Fitness financials: Nautilus completes line of credit deal, plus Town Sports, Under Armour, Life Time Fitness, Hibbett Sports, Dick's Sporting Goods, Iconix

Nautilus completes line of credit deal

Nautilus, Inc. (NYSE: NLS) has announced it signed its new line of credit agreement with Bank of America, N.A. The facility is an underwritten five-year, $100 million asset-based loan with an accordion feature to increase the line of credit to $125 million. The loan is expected to be syndicated by Bank of America.

Town Sports shares drop on COO’s exit

Shares of Town Sports International (Nasdaq: CLUB) dropped to an all-time low on Jan. 15 following the sudden departure of its operating chief. An RBC Capital Markets analyst downgraded the company’s shares, as well.

The stock dropped as low as $7.61 — the lowest point since the company debuted in June 2006 — during the day’s trading. It closed at $8.31, down $1.51 from the previous day’s $9.82.

Town Sports reported late on Jan. 14 that Randall Stephens resigned as chief operating officer. He joined the company in 2002.

Stephen’s departure “deepens our concern that trends are weakening due to a combination of macro factors and competitiveness issues,” RBC Capital Markets analyst Edward Aaron said in a client note. He downgraded shares to “Underperform” from “Sector Perform” and lowered his price target to $8 from $14.

The exit may indicate a slight performance turnaround is under way, and while the fitness business is stable, even a small change could significantly affect the balance sheet, Aaron said.

“We believe the COO departure is an indication that Town Sports is becoming more of a turnaround story than investors realize,” he wrote. “A recent Consumer Reports suggests to us that Town Sports’ clubs could be experiencing competitiveness issues and that customer service levels need to be addressed.”

William Blair & Co. analyst Sharon Zackfia agreed that a slowdown, especially in new gym memberships during the third quarter, may affect earnings in 2008. She kept her “Market Perform” rating.

Stephen’s exodus is due to a corporate realignment under Town Sport’s new CEO, Alex Alimanestianu, and management has stated all the COO’s responsibilities will now be assumed by other company leaders, Zackfia said. But Town Sports remains a “long-term investment opportunity,” she added.

Under Armour’s ’08 projections below analyst estimates, stock drops

Despite anticipation of growth in 2008, Under Armour’s (NYSE: UA) stock took a nosedive as it noted a major footwear launch will cause it to shift “substantial” marketing expenses to the first half of the year, and a forecast below analyst expectations.

Under Armour’s stock lost as much as $8.05 during day’s trading sinking to a low of $34.80 to close at $37.06 on Jan. 17. Shares sank another $5.36, or 14.5 percent, to $31.70 in aftermarket electronic trading.

Based on the timing of the Performance Training footwear launch, the company anticipates earnings per share in the first half of 2008 between $0.03 per share and $0.05 per share. The company did not break down its projection for the first and second quarters. On average, analysts expect the company to earn $0.26 per share for the first quarter, and $0.13 for the second quarter of 2008.

The company plans a year-long brand campaign, which will be used as the platform for its footwear launch and include a 60-second television ad spot during the Super Bowl on Feb. 3.

The company, though, still expects 2008 net income and revenue will exceed its long-term annual growth targets of 20 percent to 25 percent.

For 2007, the company expects full-year profit above analyst expectations, due to continued strong customer demand. The company expects to earn $1.03 per share to $1.04 per share for the year. Under Armour predicts full-year revenue will increase 40 percent to $650 million. The company had previously projected revenue between $590 million to $600 million.

Analysts expect the company to post earnings of $1.01 per share on revenue of $60.3.6 million for 2007.

The company will release fourth-quarter and full-year results on Jan. 31.

RBC analyst weighs in on Life Time Fitness

An RBC Capital Markets analyst said he is bullish about Life Time Fitness (NYSE: LTM) despite the heavy controversy surrounding the company.

Life Time Fitness substantially reduced the number of clubs, offering memberships to new customers, and has begun to adopt a more flexible pricing strategy in certain cases. Despite this, analyst Ed Aaron wrote in a client note that its checks on the company indicate it is taking only a small sacrifice in enrollment fees to support these pricing initiatives.

“Depending on one’s perspective, these pricing changes are either a very good thing or a bad sign of what’s to come,” Aaron wrote. “Price increases are positive as long as they are primarily demand-driven, but would be negative if being taken to compensate for areas of pressure in the business, or if management is underestimating the impact of a weakening consumer.”

He added, “Neither side is likely to capitulate in the near term, but the issue should be resolved over the course of 2008.”

RBC expects fourth-quarter results for Life Time Fitness to look similar to its third quarter. It’s also maintaining its price target of $68 and views the company as a core small cap growth holding.

It noted, though, impediments to its target include slower consumer spending, the emergence of new competitive threats, and inability to open successful new stores on a timely basis.



Hibbett Sports drops to new low after cutting Q4 profit outlook

Shares of Hibbett Sports (Nasdaq: HIBB) set a new low on Jan. 15, after it lowered its fourth-quarter profit outlook and an analyst downgraded the stock.

The stock dropped $2.58 to close at $13.38, and set a three-year low of $12.30 earlier in the session.

After the closing bell on Jan. 14, Hibbett Sports cut its fourth-quarter earnings outlook to between $0.20 and $0.26 from its previous $0.40 per share estimate.

Friedman, Billings, Ramsey analyst Jeff Sonnek downgraded the stock to “Market Perform” from “Outperform” and forecast same-store sales weakness in the first half of 2008 and softness in the company’s shoe segment.

“We are aware that we are late in changing our thesis on Hibbett Sports, but in light of the continued deterioration in the broader retail market, we feel it is prudent to adjust our rating to better reflect our more bearish macro thesis on the consumer,” Sonnek wrote in a client note.

Dick’s Sporting Goods raises Q4 outlook, names vice chair

Dick’s Sporting Goods (NYSE: DKS) raised its guidance based on strong same-store sales during the quarter.

The company said it now expects fourth-quarter profit of $0.60 or $0.61, from previous guidance in November of $0.59 per share.

Dick’s expects to at least meet its same-store sales guidance of 2 percent or 2.5 percent adjusted for a calendar shift.

In other company news: President and Chief Operating Officer William Colombo will become vice chairman, effective Feb. 2.

Colombo’s duties will be taken over by Joseph Schmidt, executive vice president of operations; Timothy Kullman, executive vice president of finance and administration and CFO; and Edward Stack, chairman and CEO.

Colombo began at Dick’s in 1988 and became executive vice president and COO in 1995. He was named president in 2002.

Iconix reaffirms guidance for ’07, ’08

Iconix Brand Group (Nasdaq: ICON), parent of Danskin Fitness, said it expects 2007 earnings and revenue at the high end of its previously stated guidance and reaffirmed its 2008 outlook.

For 2007, the company expects earnings between $0.96 per share and $1 per share on revenue of $150 million to $160 million.

For 2008, Iconix forecasts earnings per share between $1.35 and $1.40 and revenue of $240 million to $250 million.

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