How the cycling crisis is forcing this major brand to release massive funds

Scott Sports has received a massive investment of 150 million Swiss francs from its parent company Youngone Corporation, to ensure commercial and financial stability in the midst of a gloomy situation for the bicycle sector.

The bicycle and electric bike sector is doing badly. In 2023, the post-Covid-19 bubble hit small, medium and large businesses in the sector hard, forcing a certain number of them to close their doors or face serious financial difficulties threatening their activities.

Over the last six months, we have no longer really counted the number of bankruptcies. And to avoid any disappointment, certain groups do not hesitate to print money with massive investments. The idea being to replenish the brands’ liquidity and better cope with the current backlash, marked by a drop in demand.

150 million Swiss francs

Companies that have adopted this strategy include Scott Sports (Avanti, Bach, Bergamont, Bold Cycles, Dolomite, Lizard, Malvern Star, Powderhorn, Scott and Syncros). Or rather its parent company Youngone Corporation, which owns 50.01% of the Swiss brand.

Youngone Corporation simply injected 150 million Swiss francs (160 million euros) into its subsidiary, without us knowing if the other shareholders also put their hands in their pockets, we learn. BikeEurope. Although Scott Sports is profitable, its finances have nonetheless taken a hit due to the capital needed to deal with the phenomenon of overstocking, which has affected a large number of brands.

This jackpot will mainly be used to support commercial operations, pay employee salaries and appoint a controller in charge of supervising the entire process. One hundred million Swiss francs have already been transferred: the other 50 million will be paid during 2024.

BikeEurope focuses on yet another factor which partly explains the reaction of Youngone Corporation. In recent months, a crisis in the Red Sea has gradually emerged due to geopolitical instabilities in the region. Attacks by Houthi rebels on ships have pushed some boats to take longer routes to connect Asia, Europe and the United States.

A trough until the 3rd quarter of 2024?

All this commotion is putting pressure on the sector, and impacting de facto the price of sea freight. Bicycle brands therefore have to pay more money than usual.

Youngone Corporation expects this slow period to last until the end of the third quarter of 2024. Until then, receiverships and liquidations could continue to rain down if the economy remains unfavorable. New, smaller brands could be particularly affected.