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.
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