Fitness 2003: SNEWS reviews the year

It's been a long year -- perhaps longer for some companies than for others. With the stock market in a tumble, the few public companies in the fitness industry were mostly struggling to re-organize, re-structure and keep ahead of the tide. But that didn't stop legal squirmishes from offering up continuing entertainment (and keeping attorneys extremely happy), while the rest of the industry sorta got stuck in a holding pattern of product development. Development in the last year meant mostly aesthetics, not some grand new baby that created buzz.

It's been a long year -- perhaps longer for some companies than for others. With the stock market in a tumble, the few public companies in the fitness industry were mostly struggling to re-organize, re-structure and keep ahead of the tide. But that didn't stop legal squirmishes from offering up continuing entertainment (and keeping attorneys extremely happy), while the rest of the industry sorta got stuck in a holding pattern of product development. Development in the last year meant mostly aesthetics, not some grand new baby that created buzz.

Although mergers and acquisitions among suppliers are still the talk, they remained mostly talk, with everybody holding their breath waiting for the next shoe to drop. Meanwhile, the big guns of the retail world kept the merger hounds happy. We definitely expect more of all of the above.

In the annual SNEWS® Year in Review, we won't bore you with a regurgitation of the entire year. No, we won't even mention Nike 10 times. But we will do a quick two-step through the last 12 months to summarize what, who, where and when -- you'll be surprised at all the things that happened that somehow seem verrrrry looooong ago, but weren't.

Legal squirmishes
How much more money would the industry have if it didn't have to dump millions and more into attorneys' pockets and other expenses for trademark and patent-infringement cases, among other legal battles? Collectively, it could fund all kinds of consumer outreach. But let's not get off on a tangent. Who sued whom? Nautilus sued Icon then Icon sued back, and let the fun begin. The case, which centered on Icon's alleged too-similar-to-Bowflex Crossbow, bounced between a district court on the West Coast to a federal appeals court on the East Coast and back again. In the end, Icon seemed to have achieved a victory, with Nautilus still looking at appeals to save its patent's face before the patent runs out in April. We don't think this one is dead yet.

Life Fitness lost a whopping $25 million to Precor in a settlement for a patent infringement. Vectra won big over Icon in yet another infringement battle that left Vectra folks dancing in the streets and on the weight stacks. Flex got hurt bad in an injury lawsuit that isn't over yet. FreeMotion Fitness has decided to finally go after the folks it says are infringing on its free-motion strength-training systems. Oh, Nike settled its free-speech-protection case after six years in and out of court and a trip to the U.S. Supreme Court; the case could have had repercussions on corporate public relations and company statements everywhere. Did we leave anybody out? Actually, yes. Just go into the public court records of any large city that is the base of any middle-sized or large fitness manufacturer and you'll find hours of entertainment.

Going and coming from overseas
Hard to say "no" to the rush overseas in the quest to stay profitable.… Muscle Dynamics after 31 years of strictly "Made in the U.S." product goes to China for a new vertical product line. Red-white-and-blue flag-waving Spirit Fitness finds a Taiwanese manufacturer for its new treadmills. Life Fitness opens a manufacturing plant in Hungary to be able to better service growing European and Asian markets, although some of the product will come to the United States also.

Johnson Health Tech brands Matrix, Vision and Horizon continue to grow and gain respect in the industry -- all coming from Asian manufacturing. At the same time, Johnson takes a one-of-a-kind forward-thinking step and in December opens an R&D engineering center for all three brands to work under one roof with designers and engineers from the United States and Asia to help expedite and benefit product development.

Specialty, sporting goods and mass
With the difficulty of surviving on specialty alone, brands are reaching above and below to different channels to increase sales: Hoist announced its new BodyGear strength line for sporting goods while only a couple of months earlier unveiling its new high-end V series, both of which are receiving grand acceptance. Horizon rolled out a Sears-exclusive line called CFS that has given Icon a little challenging bump. Iron Grip continues to license companies like Impex to take its strength-product technology to sporting goods in a classy way. Life Fitness tried lower-cost cardiovascular lines called Essential and Sport also for specialty, but found it overestimated demand and sales both domestically and in Europe. The Nautilus Group not only took its Bowflex to retail but also introduced a slightly lower-cost model called the Schwinn Comp aimed at sporting goods. Oh, and the Bowflex was found on and off at Costco all year long, too.

And it won't stop there. Other companies are in development for different products for sporting goods -- companies you'd never dream would go there.

The big guys
We don't want to keep talking about Nautilus but it's had quite a year -- after 2002 also being a bigger-they-come, harder-they-fall year when Direct Focus became Nautilus and rang the NYSE bell on May 21. This year? Not out-and-out winning the Icon case threw a wrench in the company's works. It had to restructure (Brian Cook out as CEO, still on as chairman of the board though), hire new leadership (Gregg Hammann comes on as CEO and president to re-guide the ship to smoother waters), deal with layoffs (corporate and headquarters stuff but still…), handle curveballs in stock prices (investors can be so fickle), and still work on and develop new product (Treadclimber introduced as new direct-to-consumer sweetheart to pump up the company's cardiovascular holdings). We did notice in reviewing the year's news for this report that in April then-CEO Cook said the company was going to introduce a "significant" new "Bowflex-like product in June that was going to use the power rod technology but be "significantly" different. Hmmm, what happened? Did we miss it? None of this is meant to be a sharp rap on the knuckles. We still think Nautilus is working hard to get its ducks (and last two-plus years of acquisitions) in a row and is poised for another big jump. Oh and we LOVED the "bat phone" implemented by President Kevin Lamar so if any retailer has any question or problem it can call him and get an answer. That's service.

Speaking of ducks-in-a-row, Cybex has fallen out of sight. We hear no news is good news, but one has to wonder. After a tumultuous year where the company gnawed on his nails, not sure if it was going to be refinanced and even survive, one where the stock prices took precipitous plunges that made us close our eyes, and where the ArcTrainer's sales were skyrocketing, this era of silence is perplexing. Earlier this year the company was still talking about a sale and later in the year SNEWS found its Medford, Mass., property and buildings on the market.

What about Life Fitness? That $25 million ding to Precor had to sting a little. The company took on different categories with licenses involving stretch product and Pilates products. Then the vice president who had been primarily responsible for broadening the company's reach in that way suddenly disappeared from the executive roles. We already noted that the Essential and Sport product didn't do as well as expected. The company too is working on its equipment's aesthetics and some high-tech entertainment options for its equipment.

Oh, and Precor (aka Helsinki-based Amer Sports subsidiary): It's sticking to its "Move Beyond" theme song and its elliptical calling card, quietly guarding all its messages while working on its overall corporate look. Amer? Amer has been acquiring in non-fitness arenas, with more in the fitness area expected soon. It also has announced it will likely kick the habit (dump its tobacco manufacturing sector) by this spring. Yahoo for that statement.

Acquisitions, alliances and adios
Not huge stuff…yet. Amer is still scoping out its path to becoming, as its stated, No. 1 in sporting goods worldwide. Flex Fitness sold earlier this year to an investment group that is letting the company operate pretty much as before. Indoor cycling seems to be experiencing another blip upward on the radar with FreeMotion entering a license with Tomahawk out of Germany, and Matrix is teaming up with hip Trixter's X-bike.

Northern Lights? Who knows what's up with that company. Jhan Dolphin, U.S. director who nearly single-handedly built the Canadian brand's following here, left the fitness industry in early fall. As of November, neither he nor NL retailers had heard from headquarters what was up, and company management wouldn't tell us much of anything either. We don't think they knew. Or cared. And that's too bad. Say a prayer for Northern Lights in the United States.

New products, new category
Nothing huge to write home -- no super buzz-ridden product. Like we said earlier, lotsa aesthetic tweaks: curved bars, colored seats, low-profile gyms, rounded lines, softer metallics. Good stuff all, and a way to while the time between "new things."

The newest thing was likely the birth of a new category this year that SNEWS® dubbed "Multi-weight Dumbbell Systems." The systems are basically different methods of replacing the traditional need for a large rack of various size dumbbells with two handles that can morph into those different weights -- either by flicking levers, rotating dials, matching colors, or mixing and matching thin plates. PowerBlock of course began the category years ago, but suddenly we have Hoist with its Quick-Change System, ProBell is still around a bit, Nautilus with its cool dial dumbbell SelectTech, and TurboFit with a developing lower-cost line. And more coming from others but no names yet please. We really like the compact yet functional systems. They play into a space-spacing trend that is starting to become stronger.

Other than that, we saw the aforementioned Treadclimber. Then, hm, let us think, give us a minute, well… gee, good stuff for sure, but not that one grand piece.

Retail scene is a changin'
What a year, with Gart and The Sports Authority kicking it off with a merger in the first quarter. OK, that's sporting goods. Then in October, Fitness Holdings International (California-based Busy Body) bought the West Coast Omni Fitness stores, following that act with an acquisition of Hoist's Fitness Warehouse chain in November. That means Busy Body is now at 48 doors (and likely to grow again too), while Omni has dropped down the pecking order to No. 3 with 43 stores AND has become more of a Life Fitness showcase. Meanwhile, The Fitness Experience is now No. 2 based on storefronts with 55 stores in the Midwest. Fitness Gallery closed some doors, while All About Fitness conservatively opened a store in early December in Las Vegas. And Ilan Katz amicably left Fitness Headquarters to move to Florida where he says he may get back into retail -- not as if the Florida market isn't crowded enough. This is like a chess game.

Fat, fat, fat
How much do we need to say here? It seemed as if the topic "du year" was OBESITY. It seemed as if every week we were writing up another depressing statistic about how fat kids were, adults were, how inactive everybody was, and how unhealthy and costly it all was. When will it ever stop?

Consumers seem to want it to stop -- the top resolution for 2004 was once again weight loss and getting in shape, compared to last year's emphasis on jobs and the economy. Ah, normalcy (!). If everything goes as usual, the gyms and running trails will be packed for, oh, about six weeks before everybody overdoes, gets hurt, gets fed up and gets burned out. Not that we like crowds, but we'd rather all these people figure out a way to stick around a while and become long-term fitness and health consumers.

Cheers to 2004.


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