Fitness financials: Nautilus' Q3 net sales plummet nearly 34 percent, Mobia product launched; plus Puma, Costco

Nautilus’ Q3 net sales plummet nearly 34 percent, Mobia product launched

Despite narrowing its net loss, Nautilus (NYSE: NLS) couldn’t turn the tide on its sales decline, which dropped nearly 34 percent for the third quarter handicapped by slower consumer spending and tight credit.

For the quarter ended Sept. 30, net sales from continuing operations were $41.4 million, compared to $62.7 million in the same period last year. Net loss was $24.4 million, or $0.80 per diluted share, compared with a net loss of $34.1 million, or $1.11 per diluted share, in the third quarter 2008.

Continuing results include the company’s direct and retail businesses but exclude the commercial business. The commercial business is considered a discontinued operation since the company announced it is for sale in late September.

By business segment, direct sales posted a 34.8 percent drop to $25.2 million from $38.7 million last year; retail sales fell 34 percent to $15.6 million versus $23.7 million; and corporate rose 157.1 percent to $522,000 from $203,000. CEO Ed Bramson noted that although sales were down both consumer channels were actually profitable.

“We are starting to see some indication the consumer business is starting to feel a little healthier,” he said.

Nautilus said direct business dropped because of restricted availability of consumer credit, as well as the company’s decision to reduce advertising. Its retail business was hit by reductions in customer inventory levels, a reluctance by retailers to replenish inventory in the slow economy, and reduced product placement at certain customers.

Operating income for the retail business was $2.2 million compared to $4.4 million. The direct business generated $1.7 million in operating income compared to an operating loss of $0.9 million in 2008.

For continuing operations, consolidated gross profit margin increased 250 basis points to 49.0 percent of net sales, compared to gross profit margin of 46.5 percent for the same period last year. By segment, gross profit margin for the direct business was 62.8 percent compared to 59.3 a year ago, while for retail GPM dropped to 26.6 percent from 30 percent a year ago.

Operating expenses for continuing operations declined by approximately $11.7 million, or 33.6 percent, compared to the third quarter 2008. Nautilus said the cost reductions were partially offset by a $2.1 million non-cash asset impairment charge in the third quarter of 2009.

As Nautilus continues to look for a buyer for its commercial business, Bramson said on the quarterly call with analysts that the company must make a sale in the “very near future” and will look at selling it in parts. When asked on the call how much the company expected to earn from the sale, CFO Ken Fish said that assets from the discontinued operations for sale were valued at $10.5 million for the books.

Mobia launched

As part of the call, Bramson announced the launch of a new product called Mobia (www.mobia.com), which he said the company believes has large potential. In the fourth quarter, Nautilus will invest between $3.5 million and $4.0 million in advertising the product, which is billed as a three-in-one machine that can either be used to walk like a treadmill, like a stepper or like an elliptical. Bramson noted the company has still been short on its cardiovascular product offerings and had strength products over-represented, thus the Mobia.

The website states it burns twice the calories as on a treadmill. That figure, per the website, is based however on a comparison with walking on a treadmill with a 0 percent incline compared to the Mobia’s resistance level set to 12. If compared to a 9 percent incline walking on a treadmill, calorie use per the company’s study is about 30 percent more. Reasons for the Mobia are named as its calorie use, varied use, modern design and low-impact exercise.

Puma Q3 net income drops 24 percent

Puma said net income fell 24 percent in the third quarter due to a drop in sales, especially for footwear and in its American markets.

Net income was EUR 68 million (USD $101 million) in the July-September period, down from EUR 89 million (USD $132 million) in the third quarter of 2008.

Revenue for the period was 6 percent lower at EUR 673 million (USD $999 million) from EUR 713 million (USD $1.05 billion) in the third quarter of 2008.

Puma said its revenue fell 10.4 percent on a euro basis in the Americas, while Europe, the Middle East and Africa saw a 5.6 percent decline. Meanwhile, the Asia-Pacific region saw a 1.2 percent increase in revenue.

The footwear division saw a 13 percent decline in revenue and apparel saw a 3 percent decline during the quarter. Revenue for accessories rose 40.4 percent.



(Conversion of Euros into U.S. dollars is for information only, is not necessarily relative to earnings, and is based on the currency rate as of Nov. 9.)

October same-store sales rise for Costco

Costco (Nasdaq: COST) said its same-store sales climbed 5 percent in October, helped by strengthening foreign currencies.

Excluding stronger foreign currencies and lower gas prices, sales at stores open at least a year rose 4 percent.

Monthly sales grew 7 percent to $5.68 billion for the period ended Nov. 1.

–Compiled by Wendy Geister with contributions by Therese Iknoian

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