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Aug. 7, 2020

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Nautilus details strong first quarter

Vancouver company reports $93 million net sales, up 11% over last year

By , Columbian business reporter
Published:

Vancouver-based exercise equipment maker Nautilus experienced large sales gains propelled by surging demand for home workout options during the COVID-19 pandemic, according to a first-quarter earnings report released Tuesday.

“Our first quarter of 2020 started out as a good quarter and turned into a much stronger quarter,” CEO Jim Barr said in a Tuesday conference call with investors.

Net sales in the first quarter were $93.7 million, up 11 percent from the same period last year, and retail sales were up 23.9 percent year-over-year. The company’s direct sales segment saw its first quarterly sales increase since the final quarter of 2017.

The biggest gains were in strength training products, particularly the company’s Bowflex brand. Visitor traffic to the Bowflex website in March increased nearly 300 percent compared with March 2019, Barr said, exceeding the peak traffic normally seen during the holiday season. One particular Bowflex model sold 6,000 units through Amazon.com in a single day.

The company’s Schwinn brand saw similar gains, Barr said, although cardio products still saw an overall sales decline — increased sales of newer products like the Schwinn IC4 bike were offset by declines in sales of older cardio products like the Max Trainer.

Barr speculated that strength training equipment sales might have outpaced cardio because most consumers can still go outside to run even if they’re under a stay-at-home order due to the pandemic, but they can’t go to gyms to use resistance training equipment.

The company’s online fitness platform JRNY, which launched in October, saw a 50 percent spike in downloads during the first 30 days after states began implementing stay-at-home orders, Barr said, and user data from the app showed increased home workout activity.

“People are working out significantly more often, longer and harder,” he said.

Nautilus was also able to trim its operating expenses by 21.4 percent, primarily by cutting back on ad spending. The increased demand due to COVID-19 decreased the need for ads, Barr said.

Barr said Nautilus expects high demand for home exercise products to persist in the second quarter, but he emphasized that the company views the situation as temporary, and
he said it will continue working on initiatives to improve its sales under normal conditions.

“The duration of the current consumer tailwinds is anyone’s guess,” he said.

The pandemic-driven boom in demand for home workout experiment comes at a time when Nautilus has been working to turn itself around following years of lagging sales. The company attributed the decline in part to a failure to keep up with a market shift toward “smart” equipment with digital features such as fitness tracking. 

Nautilus has pushed aggressively in the past year to refresh its lineup with a new focus on digital offerings, such as products that can connect to JRNY.

Barr was brought on board as CEO last year with the specific goal of facilitating the company’s jump into the digital feature market.

The company launched several new digitally connected fitness products in the second half of 2019, and Barr said another new round of products is planned for the third quarter of 2020, ahead of the fourth quarter, which is traditionally the strongest time of year for the home fitness market.

The initial COVID-19 outbreak in China disrupted some of Nautilus’ manufacturing facilities, Barr said, but those operation have now nearly fully recovered.

Still, he said, the company is working to improve the efficiency of its manufacturing supply chain in response to the surge in demand, and certain products face a backlog that the company may not be able to clear until the third quarter.

This story has been updated to correct the name of the Schwinn IC4 bike.

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