Fitness: Did you hear?...

Business as usual in Orange County despite fires, Vision Fitness promotes holiday cheer and sales, SportsArt America promotes Scott Logan, adidas loses three-stripe battle in first round, Brunswick fitness earnings down, CI's new product showcase raises questions, Precor AV in UK, Reebok reports 3Q earnings, and much more....
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>> A note about the Southern California fires: In Orange County -- the home of the likes of Iron Grip, Star Trac, VersaClimber and other fitness companies -- the fires north and south of them has so far meant not much more than smoke and ash everywhere … and some scary moments for friends and family nearby. Even in Orange County, we hear the sun looks red, backyards are covered with ashes, and even the insides of homes smell smoky. Said one: "It was really eerie a couple of days ago, with the sky being so dark, but it seems to be clearing up a little." SNEWS sends its best to our family and friends in the Southland.

>> At Vision Fitness headquarters in Lake Mills, Wis., a 5-foot Christmas tree was put up the end of July. It's there to remind employees about their sales goals for 2003. Each month, they will add a new décor on the tree if sales are met for the month. When we visited in October, there were lights twinkling on the tree already since September goals had been met. Ornaments go up next, then garland, then a nice tree topper in late December. But the employees don't only get a pretty office tree. Meet 2003 goals and they all get to take Dec. 26 off (that happens to be that oddball Friday since Christmas is on a Thursday this year).

>> UNITED KINGDOM -- Fred Turok, chief executive of LA Fitness, has won European Club Operator of the Year 2003 at the European Congress of the International Health, Racquet & Sportsclub Association (IHRSA). The award, sponsored by Technogym, recognizes industry leadership, financial performance and community service. Turok beat 10 other operators from the UK and continental Europe to win the award and received it on behalf of the LA Fitness team. "It is a credit to, and a measure of, the quality of our team that in just four years we have managed the growth from 15 to 66 clubs," he said.

>> So nice to see that a pair of pants is going to make exercise equipment extinct (!)…. SNEWS got a copy of a Newport News apparel catalog for women and found a page titled "Better Body Now!" about its push-up leggings that "instantly improve your rear" with its "lift-and-curve design" that are "designed to make the body you have look like the body you want." (That last line is actually copyrighted so don't get any ideas, double darn.)

>> SportsArt America has promoted Scott Logan to director of sales and marketing. Note the addition of "sales" to his title; he will now oversee more long-range planning including product development. All regional reps will still report to National Sales Manager Ken Carpenter, who will remain as the day-to-day go-to guy. In addition, the company is STILL hiring -- this time Brian Davidson as regional commercial sales manager. Davidson spent 14 years at Life Fitness, where he had been director of North American dealer sales. After his stint there, he spent a time at the Exercise Equipment Company stores (pre-Omni purchase) as a senior vice president. That makes three new retail regional managers and one commercial manager for the company. Guess "growth" is the word for the year.

>> LUXEMBURG -- A European court has ruled that consumers aren't stupid…in so many words. In the case where adidas had asked for judicial intervention against a company out of The Netherlands using TWO stripes on its clothing, saying the logo was confusing to consumers who would think it was actually its trademark adidas three stripes, the court said forget it: Average consumers, it said, can be trusted to figure out the difference between logos and can differentiate between two and three stripes. Nevertheless, a final ruling will be made by a court in The Netherlands.

>> Life Fitness parent Brunswick Corp. (NYSE: BC) said in its quarterly earning statement last week that fitness earnings are down, largely due to depressed sales in Europe due to the current consolidation and financial restructuring of the clubs there after a period of rapid expansion. CFO Peter Leemputte said that the company would do the same thing it did when that occurred a few years ago in the United States and focus more highly on hotels, universities and the vertical market. In addition, the company said its investment in the Hungarian manufacturing facility where its strength equipment will be made will help lower costs, particularly in Europe. "It makes no sense to manufacture this heavy and bulky equipment in the United States and ship it somewhere else," CEO George Buckley said in an earnings conference call last week. He pointed out the lead time for strength equipment in Europe had been 21 weeks, which didn't allow the company to serve customers well. All in all, however, equipment sales are up 4 percent in the United States, although there was a $1 million drop in operating earnings, partly associated with the costs of closing down the Paso Robles, Calif., plant and absorbing it in the Ramsey, Minn., manufacturing facility. In general, international markets other than Europe did well, the company said. Overall fitness segment sales in the third quarter of 2003 totaled $105.1 million, down 3 percent from $108.7 million in the year-ago quarter. Operating earnings declined 10 percent to $8.7 million from $9.7 million, and operating margins were 8.3 percent, down from 8.9 percent in the third quarter of 2002. For all of Brunswick, the company announced a 58-percent increase in diluted earnings per share on a 15-percent sales gain and a 32-percent increase in operating earnings in the third quarter of 2003. Diluted earnings per share rose to $0.41 compared with $0.26 per diluted share for the third quarter of 2002. For the quarter ended Sept. 30, 2003, the company reported net sales of $1,036.3 million, up 15 percent from $900 million a year earlier. Operating earnings rose to $62.5 million, up 32 percent from $47.3 million, and operating margins reached 6 percent versus 5.3 percent a year ago. One interesting note: Buckley said when he referred to the fourth quarter that the company is positioned "very well" for the year and it intends "an acquisition or two" in its core markets. Hmmm…. (For more information about this company's financial reports, as well as to view stock prices updated every 15 minutes, visit the SNEWS Stock Market Updates. Click on: www.snewsnet.com/cgi-bin/snews/stock_report.html.)

>> Russell Corp. (NYSE:RML) has announced that Julio A. Barea has been elected senior vice president of the company and chief executive officer for the domestic activewear business. Barea, who will officially join the company Oct. 27, will be responsible for Russell's artwear and mass retail businesses. He will be based at the headquarters in Atlanta and report to Jonathan R. Letzler, president and chief operating officer.

>> Noting a newsletter out of the United Kingdom that announced Precor had "joined forces" with ClubCom and Cardio Theater for touch screen entertainment, SNEWS got its curiosity piqued. With Precor parent being public company Amer Group, it couldn't be an acquisition since that would have meant an announcement. So what was with this partnership that was announced so as "to develop and build a new, on-equipment entertainment system with touch screen technology." A company spokesman told us that Precor had not invested in the Cardio Theater but was working with it to be able to offer "total club solutions" as competitive response to other companies that were now offering touch-screen entertainment. The ClubCom equipment is all bolt-on and not integrated, we were told, since in Europe having a screen as a part of the equipment seems to be preferred. Solely in Europe for now, the partnership was introduced at Leisure Industry Week last month as "Precor AV;" it has dual-screen capacity (screen within a screen) that allows club members to view two screens at once. Yes, that's much like Technogym as well as the just-introduced system by Life Fitness. Will it come to the United States? Time will tell. SNEWS View: We think that it WILL come to the United States to be the most competitive, but we doubt it will be in a partnership as this one. Rather, it is entirely likely that Amer Group may look into an acquisition of such technology so Precor can take two leaps forward all at once.

>> At the Club Industry show earlier this month, management attempted a crowning of best new products, with an announcement at a press conference on the first morning of the trade show of the "most exciting" introductions. However, the release handed out at the conference didn't jibe with the first one sent on Sept. 4 and, as a result, we began to get curious. In the original press release dated Sept. 4, six companies were listed as the "top" new products, with another 21 listed as having being considered. The alleged top ones included Iron Grip, and the group of 21 included Star Trac. The final press release dated Oct. 9, however, listed the top six products, but inexplicably left out Iron Grip. More curious, another company called Concepts 2000 Power Press, which hadn't even been in the semi-finalists group a month earlier, was suddenly a top six pick and Star Trac was gone?!? Plus, the semi-finalists group now was up to 31. So what gives? Hard to tell, since background on how all this came to be was a bit spotty. We were told that all exhibitors got a note to submit their product information, yet we spoke to several companies that had no idea they were involved until they were told by show management a week or so before the event to show up at the press conference. One company said it never submitted an entry or even any product information. Who judged the group? "Several speakers and consultants," according to show Marketing Director Herb Greenebaum, who would say only it was "three or four" people who said they didn't want their names used. About three or four?? We can understand "about" three dozen or "about" 200, but is it three or is it four? One more question we had: How were the products judged? They had to be new in the last six months, the release said, and show "original thought and design." Only problem was, several of these had been introduced at IHRSA in March, and one had shown at the Health & Fitness Business Expo in August. And, finally, what happened to Iron Grip? The company withdrew, we were told. But the company said it never responded to an email about the event since its product (the eWeight Planner) wasn't new. Another company told us its product (the Core Strength Trainer) had been introduced at the Club Industry East show in May. We think trying to draw attention to new products is a great idea. We particularly liked the little flags on poles the show put next to the booths that had new products. That was a nice touch and allowed attendees to find these companies more easily. But for the press to recognize and to respect anything called a competition or anything that tries to announce a winner or winners, there has to be definitive, announced and printed criteria with a legitimate, announced judging panel. SNEWS knows plenty of "best of" product competitions with judging panels that are made public. No reason not to be, unless a judge has a potential bias and, in that case, he or she shouldn't be on the panel. This, unfortunately, impressed us as a last-minute attempt that wasn't crafted as well as it could or should be. Perhaps next year -- and we hope the show does try it again -- the process can be properly announced, detailed and lead to truly new, functional, practical and innovative winners who can all get a little extra attention because of it.

>> Another note out of the Club Industry show earlier this month: Technogym would have won the prize for the most unusual booth décor -- a large center space in the booth filled with what started as 1,200 apples (Washington state of course since that's where the U.S. branch is based). Help yourself, we were told, when we queried about them. Staffers plopped them into the water bottle holders of cardio equipment in the booth. SNEWS View: Perhaps viewed as a tad odd at first glance, think again. Technogym touts itself as "The Wellness Company" so why not apples? And, frankly, finding a healthy snack during the show made us smile… and go "crunch."

>> Polar Electro has moved as of Oct. 20: 1111 Marcus Ave., Ste. M15, Lake Success, NY 11042-1034. Telephone numbers remain the same. Lake SUCCESS? Great choice of locales, for the name alone!

>> Reebok International Ltd. (NYSE:RBK) has reported net income for the third quarter ended Sept. 30 of $63 million or $.96 per diluted share, an earnings per share increase of 19 percent when compared to net income of $53 million, or $.81 per diluted share in the third quarter of 2002. Net sales for the 2003 third quarter were $1.041 billion, an increase of 14 percent from 2002 third quarter net sales of $912 million. Foreign currency exchange rate fluctuations favorably impacted sales comparisons. On a constant dollar basis, third quarter sales increased approximately 10 percent over the prior year's third quarter sales. For the Reebok Brand, worldwide sales in the 2003 third quarter increased 17 percent to $898 million compared to 2002 third quarter sales of $768 million. In the United States, sales for the Reebok Brand increased 22 percent in the third quarter of 2003 as compared with 2002's third quarter. Reebok's U.S. footwear sales in the third quarter of 2003 were $279 million, an increase of 16 percent when compared with 2002's third quarter U.S. footwear sales of $241 million. The company's international sales of Reebok-branded products amounted to $411 million in the quarter, an increase of 11 percent over 2002's third quarter sales. (For more information about this company's financial reports, as well as viewing stock prices updated every 15 minutes, visit the SNEWS Stock Market Updates. Click on: www.snewsnet.com/cgi-bin/snews/stock_report.html.)

>> Star Trac managing director, Gary Knill, has resigned from the company for personal reasons and to pursue other professional opportunities. Tom Singh has been promoted to general manager of the fitness equipment supplier's United Kingdom office and Sean Thornton has accepted the role of national sales and marketing manager, according to the Leisure Media Company news.

>> A Minnesota-based health insurance plan is offering 400,000 of its members the ability to save money by working out. Medica has partnered with Life Time Fitness and is launching Fit Choices. Beginning this month, Fit Choices participants can take charge of their health and wellness via programming that includes Medica-subsidized health and fitness center memberships, Web-based coaches and meal planners. Fit Choices emanates from a successful pilot program that began in 1999 under which select Medica corporate customers were offered subsidized memberships to Life Time Fitness centers for those members who worked out regularly. Members who exercise at their Life Time Fitness center at least eight times per month will receive a $20 monthly credit from Medica toward the payment of their monthly membership dues. "Fit Choices is not just about fitness, it's about helping people make better choices about their health," said Dr. Charles Fazio, medical director at Medica. Medica estimates that it spends $80 million a year in health care costs for overweight and obesity-related illnesses among its commercial fully insured members. Medica, both non-profit and independent, has one million members. SNEWS View: Hitting people in the pocketbook we think will help them decide that working out is something to make time for.

>> Life Gear, purveyor of low-cost equipment sold via TV and mass channels, will introduce treadmills in the United States. You can see the type of gear the company offers at www.lifegear.co.th/lifegear_eng.html.

>> UNITED KINGDOM -- Obesity is a rising issue internationally, not just in the United States, although it definitely has a jump on it over its European counterparts. Nevertheless, the British are trying to nip it in the bud with a program called "10 million by 2010," pointing out an intermediate goal to cut the currently 20 million overweight Brits in half by that year. According to statistics out of the United Kingdom, obesity in the UK has nearly tripled in the past 20 years and is estimated that over 20 percent of men and 25 percent of women will be obese by the year 2005 unless something is done to stem the tide. A recent report by the Royal College of Nurses in Great Britain maintained that obesity will soon replace smoking as the UK's leading preventable killer. In Britain, inactivity is increasingly posing one of the most potent threats to the health, wealth and prosperity of the nation, according to the country's Fitness Industry Association. This fall, the association has launched a health and fitness campaign, "On the Move to 2010," which will address the problem of inactivity by attempting to educate the population about the importance of exercise and its effectiveness as a weight management tool. The FIA will launch an "adopt-a-school" campaign in which FIA member clubs will be encouraged to work with a school in their area to educate children about the long-term health risks of an inactive lifestyle. "On the Move to 2010" was launched at the FIA/LIW/Bodylife Trade Show last month.

>> UNITED KINGDOM -- On the same theme of getting people active, government ministers in the United Kingdom launched the "Inclusive Fitnes Initiative" last week. Home Secretary David Blunkett, Sports Minister Richard Caborn, and Minister for Disabled People Maria Eagle went to the gym for a workout to promote the GBP 5 million (USD $8.5 million) Sport England lottery-funded scheme designed to address the health and fitness needs of disabled people. The initiative is run by the English Federation of Disability Sport Operating Company, and 150 facilities will benefit from grant funding to support inclusive solutions in four key areas -- equipment, staff training, marketing and sports development programs.

>> A new survey by The NPD Group has found the coming holiday season could be a challenging one for retailers, with one in five consumers saying they plan to spend less this year than last, will delay purchases to wait for sales, and will shop discount and warehouse stores. Of course, on the other hand, at First Albany's recent retail industry conference call, "What's in Store for Holiday 2003," Carl Steidtman, chief economist for Deloitte Research, said he was "very optimistic" for holiday 2003. He said he expected a strong environment for consumer spending, with sales growth of 6.5 percent to 7 percent, up from 4.5 percent last year. Additionally, he expects good cost controls and record low inventory levels to yield healthy profit margins for retailers. And then there's the National Retail Federation that says its optimistic this holiday season will show growth, with consumers willing to spend money. Guess the results are up for grabs, especially with all the variables of economy, terrorism, weather and the like.

>> But are they fibbin'? Another NPD Group survey has found that for the first time in six years, America's eating habits are moving in a new direction. After gaining weight year after year since 1998, The NPD Group's "18th Annual Eating Patterns in America" report found Americans lost weight in the last year and are eating healthier. The NPD Group tracks the Body Mass Index (BMI) of adults and has found that 55 percent of the population is overweight, down from 56 percent last year. That number has never dropped; it has been increasing for the last six years. In 1998, the BMI of overweight adults was 50 percent. "We are losing weight as a country; I've never seen that," said Harry Balzer, vice president of The NPD Group. "Looks like we are focusing on health again, a return to the '80s." NPD said that Americans are less interested in losing 20 pounds, and more interested in health. Thirty-five percent of the population reported they carefully plan their meals to be nutritious -- up from 32 percent in 2001. Americans are also reporting they are exercising more. Sixty-six percent of the population tells NPD they are exercising strenuously at least once a week. That's up from 63 percent in 2002. SNEWS View: We thought we'd finish up this week with a big guffaw. We think these respondents are deluded about what they eat and how much they weigh. We don't see how one survey group -- despite 18 years of doing this study -- could find suddenly we are all losing weight and exercising, when everybody else including university researchers and government agencies that do longitudinal studies say otherwise. But hope springs eternal.

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