Fox Factory Holding Corp. reported first quarter 2025 earnings today. While the report suggests modest improvements on some fronts, it’s clear the bike industry continues to face headwinds.
Bike-related sales are up, but company inventories continue to grow
Overall Q1 sales at Fox increased 6.5% in 2025 compared to 2024. Sports Specialty Group sales, which primarily includes bicycle-related products, increased 6.6% to $121M for the quarter, which a press release says “is related to the growth in bike sales.” Still, the release cautions, “although bike sales improved compared to prior year, the ongoing channel inventory recalibration and, to a lesser extent, consumer demand remain headwinds.” Said another way, bike brands are ordering fewer components due to excess supply and decreased consumer demand for complete bikes.
Similarly, the Aftermarket Applications Group, which includes aftermarket sales, i.e. consumer upgrades, saw an increase from $101.9M to $111.9M. Again, Fox cautions that “high interest rates [are] impacting dealers and consumers, and high inventory levels at dealerships continue to pose challenges.”
Looking at the balance sheet, inventories increased slightly compared to last year to $408.7M, which suggests the company continues to struggle balancing supply and demand.
Aftermarket sales are increasing, perhaps because buyers are upgrading rather than buying a new bike
Aftermarket sales increases year over year could indicate that buyers are choosing to upgrade their mountain bikes rather than buying new. Brands have been offering major discounts on bikes since at least 2022, and over the past two years many consumers took advantage of prices that were 50% off or more. With relatively new bikes at home, buyers may not be ready to pull the trigger on another purchase yet, especially now that the discounts on complete bikes are beginning to dry up.
In addition, there are also reports that retail sales increased in March as consumers braced for future tariff-related price increases.
Tariffs are a concern
Fox notes that the effect of tariffs remains uncertain, though “new and expanded tariffs are expected to continue to pose significant challenges for the industries that the Company serves,” that could increase costs by $50M or more. However, they go on to say they have a plan to offset the impact.
Related to tariffs, the company is writing down a big chunk of Goodwill this quarter. Goodwill generally refers to intangible assets including, but not limited to, intellectual property, brand value, and the long-term value of previous acquisitions.
“After the Company conducted its quantitative assessment triggered by adverse changes in U.S. tariff policies, new and expanded tariffs enacted by the current presidential administration, and resulting sustained decline in its stock price,” Fox is now valuing Goodwill at $377.2M, down from $705.1M.
Already tight margins are getting tighter, losses expand
Fox reported that adjusted gross margins dropped from 32.3% to 30.9% year over year. However, they note adjusted gross margins are up slightly from the previous quarter, Q4 2025. The brand introduced an all-new line of forks late in the first quarter of this year, which may be beginning to help lift margins.
Accounting profits are down significantly, due mostly to a decrease in Goodwill. The brand reported a net loss of $259.7M, up from a loss of just $3.4M a year ago. Adjusted earnings before taxes, depreciation, and amortization are down year over year from $40.4M to $39.6M. Ignoring the Goodwill impairment, it appears the company would have turned a modest profit in the first quarter of 2025 thank to an increase in net sales.
5 Comments
2 days ago
1 day ago
1) The company reported a loss primarily driven by an impairment charge. Adjusted earnings was actually positive, and exceeded analyst expectations.
2) They retained prior guidance which was issued *before* the tariffs
3) Management commentary was broadly positive (if you actually listened to the conf call you'd know this).
Its not about where they were or even where they are, its about where they are going. The value of a company is the discounted present value of all future cash flows to a present value (academically). I know it doesn't work this way, but the future was far more glossy than this not-so-good piece of reporting made it seem.
If you want someone to write your business stuff for you, feel free to just lift my own stuff and give credit. I'm a former financial analyst who writes about this stuff. Only reason I took the time to comment is this creates a lot of confusion in the space.
...oh, and don't believe me, believe the market, stock was up notably following the announcement.
1 day ago
Management commentary can be helpful, but also should be taken with a grain of salt. As for where they are going, I speculated a bit, though clearly others will have their own guess as to what all of this means for the future.
20 hours ago
The correct headline would be something like "Fox reports adjusted earnings of $0.23 per share vs wall street consensus of $0.22 per share" (or if you wanted to, you could report topline and compare to consensus or year/year).
The big point here is Fox did not in fact have a bad quarter, they had a good quarter. If anything, this one *might* be the turning point for the industry, depending on if the tariff thing puts us into a recession or not. Wall Street may be greedy, but beneath this greed lies a strange (raw) relationship with the truth. The stock would not have rallied on this news if your headline was reflective of reality. Its up 22% since their earnings results; this should tell you much of your doom and gloom analysis is maybe misappropriated.
Finally, management commentary of course is going to skew optimistic, but if they are not (mostly) honest or are unable to hit targets they lay out, they get fired (or they go to jail). This is where the whole Securities Exchange Act of 1934 comes in. Of course, going to jail rarely happens, and of course they can put spin on the truth, use vague language or rely on safe harbor protections but the bigger point is if they don't hit targets that they've laid out and the board likes, they get canned. Simple as that. There is more alignment here than you think, and there is a reason Wall Street (and analysts like me) listen when they talk. There are key phrases we'll look for - and to your point the more they sound like used car salesmen the higher the likelihood something is "afoot" but to completely disregard it or not look at it is a misnomer.
Anyway - just the perspective of a former analysts $0.02. (who now CFOs for various outdoor companies)
7 hours ago
It's definitely not our intent to publish a straight analysis of Fox earnings, or any other individual company for that matter. That would be boring. :) If anyone is looking for investment advice here, they are going to be sorely disappointed. Unless, of course, they decide to invest in a new bike that they love riding haha!