Nautilus 1Q sales jump; brand plans re-entry into home treadmills

See what helped Nautilus report first-quarter 2014 sales up 21 percent, plus find out why it's getting back into treadmills.
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Nautilus Inc. (NYSE: NLS) reported impressive first-quarter 2014 sales, up 21 percent to $71.9 million with gains at both retail and its direct-to-consumer business. Net income for the quarter rose to $5.4 million versus $5.2 million a year ago.

Nautilus’ first-quarter direct-to-consumer business rose 19 percent to $50.7 million, while its retail business jumped 33 percent to $20.1 million.

The positive figures — thanks to well-received sales of its Bowflex TreadClimber and Bowflex Max Trainer products (the latter, a cross between an elliptical and stair climber) — is giving the company confidence to expand the Nautilus name back into treadmills for the home, as well as open a new distribution center.

It would be the first time since selling off its commercial division in 2010, that the Nautilus home retail side of the business would deal with the fitness equipment staple. (On an unrelated note, the commercial Nautilus brand is up for sale again by its current owner Med-Fit Systems).

“One category that’s being conspicuously absent in our product mix for several years is treadmills,” Chief Operating Officer Bill McMahon told investors on the May 5 conference call. “While elliptical machines represent the fastest growing category in fitness, it is still treadmills which remain the largest category accounting for about 25 percent of wholesale fitness volume in the United States alone.”

McMahon said that until now, Nautilus felt the treadmill category had become too commoditized and rife with competition.

“For fall 2014, we feel we have developed that product that can compete in this space and do so at a reasonable margin, he said. “We plan to launch treadmills at the $799 and $999 price points under both the Schwinn and Nautilus brands.” McMahon said the treadmill launch will be “selective” as company officials realize, the category remains a crowded field.

To support the recent and upcoming growth, Nautilus plans to open a second U.S. distribution center (to be leased) somewhere in the Midwest by fall 2014.

“This expansion will allow us to better serve our customers on the East Coast with improved delivery times as compared to our currently Portland, Ore. center alone,” McMahon said. “Also it’s important to note that this dual positioning capability is expected to reduce our outbound freight cost overall.”

Nautilus added to and outperformed gains across the fitness equipment market on Wall Street, which also saw Precor and Life Fitness report stronger sales for the first quarter. Investors cheered the Nautilus news, sending its stock price up more than 10 percent on Tuesday.

--David Clucas

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