Fitness financials: Nautilus "bullish" on year, plus Brunswick, Under Armour, Life Time Fitness, Wal-Mart

Nautilus says it is “bullish” on the year
Summarizing its net sales and growth plans, Nautilus (NYSE: NLS) told analysts on a conference call announcing results for the second quarter ended June 30, 2006, that it was bullish on how it will do as the busy fitness season ramps up between now and the end of the year.

“To say we’re bullish is pretty appropriate,” said CEO Gregg Hammann on the call. “We’ll say this, we’re pretty focused.”

The company announced net sales for the quarter as $137.6 million, compared to $129.6 million for the corresponding period last year, or an increase of 6.2 percent. Net income for the quarter was $1.7 million, or $0.05 per diluted share, compared with $3.3 million, or $0.10 per diluted share for the year ago quarter, or $0.08 per diluted share on a non-GAAP basis when adjusted for FAS 123R.

In its various channels, Nautilus showed a mixed bag of increases and decreases. The specialty retail channel had sales of $16.6 million, up 11 percent over a year ago, including 260 separate fitness stores and 900 independent bike dealers, many acquired with the Pearl Izumi buy last year. Tim Hawkins, president of fitness equipment, noted on the call that the company expects about 10 percent growth in the specialty area this year.

When queried by an analyst about the specialty area and the caution cited by Nautilus in that realm, Hawkins said that segment is “a very small” portion of retailing to consumers and was very high end.

“We look at that channel as an opportunity to test and as a cascade to direct,” Hawkins said.

In other retail channels, including clubs, sporting goods and department stores, sales were $15.8 million, and growth expectations of 15 percent to 20 percent were cited. For the commercial segment, sales for the quarter hit $16.2 million, down 8.2 percent over a year ago.

In direct, sales were also down (13 percent) but still hold the largest chunk of overall sales at $60.2 million. The company blamed higher advertising rate and lower conversion rates, but noted prices acceptable to this consumer were higher and it would introduce two new Bowflex Revolution gyms this year. Hawkins forecast single-digit growth for the year.

Internationally, sales were $14.9 million or up 25 percent as the company is making larger pushes around the world, including larger Western European markets, as well as China, Sweden, Russia and India. There, 20 percent growth was cited.

In its new apparel arena, coming from its acquisition of Pearl Izumi, the company noted net sales of $13.8 million or up 11 percent over a year ago. It also said it is going to show its new line of Nautilus-branded apparel at the Health & Fitness Business show after launching it at the IDEA show for instructors in late July. About 20 percent overall growth for the year was forecast in this segment on the call.

Hammann gave guidance for the third quarter only, citing expected net sales of $165 million to $180 million. He said the wide range was because of many uncontrollable factors, including consumer caution, the economy, global unrest and the price of fuel.

“Our channel diversification strategy helped us improve sales in several channels, despite cautious consumer behavior in the wake of high fuel prices and continued interest rate increases,” Hammann said in a statement. “Good expense management helped us offset these pressures.”

For the third quarter of 2006, the company also estimated expected earnings of $0.16 to $0.24 per diluted share. Hammann said full year net sales are expected to be within its three-year range of 10 percent to 20 percent top-line annualized growth, and earnings expected to be above the high end of its three-year range of 20 percent to 30 percent growth.

Brunswick profit drops 27 percent, fitness division sales up
Brunswick Corp. (NYSE: BC) reported a 27 percent drop in second-quarter profit for the entire company as sales excluding acquisitions fell, while sales for its fitness division increased 8 percent.

The company said it is planning further production cuts, after already slowing production. It had warned of weakened demand for its marine products earlier this month in cutting its full-year earnings forecast.

Net income for the quarter fell to $83.2 million, or $0.88 per share, from $114.1 million, or $1.16 per share, a year earlier. Income from continuing operations fell to $0.99 a share from $1.12 a share. Sales rose 1 percent to $1.54 billion from $1.53 billion. But not counting those from acquired businesses, they would have fallen 5 percent.

The company said it experienced declining demand in its retail segment. This caused it to cut inventory levels by slowing production, something Brunswick said it must rely on as it approaches the off-season. It added that it is planning further production cuts to manage pipelines for the 2007 model year, which began on July 1.

Sales for the Life Fitness Division, which manufactures and sells Life Fitness, Hammer Strength and ParaBody fitness equipment, increased 8 percent in the quarter to $129.7 million, up from $120.4 million in the year-ago quarter. Operating earnings for the quarter totaled $7.4 million, up 45 percent from $5.1 million in the second quarter of 2005, and operating margins increased 150 basis points to 5.7 percent from 4.2 percent a year ago.

“Segment sales benefited from continued expansion of health clubs in both domestic and international markets. At the same time, our continued emphasis on containing operating expenses led to the operating margin improvement,” Dustan McCoy, Brunswick’s chairman and CEO, said in a statement.

Brunswick reiterated its 2006 earnings target of $2.40 to $2.55 a share, excluding items, down from $3.13 a share posted last year.

Under Armour’s Q2 revenue up 63 percent
Under Armour (Nasdaq: UARM) doubled its second-quarter profit and posted a 63 percent rise in revenue, beating analyst expectations.

Net income rose to $2.4 million, or $0.05 per share, from $1.2 million, or $0.03 per share during the same period last year. Analysts had forecast earnings of $0.02 per share. Revenue grew 63 percent to $80 million, from $49 million during the comparable period last year, beating analyst expectations for $75.1 million in revenue.

The company’s new footwear division brought in $15.6 million in the second quarter. The company’s fastest-growing unit compared with 2005 is women’s apparel, which grew 37 percent to $12.1 million in revenue. The men’s apparel division continued to make the most money, bringing in $41.9 million in the quarter.

Under Armour raised its fiscal 2006 guidance, and said it expects a profit of $34 million to $35 million on revenue of $400 million to $410 million. In April, it forecast a profit of $31 million to $32 million on revenue of $380 million to $390 million.

Life Time Fitness’ profit up 20 percent
Life Time Fitness (NYSE: LTM) reported that its second-quarter profit grew 20 percent as membership grew. Quarterly profit rose to $12.4 million, or $0.33 per share, from $10.3 million, or $0.28 per share during the same period last year.

Revenue grew 28 percent to $122.5 million, or $95.6 million. Membership grew 17 percent during the quarter. In-center revenue grew nearly 41 percent, driven by higher membership, marketing programs and new products and services.

The company now predicts 2006 net income will be $48 million to $49 million, up from previous guidance of $46.7 million to $47.3 million, including a stock-option expense. Per-share income is projected at $1.30 to $1.32, compared with an earlier outlook of $1.26 to $1.28 per share, including the stock-option expense.

The company said it opened one fitness center in Texas during the quarter and has five under construction.

Wal-Mart posts July sales
Wal-Mart (NYSE: WMT) posted a 2.4 percent gain in same-store U.S. sales for July, landing on the high end of its forecast for the month and rebounding from a relatively weak showing in June. For its July U.S. sales, Wal-Mart had forecast a gain of 1 percent to 3 percent.

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