Nautilus to add Bowflex products, expand retail sales

With increased competition from Icon and with commercial retail sales now growing more strongly than The Nautilus Group's direct segment, the company plans not only to expand its retail sales of Bowflex, but also introduce several new Bowflex models and a "Bowflex-type" product this year.
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With increased competition from Icon and with commercial retail sales now growing more strongly than The Nautilus Group's direct segment, the company plans not only to expand its retail sales of Bowflex, but also introduce several new Bowflex models and a "Bowflex-type" product this year.

The new Bowflex-like product, expected in June, will be "substantially different" from the current Bowflex, but will use the current patented "power rod" technology, according to CEO Brian Cook, speaking on the company's first quarter financial call with analysts. It will be sold direct, rather than added to the expanding retail sales of current models.

"By adding new products," Cook said, "you keep your product line fresh to consumers."

Nevertheless, retail sales of Bowflex by Nautilus (NYSE: NLS) have been going well, he said, with more storefronts to be added as the company expands those sales. In the short period of the test, retail Bowflex sales have brought in $4.6 million in revenues, which is about 9 percent of the company's commercial sales. The company declined to disclose "for competitive reasons" what the average selling price is or how many were sold. (A little calculator button-pushing reveals that an average selling price of $1,000 would mean about 4,600 sold in the one quarter.)

In comparison, Cook said that the average selling price direct-to-consumer is $1,540 and 46,000 were sold during the first quarter 2003.

Commercial net sales for the quarter were $55.5 million, compared to $44.8 million a year ago, or an increase of 13 percent, partly due to the 2001 acquisition of Schwinn Fitness and the February 2002 acquisition of StairMaster. Direct net sales were nearly $79 million, compared to just over $91 million a year ago.

The company projects revenues of about $525 million to $545 million for the year, with a gross profit margin of 52 percent to 54 percent, down from its first quarter 2002 margin of 57 percent, due to the increase in sales of commercial retail products which traditionally have lower margins, said CFO Rod Rice. Commercial retail sales for 2003 are being forecasted about 39 percent to 42 percent of the company's total sales, he said, which includes Bowflex retail sales. For the first quarter of 2003, the company reported net sales of $129.4 million, compared to $135.9 million for the corresponding period last year. Net income for the quarter was $13.7 million compared to $24 million in the first quarter of the prior year. Details are available at www.nautilusgroup.com.

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