Driven by robust growth in its Direct segment, Nautilus Inc. reported revenues in the fourth quarter climbed 23.1 percent to $94.9 million. Earnings grew 21.4 percent to $10.4 million, or 33 cents a share.
Gross margins for the quarter improved by 350 basis points to 51.1 percent, reflecting strong margin expansion in the Direct segment, partially offset by lower Retail segment gross margins.
In its Retail segment, sales advanced 7.8 percent in the quarter to $34.6 million. The improvement reflects a positive reception to the company's new lineup of cardio products launched in both the fall of 2013 and 2014, partially offset by weaker sales experienced in Canada in the latest period.
Operating income in the segment slid 11.1 percent to $5.7 million. Gross margins eroded to 25.2 percent, compared to 27.4 percent a year ago, impacted by higher customer allowances, product mix, and discontinued inventory liquidation.
On a conference call with analysts, Bill McMahon, COO, said the sales performance was helped by additional placement gained on selling floors due to its improved product assortment.
“We believe that across much of the retail environment, the fourth quarter and holiday selling season was relatively challenging, so we are particularly pleased to grow our retail business in light of this,” said McMahon.
He did note that sales growth was less than recent quarters partly because retailers accelerated some purchases of its strong-selling Schwinn line into Q3 versus historical Q4 purchasing. For the second half, its Retail segment grew 13 percent, strongly outpacing the industry average. The West Coast ports slowdown also impacted some deliveries in the quarter.
In fall 2014, promising launches included Nautilus cardio products as well as its first entries into the large treadmill segment. Said McMahon, “We are very encouraged with the performance of these product launches. Our treadmills, in particular, are receiving strong reviews. These products are meeting our expectations, and we feel they will provide a key for platform for growth in the second half of 2015.”
McMahon also said he sees national sporting goods retailers investing in the fitness category. He added, “They are taking the long-term view of that, so we are optimistic that we can be part of that solution going forward.”
For the year, earnings dropped 60.8 percent to $18.8 million, or 59 cents a share. The year-ago period was boosted by a tax benefit of $32.1 million due to a valuation allowance recorded against its deferred tax assets. Earnings from continued operations before taxes rose 88.4 percent to $30.2 million. Revenues in the year rose 25.4 percent to $274.4 million with Direct ahead 28.5 percent and Retail up 21.4 percent.
Bruce Cazenave, Nautilus’ CEO, “It is still early in the year, but we are pleased to see that the growth trends that we realized in the fourth quarter of 2014, in direct, and to a lesser extent in retail, have continued into the first quarter of 2015.”
