Fitness financials: Nautilus to lay off 140 employees to cut expenses, hits all-time NYSE low; plus Dick's, Amer, Finish Line, Wal-Mart, Costco

Nautilus to lay off 140 employees to cut expenses, stock hits all-time NYSE low

Nautilus (NYSE: NLS) said in an announcement released Friday at 5 p.m. EST that it is cutting about 140 positions, or 9 percent of its work force, to cut yearly expenses by more than $10 million.

The job cuts include about 80 positions at the company’s headquarters, and the adjustment equates to about 12 percent of the company’s annualized compensation. Severance and benefits packages based upon years of service will be offered to affected staff, the company said. No word was released as to exactly which positions will be trimmed.

“We are pursuing this workforce reduction, along with a number of other restructuring initiatives, to improve operating margins in a period of lower-than-expected sales,” said Bob Falcone, chairman and CEO of Nautilus, in a statement. “We regret the impact to staff, families and communities but must make tough decisions now to assure a bright future for this company and long-term value for our shareholders.”

Falling sales of the company’s Nautilus and Bowflex home exercise machines cut deeply during the first half of the year. Overall sales fell 14 percent in the first quarter, and 15 percent in the second quarter, compared with the same periods last year. In July, the company projected 2007 sales in the range of $715.58 million and $749.66 million.

In mid-August, Gregg Hammann exited the company, relinquishing his roles as CEO, president and chairman of the board — four years after being touted as the one to usher Nautilus to the next level by company founder Brian Cook.

In September, Sherborne Investors — a turnaround investment firm with a 23.5 percent stake (7.4 million shares) in Nautilus — began agitating for the dismissal of four board members and seeking to take charge of the company. It also called for a special shareholder meeting before year’s end.

In a recent filing with the SEC, Sherborne Investors said it met with company representatives last week to discuss adding board members. It proposed that two Sherborne representatives be added as non-executive directors to the board, along with a third representative not affiliated with Sherborne, increasing the size of the board from seven to 10 members.

No agreement was reached, and both parties agreed to speak further about the matter this week, according to the filing. Sherborne said it would continue to pursue its demands.

Nautilus also is dealing with pressure from its creditors. The company was at risk of violating financial covenants on a debt facility with Bank of America.

Nautilus signed a proposal letter with Bank of America, N.A. to expand its current debt facility to a 5-year, $150 million asset-based loan with a $50 million accordion. The company expects to close the new facility by the end of the year.

In the interim, the company is negotiating an amendment and has executed an agreement to secure its existing 5-year, $125 million unsecured debt facility with its current lending syndicate led by Bank of America.

With an end-of-day announcement on Friday Oct. 12 of the layoffs, the Street’s reaction continued in earnest Oct. 15. Stock prices, previously hovering around $8 since Hammann’s departure, dropped significantly Oct. 15 to close at $7.03, down 9.64 percent on a tremendous volume of 1,028,500. This represented its lowest price since it joined the New York Stock Exchange in May 2002 with share prices on May 2, 2002, hitting $45.89. That was soon after Business Week picked the company as its No. 2 “Hot Growth” company.

Shares dipped as low as $6.74 at one point on Oct. 15. In the last year, shares have traded between $7.46 and $18.63.

Dick’s downgraded by analyst

An analyst from Robert W. Baird & Co. downgraded shares of Dick’s Sporting Goods (NYSE: DKS) on a recent run-up in the stock price and warm weather that may hurt third-quarter results.

Analyst J. David Cumberland said shares of Dick’s have risen over 22 percent since the company’s strong second-quarter report. He downgraded the stock to “Neutral” from “Outperform.”

In August, Dick’s said second-quarter earnings rose 87 percent on higher sales from both existing and new stores. In a client note, Cumberland warned, however, that mild weather conditions hurt recent sales of cold weather merchandise for many retailers. He added that temperatures have been six degrees above average in Dick’s markets over the past four weeks, which may hurt third-quarter results.

In the long-term, Cumberland said the company will continue reporting strong earnings and sales growth because of its market leadership and strong execution.

Ajanta Oy’s shares in Amer tips over 10 percent

Amer Sports said it received information that Ajanta Oy’s holdings of the company exceed one-tenth of its share capital and voting rights via forward market transactions concluded on Oct. 12, 2007, maturing on Dec. 21, 2007.



Total holdings, after forward market transactions have matured on Dec. 21, will be 7,243,326 shares — 10.02 percent of the company’s share capital and voting rights.



Amer Sports capital consists of 72,318,750 issued shares.



Finish Line lenders extend deadline for financing $1.5 billion Genesco takeover

Finish Line said its lenders will extend the termination date for financing its proposed $1.5 billion takeover of Genesco, a shoe company. UBS Loan Finance LLC and UBS Securities LLC extended the termination date to April 30, 2008, from the previous expiration date of Dec. 31, 2007.

The lenders had expressed concern about Genesco’s financial performance since the buyout agreement in June. In turn, Genesco filed a lawsuit to force Finish Line to close the $54.50-per-share deal.

Wal-Mart September same-store sales up, raises outlook for Q3

Wal-Mart Stores (NYSE: WMT) raised it earnings outlook for the third quarter, citing improved cost controls at Wal-Mart Stores. It also said that same-store sales for its U.S. operations rose 1.4 percent in September, driven by growth at its Sam’s Club warehouse stores.

Wal-Mart boosted its forecast for earnings from continuing operations to a range of $0.66 to $0.69 per share from an earlier outlook of $0.62 to $0.65 per share. For the first two months of the quarter, the company said it has seen improvement in initial margin and expense leverage at the Wal-Mart Stores division, which is driving this change. In August, Wal-Mart cut its profit outlook for the year due to slower consumer spending.

In September, same-store sales at Wal-Mart stores increased 0.8 percent, including fuel, while Sam’s Club comparable-store sales jumped 4.1 percent. Excluding fuel, Sam’s Club same-store sales rose 4.4 percent.

Total net sales for the month jumped 9.7 percent to $34.41 billion, from $31.37 billion, boosted by a 20.1 percent surge in international sales. Sales at Wal-Mart Stores rose 6.4 percent, while Sam’s Club sales increased 6.8 percent.

In October, Wal-Mart expects the same-store sales at its U.S. operations to range from flat to 2 percent.

Costco reports Q4 earnings and September sales

Costco (Nasdaq: COST) reported a 5 percent jump in its fiscal fourth-quarter earnings, driven by a rebound in same-store sales growth, cost-cutting and a tighter returns policy for electronics.

Net income for the 16 weeks ended Sept. 2 rose to $372.4 million, or $0.83 per share, compared with $355.6 million, or $0.75 per share, a year earlier. Results were hurt by a one-time charge of $35.8 million, or $0.08 per share, reflecting a change in how the company accounts for deferred membership fee revenue. Excluding the charge, earnings were $408.2 million, or $0.91 per share. Quarterly revenue grew 3 percent to $20.48 billion from $19.88 billion. Same-store sales rose 5 percent during the quarter.

September same-store sales increased 6 percent, up sharply from August, when same-store sales grew by only 2 percent. For the five-week period, the company reported net sales of $6.05 billion, an increase of 9 percent from $5.53 billion during the similar five-week period of the prior year.

For fiscal year 2007, earnings dipped to $1.08 billion, or $2.37 per share, from $1.1 billion, or $2.30 per share, a year earlier. Sales rose to $64.4 billion, up 7 percent, from $60.15 billion in the previous year.

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