Keys Fitness "not going away," re-strategizing underway

Despite a swirl of industry rumors that have accelerated in the past couple of months, executives at Keys Fitness have told SNEWS® the company is reorganizing, planning a more efficient strategy and is most certainly staying in fitness.

“We’re not going away,” Steven Overgaard, senior vice president at Keys since July, told SNEWS®. “We are in the process of reorganizing the management team…. Contrary to vicious rumors, we continue to operate.”

Just after the New Year, all of Keys’ bank debt, formerly with Bank of America, was acquired by Jacobson Partners (www.jacobsonpartners.com), a private equity firm that according to its website “makes control investments in underperforming companies” with a portfolio that currently includes FormTech, Tug and Bertucci’s, among others.

“They have taken over as our primary secured lender,” Overgaard said.

In addition, the sale of the spa business acquired in 2005 from Icon was completed just before the end of 2007.

“It became a big challenge and a distraction,” Overgaard said. “The sale allows us to focus our energies and effort on the plans that we’re developing for Keys.”

Both the acquisition of a new secured lender and the divestment of the spa division, as well as a reorganization of management under the oversight of President Darryle Cromwell will allow Keys to strengthen its fitness area. The ownership, including Tim Chen, and the other faces the industry knows are remaining, he said. Chen, he added, is more focused on vendor relationships and is assisting with contacts in Asia because of his relationships there.

“We are going back to focus on our core business, which is fitness,” Overgaard said. That includes increasing product reliability, strengthening delivery and improving technical support. In addition, he said the management team will take a look at managing the Asia operations and production from Asia.

“Our argument is, we can do a whole lot better,” Overgaard added, “in terms of product and delivery.”

SNEWS® View: Without having lost any of its key accounts and (of course) still having the Ironman license for equipment, Keys may be stepping back for a breath while also preparing for a big spring forward again later this year. Already, we have seen its high rating of the center-drive elliptical in the current issue of Consumer Reports magazine, a rare rating for Keys in the magazine. Although we know the company had big plans for the spa division that weren’t totally off-base, it was going to take a different focus; there must have been a good reason for Icon to have dumped the spa unit at a loss. Unfortunately, Keys learned the hard way and, unfortunately, after losing many millions. The company’s no-show at the Health & Fitness Business show in August 2007 was a late decision that the new management team approved; we just hope it doesn’t become a no-show in the future since the show is important to the retail industry as a whole for more reasons than showing equipment. Perhaps just a smaller representation would be the compromise. Refocusing on pure fitness is a smart decision and SNEWS® will be checking in regularly to see how the plan progresses.