Fitness: Did you hear?…

>> The March 2004 issue of Smart Money magazine rated home gyms, with the True Strength 540 HG coming out on top with five stars (the magazine noted a “pleasing tubular look”), but was tailed closely by the Parabody GS6 with 4.5 stars. Next with four stars came the Hoist V5 (with the magazine calling it out as the smallest footprint) and the Vectra On-Line 1400 (noting its “innovative U shape”). Last, but not least still rating 3.5 stars was the Precor S3.25, which was called a “reliable brand that gets the little things right.” The magazine also pointed its readers to specialty dealers since it said the staff knows its products well.

>> GERMANY — Icon is regrouping in Germany, one of the two largest fitness markets outside of the United States. European sources tell SNEWS® that the company hasn’t seen the growth it wants or needs (and in fact has seen some rather significant losses), which is part of the reason for the departure of former country boss. Mark Richard was brought in from the United Kingdom to shake up the German division and get it moving forward with what was called in one Germany trade magazine as an offensive action focusing on service. “Germany is the bridge between east and middle Europe,” Richard told the trade publication sport + mode. With that in mind, the goal is to convince the Germany trade that Icon (“Aicon” in Germany) is a trustworthy business partner, the magazine wrote. The problem in the past, SNEWS was told by its sources, is that Icon made mistakes including not individualizing products for European tastes and needs. In Germany, the company said it plans to focus on the Pro Form and NordicTrack brands. It also introduced its iFit interactive technology to the German market at the just-completed ispo winter 2004 sporting goods show in Munich, Germany.

>> In the continuing slew of New Year’s magazine reviews of fitness equipment, Men’s Journal magazine took a look at five home gyms in the February 2004 issue, evaluating them based on ease of setup, general responsiveness and how well they work the upper body, core and legs. The True Fitness’ 550 Home Gym earned the “Best All-Around” spot, with reviewers calling out the “smart layout that lets two people work out simultaneously, the isolateral presses and free motion-style pulley arms.” The “Ultimate Heavyweight” title went to the $7,285, four-stack Tuff Stuff Apollo 5, which accommodates four people at the same time. The “Top Value” was Hoist’s V4, which is a single stack, compact $1,800 unit. The title of “For Free Weight Purists” was the Prospot P-500, which includes a touch sensor automatic spotter. Finally, the Bowflex XTLU took the “For Tight Spaces” category for its ability to provide a full-body workout and fold up to 27 inches x 49 inches. SNEWS View: Cute titles at least. Interesting to note that both True and Hoist now showed up in both these latest reviews, although not the same piece. Good going for these companies!

>> GERMANY — In the new February issue of Germany’s “Fit for Fun” magazine (perhaps the equivalent in statue and readership there to the U.S.’s “Fitness” magazine), editors have rated home gyms — those with retail prices under Euro 1,000 (about USD $1,250 in today’s exchange) and those costing more than Euro 1,000. In both categories, Kettler took the blue-ribbon and the Fit for Fun stamp of “Test Sieger” (“review champion”). From the top-rated and moving down: Kettler Basic, InShape Body Lift Pro, Hammer Titanium Mega Tower, Weider System 9150, and Christopeit Synchro 3, with the last two earning relatively low points for ergonomics, function and range of resistance. Among those costing more, the order from the top, moving down was: Kettler Multi-Fitness Center, Nautilus NS 200, Schwinn 710S, Life Fitness Parabody GS 2, and Body Track EXM 2750, with all coming out relatively well in ratings. If you want to check out the magazine, which does regular reviews (got German?): www.fitforfun.de.

>> As an addition to its new aggressive marketing campaign, “Every Body Needs Something,” Bally Total Fitness announced on Feb. 6 that it is opening all 400 of its Bally Total Fitness centers throughout the United States for free workouts every Friday during the month of February. Anyone over the age of 18 is eligible to participate. Bally said that it has launched this program to help America get into shape and combat the obesity dilemma in America.

>> GERMANY — A recent survey in Germany asked residents why they didn’t belong to a fitness club or studio. The top two reasons hit straight at the pocketbook: No. 1, too expensive and, No.2, the binding contracts. Other top reasons named, in order, included: participation in other sports, unpleasant environment, no interest or desire, too lazy (Ed. Note: no really, that was a reason given), enough physical activity already, and no time. The survey was done by the Center for Health in that country and polled 1,000 men and women, ages 15 to 65. The survey happened partly to check in on the progress of the huge growth in clubs and memberships in the last few years that has now slowed; clubs are beginning to be forced to compete for members more strongly.

>> Calling 2003 a “challenging year” for The Nautilus Group (NYSE: NLS), President and CEO Gregg Hammann in the Jan. 28 earnings call emphasized the company’s commitment to its rigorous turnaround program, FIT1 (See SNEWS story Nov. 7), and said, “Our goal is to be firing on all cylinders by the end of 2004.” Net sales for 2003 were $498.8 million, compared to $584.7 million in 2002; net income was $34.4 million, or $1.04 per diluted share, down from $97.9 million, or $2.79 per diluted share, in 2002; and gross profit margins were 49.3 percent, compared to 56.9 percent last year. Direct net sales were $246.9 million, compared to $392.6 million in 2002, with commercial and retail net sales at $251.9 million, up over last year’s $192 million, and now representing 50 percent of the company’s overall revenue, versus 33 percent last year. Fourth quarter net sales were $152.8 million, compared to $155.5 million for the corresponding period last year; net income was $9.4 million, or $0.28 per diluted share, down from $23 million, or $0.69 per diluted share for Q4 2002; and gross profit margins were 44.7 percent, compared to 53.4 percent last year. The company sold 53,000 Bowflex units in the fourth quarter — 32,000 direct with an ASP of $1,500 and 21,000 at retail with an ASP of $950. Plus, the new Treadclimber, which started shipping in late first quarter 2003 with an ASP of just over $2,000 and margins in the low 60s, contributed $18.9 million in revenue for the year, significantly higher than the company’s $10 million expectations. Hammann said Nautilus made the important realization in 2003 that it was not developing and positioning its products to their full potential, so the company now is strictly focused on altering its cardio and strength product mix, diversifying and better leveraging sales channels with emphasis on retail and new outlets like Amazon.com and delivering differentiated products at a faster rate than ever before. Although the Bowflex patent expires in April, Nautilus is still banking on this machine and has developed “significant innovations,” he said, that will create differentiated products for various sales channels (Costco versus specialty fitness, for instance) in the first and second quarters. Also, the company estimates Treadclimber sales to be $50 million to $60 million in 2004. Doubling its R&D investment this year, Nautilus also promises to provide a more complete cardio offering, including new products in fourth quarter such as a commercial Treadclimber and a variable stride elliptical. Given what it called its “turnaround position,” the company statement said it was being cautious with guidance and only forecasted first quarter figures: revenue in the $120 million to $130 million range, with EPS of $0.18 to $0.20. Based on the earnings report, several analysts issued a share price target change for Nautilus: RBC Capital Markets — up to $15 in 12 months from its old target of $12; and U.S. Bancorp Piper Jaffray — to $14 in 12 months, up from its old target of $12.50. For more information about this company or its financial reports, as well as to view stock prices updated every 15 minutes, visit the SNEWS® Stock Market Updates. Click on: www.outsidebusinessjournal.com/cgi-bin/snews/stock_report.html.

>> After a year in which it introduced 50 new products, opened a strength-training equipment manufacturing plant in Hungary and boosted operating margins to the highest level in all of parent Brunswick Corp.’s (NYSE: BC) segments, Life Fitness reported 2003 sales of $486.6 million, up 7 percent from $456.7 million in 2002, with operating margins at 11.3 percent, excluding the $25 million litigation charge for the Life Fitness-Precor patent-infringement suit. The fourth quarter of 2003 proved strong as well, with sales of $157.2 million, a 13 percent jump from $139.4 million in the prior year period, and operating margins at 18 percent, up 200 basis points from 16 percent in Q4 2002. In the Jan. 29 earnings call, Brunswick Chairman and CEO George W. Buckley described 2003 as “a remarkable year” with five acquisitions and many successes — including company net sales of $4.1 million, an 11 percent increase over last year’s $3.7 million; net earnings of $135.2 million, or $1.47 per diluted share (which includes aforementioned litigation charge), compared to $78.4 million, or $0.86 per diluted share, for the prior year. For the quarter, Brunswick net sales rose 17 percent to $1.1 million from $928 million in Q4 2002, and net earnings were $39.9 million, or $0.43 per diluted share, nearly double the net earnings of $20.5 million, or $0.22 per diluted share, for the prior year Q4. And it looks like Life Fitness has another busy year ahead — Buckley said that Life Fitness’ 2004 plans include opening a new cardiovascular manufacturing facility in Eastern Europe, reducing the cost of the delivery process, further improving operating margins and introducing a number of new products such as a commercial adjustable stride cross trainer; “multi-functional” cardiovascular equipment; products specifically targeting the inactive and overweight; fitness equipment entertainment options and new technology that wirelessly networks cardio and strength machines, directs workouts from a central computer and provides interactivity on the equipment itself (look for that at the IHRSA trade show in March). Given these new products, the company’s strong brands, new overseas manufacturing plant and share gains, Buckley said that sales growth for Life Fitness is estimated at 8 percent to 9 percent in 2004, although overall fitness industry growth rates are expected to be only 4 percent to 5 percent. Brunswick 2004 guidance specified sales up by 11 percent, with EPS in the range of $2.10 to $2.30. For more information about this company or its financial reports, as well as to view stock prices updated every 15 minutes, visit the SNEWS® Stock Market Updates. Click on: www.outsidebusinessjournal.com/cgi-bin/snews/stock_report.html.

>> GERMANY — According to Europe’s two lead buying groups, Sport 2000 and Intersport, the top brands and strongest suppliers for 2003 among their members include both Amer Sports and Kettler, among fitness equipment manufacturers. Sport 2000 ranked Amer as No. 7 and Kettler as No. 19, while Intersport noted Amer was No. 6 and Kettler was No. 12. Amer had fallen one or two places on both, and Kettler had fallen four positions on the Intersport list. Shoe and apparel manufacturers lead the way for both with adidas and Nike taking the top two slots in that order, while Asics leaped into the No. 3 position for Sport 200 and was in fourth for Intersport. Others on the Sport 2000 list include Reebok No. 10, K2 No. 13 and Odlo No 18. On the Intersport list Reebok is No. 18, while K2 is No. 10 and Odlo is No. 13.

>> Sears, Roebuck and Co. (NYSE: S) reported full-year 2003 net income of $3.4 billion, or $11.86 per share on an average base of 286.3 million common and dilutive common equivalent shares, compared with a net income of $1.4 billion, or $4.29 per share on an average base of 320.7 million common and dilutive common equivalent shares for 2002. For the fourth quarter of 2003, net income was $2.7 billion, or $10.84 per share on an average base of 253.6 million common and dilutive common equivalent shares, compared with $848 million, or $2.67 per share on an average base of 317.6 million common and dilutive equivalent shares in Q4 2002. For more information about this company or its financial reports, as well as to view stock prices updated every 15 minutes, visit the SNEWS® Stock Market Updates. Click on: www.outsidebusinessjournal.com/cgi-bin/snews/stock_report.html.

>> FINLAND — Amer Group (owner of Precor, Wilson, Atomic and Suunto) has struck a deal with Philip Morris to exit its non-core tobacco business as of March 26. Philip Morris is buying back the exclusive right Amer Tobacco Ltd. holds to produce and sell Philip Morris cigarettes in Finland, and the company also will acquire Amer Tobacco’s cigarette trademarks, inventory and some machinery and equipment. Seventy Amer Tobacco employees are being transferred to Philip Morris as part of the agreement, but the Amer Tobacco factories are not part of the deal. The consolidation will be EUR 29 million, with an estimated positive impact of EUR 18 million on Amer’s operating profit in the first quarter of 2004.

>> Sport Chalet Inc. (Nasdaq: SPCH) announced a 10.3 percent sales increase in its third quarter ended Dec. 31, 2003. Sales for the period increased from $72.3 million last year to $79.7 million this year as a result, according to the company, of opening five new stores since November 2002. It had a same store sales increase of 2.9 percent. Gross profit margin increased from 31.3 percent for the quarter ended Dec. 31, 2002, to 32.6 percent for the same period in 2003, as improving inventory purchase controls allowed management to reduce low margin sales promotions. Increased sales at higher profit margins improved net income 18 percent from $2.6 million, or $0.38 per diluted share, in the third quarter last year to $3.1 million, or $0.44 per diluted share, for the same period this year. During the nine months ended Dec. 31, 2003, sales increased from $179.8 million last year to $194.8 million this year, an 8.4 percent increase. Sport Chalet plans on opening five new stores during 2004 — four in Northern California (Roseville, Elk Grove, Pleasanton and Visalia), and one in Southern California (Arcadia). For more information about this company or its financial reports, as well as to view stock prices updated every 15 minutes, visit the SNEWS® Stock Market Updates. Click on: www.outsidebusinessjournal.com/cgi-bin/snews/stock_report.html.

>> In what it’s calling the first in a regular series of surveys, Bally Total Fitness polled a random sample of Americans 18 and older in December 2003 to collect their thoughts about the nation’s soaring obesity incidence, their personal fitness levels and their wish lists of tools to get fitter. Not surprisingly, given the deluge of information about our nation’s battle of the bulge, 97 percent of respondents to the “Every Body Needs Something Survey” professed awareness that the United States is the world’s fattest nation, with 64 percent saying that this is embarrassing for our country and for them personally. Typically, however, the survey reflected the perpetual disconnect between what Americans say they want and their actual behavior. While more than 97 percent who felt that they were unfit or overweight wanted to lose weight, only 25 percent were currently following a diet plan. Although participants cited aerobic exercise, weight training and personal training as the top three needs for their bodies, only 20 percent belonged to a fitness facility. While 83 percent claim to want complete nutritional information on menus, only 39 percent admitted that these details would influence their food selection. Other survey results showed that Americans are still confused about nutrition, and more than 75 percent of respondents cited a need for complete diet and fitness information in an easy-to-access, one-stop-shop environment. Bally said it will use the results of these surveys to try to become that convenient, comprehensive source of products and services to help Americans get healthier.

>> Everlast Worldwide Inc. (NASDAQ: EVST) has announced the signing of a new licensing agreement with Sparta Ltd., a sporting goods supplier based in St. Petersburg, Russia. Sparta will serve as the Everlast licensee of retail boxing equipment as well as products used for exercising, aerobics, weightlifting and the martial arts, among other sports. The Everlast line produced by Sparta will be distributed throughout the Russian Federation and sold through sporting goods outlets and better department stores.

>> Foot Locker Inc. (NYSE: FL) reported sales for the 13-week period ended Jan. 31, 2004, of $1,333 million, versus $1,214 million in the comparable period last year, an increase of 9.8 percent. Comparable store sales for the its 2003 fourth quarter increased 3.9 percent. For the 52-week period ended Jan. 31, 2004, sales increased 6.0 percent to $4,778 million, from $4,509 million in the company’s corresponding period last year. For the same 52-week period, comparable store sales decreased 0.5 percent. Excluding the effect of foreign currency fluctuations, total sales for the 13-week and 52-week reporting periods increased 5.6 percent and 2.2 percent, respectively. For more information about this company or its financial reports, as well as to view stock prices updated every 15 minutes, visit the SNEWS® Stock Market Updates. Click on: www.outsidebusinessjournal.com/cgi-bin/snews/stock_report.html.

>> Trixter Developments Ltd., England-based maker of the X-Bike for indoor cycling, has reached multiple agreements for global distribution of its bike. Aside from the private label agreement inked by Matrix Fitness last October that allows club distribution of a Matrix version for North America, Mexico and part of Canada, Trixter has secured distribution agreements with Rocfit, Spartacus Fitness & Fit Systems, Byloth BV, Workout Plus Pty. Ltd., Shark Fitness AG and Style Fitness GmbH for distribution of the X-Bike in the Spain, Canada, The Netherlands, Australia, Switzerland and Germany, respectively. Trixter will internally manage Trixter X-Bike distribution in the United Kingdom as well as the United States. According to Trixter CEO Rick Sutton, the Matrix-Trixter relationship is a “work in progress, with both Matrix and Trixter working in concert to open new countries and markets.” Meanwhile, Trixter itself will expand worldwide distribution of the brand’s own yellow-and-black Trixter X-Bike. “Both companies, Trixter and Matrix, believe there is plenty of room out there for two X-Bike distribution channels,” Sutton added. Style Fitness GmbH, with whom SNEWS® visited while at the ispo show, is doing booming business there. Seems the company just ordered its third full container in three months (Euro price we saw in a local fitness pub was 1,392).

>> In the latest round of recent leveraged recapitalizations, secondary stock offerings and IPOs, Deutsche Bank AG just launched a $125 million high-yield offering to support a leveraged recapitalization of Town Sports International (TSI), the holding company for New York, Boston, Philadelphia and Washington Sports Clubs. Moody’s Investors Service rated TSI’s $125 million debt issuance Caa2 with a stable outlook, noting the company’s “strong track record in building and operating new clubs, cash flow stability from membership fees through EFT payments and impressive market position in its target markets.” The new debt offering will take out senior redeemable preferred holdings at several of TSI’s major private equity backers, including Bruckmann, Rosser, Sherrill and Co. LLC; Farallon Partners LLC; Canterbury Capital Partners LLC; and Rosewood Capital.

>> More health clubs have opened in the past year in the United States, according to American Business Information. The number of health clubs listed in the nation’s Yellow Pages grew 16.3 percent as of Jan. 1 this year to 23,497 from 20,207 on Jan. 1, 2003, and by 6.6 percent since July 1, 2003. The increase of 1,466 clubs over the past six months, however, was lower than the previous two six-month periods of 2,000 more facilities.

>> Trekking pole manufacturer Leki has hired Gottfried Kuermer as its Nordic walking program director. Kuermer is an original master trainer from the International Nordic Walking Association — one of only 42 worldwide. Kuermer will play a key role in training and certifying Leki sales representatives and retailers as basic Nordic walking instructors. Kuermer’s responsibilities will include product development and sales training. The Austrian resident will also conduct basic instructor certification seminars on behalf of Leki across the United States. He’s currently the director for the Austrian Nordic Walking Association.