Nautilus shakes up leadership ... again

Nautilus Inc. has yet another new CEO -- its fourth new leader in as many years. SNEWS looks into the latest changes and the continuing carousel of management and strategies trying to turn around the now consumer-only fitness equipment brand.
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Another year, another new leader for Nautilus Inc.

For the fourth time in as many years, the Vancouver, Wash.-based consumer fitness equipment brand has a new CEO. This time it’s Bruce Cazenave, a former executive with Timberland and Black and Decker.

The latest management shift comes as former CEO Edward Bramson and his investment group Sherborne Investors Management annouced May 26 they were stepping aside and then filed an SEC statement May 31 noting they had cashed out their stake in Nautilus – about 10 million shares worth $25.3 million.

On June 6, Nautilus' new leadership issued a press release assuring investors that despite the departure of Sherborne's managment and investment, the company is moving in a “new growth-oriented strategic direction” following several years of cost and corporate restructuring.

While Bramson touted Nautilus’ “turnaround” upon his exit – the company posted its first quarterly revenue increase in nearly three years for the fourth quarter 2010, and a quarterly profit for the first quarter 2011 – his investment firm lost money for itself and its investors over the long haul. Nautilus’ stock price (NYSE: NLS) fell during the Sherborne-led era from $5 per share in late 2007 to about $2.50 per share in late May.



The company faced a non-compliance warning from the New York Stock Exchange in September 2010 -- noting it may be delisted if compliance with cap thresholds and share price were not met. The company's compliance plan was accepted by the NYSE in December 2010, but it is subject to quarterly reviews through early 2012.

After news broke that Sherborne had sold its shares, the stock price began to drop again and closed at $1.97 on June 7, down more than 20 percent from before the sale.

“The fitness company is a long way from being fit,” wrote business editor Courtney Sherwood in an op-ed piece for The Colombian newspaper in Vancouver on June 5. “Bramson based his business plan on balance sheets, rather than the industry, and the fitness sector is too nuanced to run if you don’t understand the forces as play.”

Bramson’s biggest move was to sell off Nautilus’ commercial fitness business and re-focus the company on its past strength -- consumer business. As previously reported by SNEWS, Med-Fit Systems acquired Nautilus-brand commercial in February 2010, and Michael Bruno's Core Fitness acquired assets of StairMaster and of Schwinn commercial in January 2010.

Bramson also repositioned the company to focus on its cardio line of products, such as the Bowflex TreadClimber, rather than its strength products. In the first quarter 2011, cardio sale at Nautilus rose 24 percent and represented 69 percent of total sales, an increase from 59 percent of sales from a year ago. The company's strength product sales, meanwhile, fell 19 percent in the first quarter. Bramson also prioritized direct-to-consumer sales over retail in search of larger margins.

The latter strategy "may have been the wrong move," alienating retailers, Sherwood wrote in her piece.

Bramson and his company Sherborne muscled their way into Nautilus’ leadership through a hostile takeover of its board in December 2007. The new board soon replaced then CEO Robert Falcone with Bramson in March 2008.

Falcone had been at the helm of Nautilus for just eight months before being pushed out – never getting much of a chance to implement his plans for the company. He had taken over for CEO Gregg Hammann, who stepped down in Aug. 2007, after three-and-a-half years of leading the company.

The Nautilus CEO carousel now arrives to Cazenave, who took over May 30, with help from newly elected non-executive chairman M. Carl Johnson III, a former executive with Campbell Soup Co. and Kraft USA.

“Although my tenure with the company is short, I am encouraged by the positive trends of our products during this seasonally soft quarter and am confident of the profitable growth potential of Nautilus in both the direct and retail channels,” Cazenave said in the June 6 press release. “Accordingly, we are aggressively advancing plans to expand our offerings and add new value to our current line-up, building on our strengths in product quality and innovation.”

-- David Clucas

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