Cybex International Inc. saw a 17% increase in Q3 sales to $44.5 million from $38.2 million last year. Cardio Equipment sales were up 14% to $24.8 million and Strength Equipment jumped 25% to $16.3 million. Other sales – mostly parts and freight – were down 2% to $3.4 million. North America was up 9%, while International jumped 40% in the quarter. The only material decline came from the consumer line, which was down about $1.5 million.
Gross margins were down 420 basis points to 34.2% from 38.4% due to a $250,000 charge to cover the transition to a new version of the Home Arc launching in the middle of the year. The new Home Arc is not expected to make a major contribution until Q4 2008, as its prime selling season is on the consumer side. SG&A was reduced to 21.8% of sales from 35.6% due to tight cost controls and a settlement from an old royalty agreement.
Inventories increased to $13.8 million from $9.6 million, driven by new products, including the 750T treadmill, and an overall increase in monitors, or TVs, attached to equipment.
In a Q&A session, John Aglialoro, Cybex's chairman & CEO, said the commercial side of the equipment business continues to grow on a global scale, driven between a 4% to 5% annual increase in club memberships. “We see it in the news everyday,” said Aglialoro. “It has become not just weight loss and muscle building and good looks oriented, but more to an integral way that people live, want to live.”
The consumer side continues to be pressured by heightened competition and low-price imports. Cybex will do more outsourcing, at least of components, to become more competitive on price in the consumer channel and Aglialoro is also optimistic about the better-designed 360 Home Arc line. But Aglialoro also said Cybex will be increasing its focus on upper price point areas and less in the mid-price points.
“Our pricing will probably be higher, but we think we will have more control, more quality and get what the customer wants,” said Aglialoro.
