike in the world.

5/15/23 U.S. Households Show Signs of Stress as New Delinquencies Rise, Bloomberg Markets: U.S. households showed signs of increasing financial stress in the first quarter, with credit card balances not declining in the way they typically do at the start of the year, and delinquencies rising for most types of consumer loans. Households added $148 billion in overall debt, bringing the total to $17.05 trillion, according to a report released by the Federal Reserve Bank of New York on May 15. Balances are now $2.9 trillion higher than just before the pandemic. Consumers typically build up more credit-card debt at the end of the year during the holiday season, and then reduce those balances at the start of the following year, sometimes with the help of tax refunds. But for the first time in 20 years, that wasn’t the case this year, suggesting some households are under strain from high prices, and may be relying on credit cards to maintain their spending. HPS Analysis:  Purchasing a bicycle using a credit card has become S.O.P. for most retailers, including bike shops and DTC’s. The overall delinquency rate remains low by historical standards at 2.6 percent. But the share of debt that became delinquent, meaning it was at least 30 days late, is rising for most loan types, including credit cards and auto debt. Bike shops will continue to need access to credit card financing, but delinquencies will contribute to interest rates pushing consumers back further from buying that new bicycle.

5/17/23 Taiwan’s Giant, Ideal and Merida Release Q1 Earnings Reports, Bicycle Retailer and Industry News: Taiwanese bike makers Giant Group, Ideal Bike Corporation and Merida Industry Co., LTD, each released their first-quarter earnings reports this month. Merida was the only one of the three to record a sales increase in the quarter, although its profits in the quarter were down significantly from the same period in 2022. Giant’s total first-quarter operating revenue declined 9.6 percent year-over-year, from NT$22.3 billion last year to NT$20 billion this year. Giant’s total profit from the first quarter was NT$88.3 million, down from NT$1.91 billion last year. Earnings per share declined from NT$4.83 last year to NT$2.13 this year. Merida’s Q1 first-quarter operating revenue increased 2.8 percent, from NT$8.2 billion last year to NT$8.4 billion this year. Merida’s total profit from the first quarter was NT$627.5 million, down from NT$1.2 billion in the quarter last year. Earnings per share declined from NT$4.04 last year to NT$1.89 this year. Ideal’s total first-quarter operating revenue declined 1.8 percent year-over-year, from NT$1.13 billion last year to NT$1.11 billion this year. Ideal’s total loss from the first quarter was NT$38.8 million, compared to a profit of NT$94.53 million. Earnings per share declined from NT$0.14 in Q1 last year to a loss of NT$0.17 per share this year. HPS Analysis:  As these numbers show, Merida (primary supplier to and 45 percent owner of Specialized) emerged as the only one of the Taiwanese Big Three bike makers that posted a sales increase in the first quarter of 2023, although significantly down from the first quarter 2022. Giant, Merida and Ideal are publicly-traded companies on the Taipei exchange, and their quarterly financial statements are a matter of public record. While remaining positive and optimistic, the financial data from the top three Asian OEMs is a clear indicator of the shakeout in the U.S. and U.K., and the downturn in the bicycle business in continental Europe. The only growth region appears to be mainland China. 

5/17/23 Pon puts Lithuania on the Forefront as Europe’s Next Bicycle Production Hub, Bike Europe: The announcement by Pon Holding to construct a new e-bike and bicycle factory in Lithuania started a string of reactions in this small Eastern European country. With this new dynamic, the country has put itself on the map as the next bicycle production hub in Europe. At the country’s investment promotion agency, Invest Lithuania, the Pon announcement was of the main reasons to study the international bicycle industry. Invest Lithuania also confirmed that they aim to step up bicycle manufacturing, in addition to the automotive industry, which is already strongly present in this Baltic state. Two well-known names in the automotive industry, Continental and Hella, are regarded as important foreign direct investors. For them, just like Pon, the strong presence of a manufacturing industry and logistic services have been important reasons to choose Lithuania as a production base. HPS Analysis: Pon Holding is an important player in both the bicycle and automotive sectors, and Lithuania is also attractive to Taiwanese investment and manufacturing for the European market. Taiwan has a representative office in Lithuania, and Lithuanian and English are the legal languages which make it convenient for Taiwanese to do business. It appears that the Pon investment in bicycle manufacturing will attract Taiwanese component manufacturers, which over time may become sources for the componentry required for North American bicycle assembly and, eventually, manufacturing.

5/19/23 Cars Still Dominate the American Commute Statista: May 19 was Bike to Work Day, part of National Bike Month, celebrated in the U.S. to promote cycling as a fun and healthy mode of transportation. According to Statista Consumer Insights, 73 percent of American commuters use their own car to move between home and work, making it by far the most popular mode of transportation. Meanwhile, only 13 percent use public transportation, while 11 percent ride their bikes. As the chart shows, alternatives to the car have become more popular since 2019, but none comes close to challenging the car’s status as the king of the American commute.

 HPS Analysis: There are several factors contributing to the low adoption of bicycles as a means of everyday transportation. For one, Americans are used to commuting longer distances than people in most European nations, ruling out the bike for many. And secondly, many major cities in the U.S. are not exactly bike friendly. The good news is the growth in bicycle use for commuting, up from less than five percent in 2019 to 11 percent in 2022/2023. Lilian van Ek Lilian, policy associate for the Department of infrastructure and Water Management, Embassy of the Kingdom of the Netherlands, presented the work she has done with cities in the U.S. including Washington D.C., Austin, Texas and Bentonville, Arkansas, at the NBDA Retailer Summit. She emphasized the importance of patiently combining the successes of European cities with U.S. city planners to create a uniquely American bicycling infrastructure.

5/23.23 Walmart Explores Bicycle Sourcing in India, Bike Europe: The largest volume seller in the U.S. is investigating opportunities to find new suppliers for some of its product categories, including bicycles, in India. Walmart has committed to triple its exports of goods from India to $10 billion each year by 2027. Earlier this month, Walmart Inc. president and CEO Doug McMillion reaffirmed its commitment during his visit to India, and said that India’s unique ecosystem of suppliers will help the company in achieving its goals. The company wants to build an ecosystem of suppliers and partners in India, including micro, small, and medium-sized enterprises. Other product categories included in the strategy are toys and shoes. The Walmart team met with representatives across key Indian programs and initiatives. The Indian bicycle industry has been investing in recent years to improve production quality, and to promote capabilities. HPS Analysis: As we noted earlier, Walmart has figured out how to do business in India as a buyer, and has established a supply chain that it will be expanding as it slowly withdraws and re-sources from China. The interest expressed by Walmart in the Indian bicycle manufacturing capability has undoubtedly been thoroughly vetted and tested, and there are probably Indian-sourced bicycle products already somewhere in the Walmart U.S. distribution system. Walmart has a number of simultaneous sourcing initiatives in process, for both the U.S. domestic and Indian markets. Walmart is currently purchasing from the Bicycle Corporation of American (BCA) assembly plant in Manning, SC, owned by Kent International. Kent also is a supplier of bicycles imported from a partner plant in China.    

5/23/23 CPSC Considers Creating New Bike Safety Requirements, Bicycle Retailer and Industry News: The Consumer Product Safety Commission (CPSC) voted May 19 to seek public comment on whether bicycle safety requirements are outdated, and if they adequately address e-bikes. In addition, commissioner Mary T. Boyle requested the agency’s technical staff conduct a study of e-bike “hazard patterns.” Under scrutiny is 16 CFR Section 1512, established in 1975, and as amended. The action comes after the CPSC was petitioned to eliminate the coaster brake requirement on certain kid’s bikes, which it also will seek comments on. The bicycle safety requirement comment period will begin when the CPSC’s formal notice is published in the Federal Register on May 25, and end 60 days later. The notice will explain how to submit comments, including submission of written comments through the Federal eRulemaking Portal, or by mail. The CPSC said commenters should evaluate whether compliance with these standards provides adequate safeguards, especially related to e-bikes. HPS Analysis:  This is huge, and one of the biggest issues and opportunities the American bicycle business has been presented with since the CPSC was first established, and announced the first mandatory safety standard it was developing for bicycles. The answers to the question of “… whether bicycle safety requirements are outdated, and if they adequately address e-bikes” will set the stage for a standards-setting process that will be international in scope, and challenge an under-staffed and under-financed CPSC to manage to a successful conclusion. It will be the mandatory safety standard for bicycles that are sold at retail to consumers, whether imported or domestically assembled or manufactured, going forward. The opportunity is whether the American bicycle business will step up and do the right thing for consumer safety.

5/26/23 Bike Share Schemes Do Create New Cyclists, Report Says, Cycling Industry News: The long-running debate on whether cycle share schemes have a material impact on cycling has a new bank of evidence to call on. A U.K.-focused report found that 53 percent of bike share users started cycling again after at least one year. A modest but useful seven percent used bike share to cycle for the first time ever. Attracting new riders is of course vital to cycling in general, and to the cycling industry specifically. Arguably, bike share has been doing a better job of it than some other aspects of the cycling world. Frequency was a significant success story, with 66 percent of users cycling more frequently since joining a bike share scheme. Those with interest in multi-modal trips will be interested in the finding that 64 percent of users combine bike share with other means of transport, largely bus or train rides. 71 kg of CO2 emissions are reduced on average each year per user as a result of the mode shift caused by shared bikes. In terms of sustainability, bike share was found to reduce car use. 37 percent would otherwise have made their most common bike share trip by car (as driver, passenger or taxi/hire vehicle). HPS Analysis: This report comes at a time when bike ride share is being severely challenged by the economy. Lyft owns Motivate, the largest bike ride share back-room, facility and bicycle supplier to 80 percent of the municipal programs in North America. Lyft just announced layoffs that have and will continue to impact Motivate and its ability to serve its municipal clients to maintain and manage bike ride share programs. Many in the bicycle business have been negative about bike ride share, and there is some validity to the complaints. However, overall bike ride share, as this study shows, has been positive for bicycling, and has contributed to creating a market for selling bicycles and related products and services. HPS urges all segments of the bicycle business to promote and assist bike ride share whenever and wherever possible.

5/30/23 There’s Nothing Minimal About an Apparent Loophole in U.S. Efforts to Stop Imports from China of Product Made with Forced Labor, The Wall Street Journal Logistics Report: Some 446 million packages from China entered the U.S. in the 2021 fiscal year as “de minimis” imports, meaning they were valued at less than $800 apiece, paid no tariffs, and required little paperwork. The WSJ’s Josh Zumbrun reports the category has emerged as a gap in effort to halt imports made with forced labor in China’s Xinjiang province, the home of the minority Uyghur people. It has led to moves in Congress to close what many lawmakers consider a loophole, potentially adding new trade compliance requirements for the shipments. The concerns have grown as trans-Pacific e-commerce trade has expanded. China’s Shein and Temu sell primarily online, and their trendy, low-cost apparel is often shipped directly to U.S. customers under the de minimis category. HPS Analysis: At the NBDA Retail Summit, I was asked by a retailer if eliminating the de-minimis loophole would also increase consumer prices, and be a contributor to inflation. The answer is yes. Eliminating de-minimis will increase the cost of imported merchandise, including e-bikes, lithium-ion batteries and chargers, and accordingly contribute to inflation. However, the positives are potentially very significant, including saving lives. Keeping in mind that this is still an unproven theory, HPS believes from the evidence we have been able to gather that a large percentage of e-bike fires caused by lithium-ion batteries and miss-matched chargers are the result of low-cost (below $800) e-bikes, lithium-ion batteries and replacement chargers imported under the de-minimis loophole. These hazardous low-cost imports originating in China cannot be identified because they are shipped directly from the source to the purchasing consumer. In this case the de-minimis loophole is the source of hazardous products that are taking lives and doing significant property damage. The cost of closing this loophole is not even close to the value of human lives saved.   

5/30/23 Fitch Revises Accell Group Outlook from Positive to Negative, Bike Europe: The ongoing supply chain challenges have impacted Accell Group’s financial position to such an extent that the international credit rating agency Fitch has revised its outlook for the bicycle manufacturer from positive to negative. The negative outlook reflects limited visibility over Accell Group’s working capital-related cash outflows due to persisting supply chain challenges. These have “materially eroded the company’s liquidity headroom and free cash flow generation, as well as weakening its deleveraging prospects,” wrote Fitch in a report recently. The Fitch outlook formally applies to Sprint BidCo BV, the new holding company of Accell Group that delisted the company in August 2022. Accell Group was delisted following the takeover by a KKR-led consortium last year. HPS Analysis: Accell Group is one of the largest bicycle manufacturers, importers and bicycle and e-bike brand owners in the world. It was taken private when it was acquired by KKR in 2022, so we are not sure exactly where it now ranks relative to Pon, Giant and Merida. That, we gather, is one of the reasons for Fitch to revise its outlook from positive to negative, reflecting a limited visibility over Accell Group’s “working capital-related cash outflows due to persisting supply chain challenges that have materially eroded the company’s liquidity headroom and free cash flow generation.” HPS takes all this to mean that since Fitch does not have access to the earnings statements filed by public companies, it is downgrading Accell Group, but remains positive in its longer term outlook for the company.     

Contact Jay Townley: jay@humanpoweredsolutions.com.