Nautilus records third-quarter profit, introduces new products

By Aaron Corvin, Columbian port & economy reporter

Published:

Updated: November 5, 2012, 5:04 PM

 

Although its retail sales have been flat so far this year, Nautilus Inc. on Monday reported a third-quarter profit of nearly $1 million. The company's top executives, meanwhile, said they're working on several initiatives, including rolling out new products at lower prices to reach more consumers and to expand the business.

The company's third-quarter profit of $951,000, or 3 cents per share, compares with a loss of $92,000, or about break-even per share, for the same July-to-September period in 2011.

The Vancouver-based manufacturer of fitness equipment generated total net sales of $38.05 million for the three months ended Sept. 30. That's up 1.7 percent from $37.40 million in net sales in the third quarter of 2011.

Bruce Cazenave, chief executive officer of Nautilus, said the third-quarter financial results are evidence of the company's continuing improvement of its overall profitability. "We continue to build a stronger foundation of a business that puts us on a path toward long-term success," he said during an afternoon conference call.

Direct sales grow

Although its overall net sales were up in the third-quarter, sales in the company's retail segment — where it offers everything from cardio products to strength machines through brick-and-mortar outlets — were $11.38 million, down nearly 17 percent from $13.71 million in the third quarter of last year.

But company officials said the year-over-year decline in retail sales was expected as some retail outlets shifted their purchasing habits to focus more on the second-quarter as opposed to the July-to-September period.

By contrast, net sales in Nautilus' direct-to-consumer segment — through which it sells products by way of TV, social media and other advertising — were $25.10 million in the third quarter, up nearly 11 percent from $22.64 million during the same three-month period a year ago.

Bill McMahon, the company's chief operating officer, said the direct channel's strong growth was "primarily driven by our cardio product lines."

Entering new market

Company officials also highlighted Nautilus' new product initiatives.

McMahon said the company enters a realm this week that it's never competed in before: the exercise DVD market. The vehicle for this launch is the Peak Fit System DVD program, McMahon said, which Nautilus is selling for $89.85.

The exercise video, which features Michelle Dozois -- a certified fitness instructor who created the Peak Fit System -- blends cardio and strength workouts. "We're very excited to enter this important market segment," McMahon said.

The company's move into the DVD market is part of its ongoing effort to offer more affordable products to consumers. Nautilus has traditionally marketed pricey exercise machines, which depend largely on consumer credit for purchase.

Digital device delayed

McMahon said the company also plans to launch, in the first half of 2013, a "lower price point" fitness product under its Bowflex brand, which encompasses the company's muscle-building machines. The company will have more to say about that new product in the fourth quarter, McMahon said.

Conversely, McMahon said, Nautilus has delayed the launch of another product: a digital caloric tracking device. The company's product developers and managers aren't yet satisfied with prototypes of the device, McMahon said. Nautilus will provide an update of the device's development "when we feel we have a compelling product worthy of our brand," he said.

Nautilus employs about 300 people, 240 of whom are based in Vancouver.

The company's stock, which trades as NLS, closed up 1 cent Monday, at $2.86 per share. The company's shares have traded between $1.50 and $3.64 in the past 52 weeks.

Aaron Corvin: http://twitter.com/col_econ; http://on.fb.me/AaronCorvin; 360-735-4518; aaron.corvin@columbian.com.