Fitness financials: Nautilus posts Q4 loss, sales down 37 percent, plus Gaiam, Dick's Sporting Goods, Collective Brands

Nautilus posted a Q4 loss and sales dropped 37 percent, Gaiam's Q4 swung to a net loss, Dick's Sporting Goods reported a Q4 loss on charges, and Collective Brands posted a larger Q4 loss.
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Nautilus posts Q4 loss, sales down 37 percent

Nautilus (NYSE: NLS) reported a smaller fourth-quarter loss, with the largest hit coming from plummeting sales in the direct business.

Nautilus posted a loss of $41.2 million, or $1.35 per share, compared with a loss of $45.7 million, or $1.45 per share, a year earlier.

The company said results in the most recent quarter included a goodwill impairment charge of $29.8 million, while total operating expenses declined to $78.4 million from $83 million.

Overall sales for the quarter dropped 37 percent to $92.3 million, down from $146.7 million. In fourth quarter '07 the loss was $31.8 million.

"There's nothing else to say except 2008 was a bad year by any measure," said Edward Bramson, chairman and CEO, in a call March 10 with analysts.

In the direct business, sales in the fourth quarter dropped 41.7 percent, which was blamed partly on the credit crisis, which made it more difficult for consumers to finance purchases, and on a company decision to do less discounting. They were $36 million compared to 61.9 million a year ago.

At retail, net sales dropped 31 percent or $28.5 million versus $41.4 million.

"We experienced acceptable results with larger nationwide partners, but our smaller retail partners did not perform as expected," said CFO Ken Fish, who did not offer definitions or examples on the call of the partners he meant.

Fourth-quarter net sales in the commercial segment were down 36.9 percent ($26.4 million versus $41.9 million), which the company noted was partly due to fewer clubs opening and the lack of the commercial TreadClimber, which was taken off the market while the company accounts for higher use in its manufacturing. The company also noted that commercial business sales declines were similar across geographic regions and reflected an overall economic decline.

For FY '08, Nautilus posted a wider loss of $90.6 million, or a loss of $2.91, compared with a loss of $55.6 million, or a loss of $1.76 per share, in FY ‘07.

Sales were also down -- 18 percent to $411.2 million from $501.5 million. Its gross profit margin was up to 33.7 percent in the fourth quarter versus 24.1 percent a year ago. Adjusting for restructuring charges and other charges the gross profit margin was 37.2 percent.

The company said the drop in net sales reflected lower net revenues in all three of its business segments: direct, retail and commercial.

Fish and Bramson explained in the call the company is working on the issues "as we continue to right-size the company" to lower its breakeven point.

In reviewing presentations supplied to listeners on the continued strategy and the operation, Bramson explained Nautilus was doing a major review of its direct business to grow more with more of a focus on differentiating between the brands Nautilus and Bowflex, the type of products that should be sold as those brands, the demographics attracted to them and the demands by those consumers.

He also said the company is working on new fitness products but they would not be released until 2010 so the company has enough to invest in appropriate marketing of them. Bramson did say that the emphasis will be on cardiovascular equipment with more of a health and wellness message.

He also said the look of the TreadClimber for each demographic would also change, with one retaining the stark black and red "gym-look" that appeals more to younger men interested in their appearance and another (see photo) becoming more sleek.

"We think," he added, "there is a lot of opportunity ahead of us in cardio."

A copy of a presentations reviewing the status of operational improvements and a presentation on the company's direct business strategy are available at www.nautilusinc.com/earnings.

Gaiam Q4 swings to net loss

Gaiam (Nasdaq: GAIA) dove into the red, reporting a fourth-quarter net loss compared to the previous year's earnings after being hit with non-cash charges for goodwill impairment.

For the quarter ended Dec. 31, the company recorded a net loss of $30.3 million in the quarter, or $1.26 per share, compared to earnings of $4.2 million, or $0.17 per share, in the fourth quarter of 2007.

The loss was a result of expenses that included a non-cash charges for goodwill impairment of $27.2 million from the company's 56-percent owned solar subsidiary, Real Goods Solar, and $15.1 million related to the company's goodwill and intangible assets in its direct segment. The goodwill impairments were primarily driven by the decline in the market price of the company's common shares experienced in the fourth quarter.

Excluding the impairment charges, disposition of businesses and the loss from consolidating Real Good Solar, Gaiam said its fourth-quarter net loss would have been $1.2 million, or $0.05 per share.

Revenue for the fourth quarter was down 8.9 percent to $74.5 million from $81.8 million in the same period last year. The company said the drop was primarily a result of a decrease in consumer spending and conservative retail buying throughout the holiday season.

Gross profit dropped to $38.3 million or 51.4 percent of revenue for the fourth quarter of 2008, from $51.1 million, or 62.5 percent of revenue, in the comparable quarter last year. Gaiam said the change in gross margin reflects the company's investment in the lower margin solar business, continued aggressive retail expansion and absorption of increased product and freight costs.

Selling and operating expenses decreased $1.5 million, or 3.7 percent, to $39.7 million from $41.2 million during the same quarter last year, partially reflecting recent cost control initiatives.

For the full year, Gaiam recorded net revenue of $257.2 million, a 2.2 percent decrease from $262.9 million in 2007.

Including the impairment charges, the company recorded a net loss of $35.6 million, or $1.46 per share, compared to net income of $8.5 million, or $0.34 per share, for the last fiscal year.

Excluding the impairment charges, disposition of businesses and the loss from consolidating Real Goods Solar, Gaiam said its net income would have been $0.8 million, or $0.03 per share for the year. Driven by the impairment charges, Gaiam generated an $8.4 million tax refund and $7.0 million current tax credit.

In other company news, Lynn Powers, president and CEO of North America, has assumed the title of CEO in addition to her title of president for the company. Former CEO Jirka Rysavy will continue as company chairman.

Also, Carole Buyers has joined Gaiam as vice president of corporate finance and investor relations. She was formerly vice president of The Boston Company (Bank of New York Mellon). For several years, she also covered Gaiam when she was a sell side analyst for RBC Capital Markets.



Dick's Sporting Goods reports Q4 loss on charges


Dick's Sporting Goods (NYSE: DKS) swung to a fourth-quarter loss hit by write-downs mostly related to its February 2007 acquisition of the Golf Galaxy chain.

For the quarter ended Jan. 31, it reported a loss of $104.4 million, or $0.93 per share, compared with earnings of $73.2 million, or $0.62 per share, in the same quarter a year ago.

The latest quarter's results included a pretax non-cash impairment charge of $1.44 per share. Excluding the impairment charge and costs related to acquisitions, Dick's said it would have booked a profit of $63.4 million, or $0.55 per share.

Quarterly sales were down less than 1 percent to $1.21 billion.

Dick's said its sales benefited from the opening of new stores. Same-store sales -- which only look at sales for stores open at least one year -- dropped 8.6 percent during the period. Same-store sales fell 8.1 percent at Dick's flagship stores and 20.7 percent at its Golf Galaxy stores.

Dick's noted that it ended the quarter without any balance outstanding on its line of credit and reduced inventory per square foot by 14 percent at the end of the year.

For the full fiscal year, Dick's reported a loss of $35.1 million, or $0.31 per share, compared with a profit of $155 million, or $1.33 per share, the year before. Excluding one-time items, the company would have booked earnings of $138.9 million, or $1.19 per share.

Full-year sales rose 6 percent to $4.13 billion from $3.89 billion, mostly due to new store openings and the November 2007 acquisition of Chick's Sporting Goods. Same-store sales fell 4.8 percent for the year.

Looking forward, Dick's is forecasting weaker-than-expected first-quarter earnings. It's predicting earnings of $0.01 to $0.06 per share, down from the $0.18 per share recorded in the year-ago period. Excluding merger and integration costs, Dick's expects adjusted earnings of $0.03 to $0.08 per share. It expects a same-store sales decline of 9 percent to 12 percent for the period ending in April.

For the full fiscal year, Dick's expects earnings to range from $0.80 to $1 per share, compared with $1.19 per share in the prior year. The company expects adjusted earnings between $0.77 and $0.97 per share. Same-store sales are expected to drop between 8 percent and 12 percent.

Dick's said it plans to reduce operating costs by roughly $50 million during the year through payroll, advertising and pre-opening expense reductions.

Collective Brands posts larger Q4 loss

Collective Brands (NYSE: PSS), parent of Hind and Saucony, said its fourth-quarter loss more than tripled as sales fell and it wrote down the value of its 2007 acquisition of the Stride Rite chain.

The company reported losing $144 million, or $2.28 per share, including a $130.2 million write-down linked to Stride Rite. The company also recorded $2.5 million in charges, not including insurance recoveries because of litigation. Last year, the company lost $46.6 million, or $0.73 per share, during the same period.

Not including one-time items, Collective Brands said it would have lost $0.55 per share in the latest quarter.

Quarterly revenue declined 5.4 percent to $735.2 million from $776.8 million. Same-store sales fell 6.6 percent during the quarter.

For the year, the company posted a loss of $68.7 million, or $1.04 per share, compared with a profit of $42.7 million, or $0.65 per share, in 2007. Not including one-time items, Collective Brands said it would have earned $1.12 per share.

Revenue for the year was up 13 percent to $3.4 billion.

--Compiled by Wendy Geister

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