Gaiam Inc. to Launch Mid-Priced Women’s Activewear Line

 

“We are confident there is an opportunity for a mid-price point women’s fitness fashion line focused on yoga Pilates and other non-impact activities,” said CEO Lynn Powers. “We’ve hired the design team, a consultant for fit and an internal team of people to work with the design team. We have shown the concept to a few retail launch partners with positive response.” 

 

The disclosure represents how the Boulder, CO-based company is refocusing its resources on its core yoga, fitness and wellness business following a major restructuring last year. During the fourth quarter, GAIA sold a video distribution business (GVE) for a nearly $27.0 million profit and closed a direct response television marketing (DRTV) operation at a loss of about $6.7 million.

 

 

GAIA released preliminary, unaudited financial results last week showing sales declined 11.4 percent to $50.8 million in the fourth quarter, but grew 21.7 percent for the year ended Dec. 31, 2013 compared to the same periods in 2012. The results reflect sales by GAIA’s continuing businesses, which are comprised of Gaiam-branded fitness videos, yoga and wellness products, which are sold at more than 38,000 retail doors worldwide, as well as its branded e-commerce platform; and Gaiam TV, which offers subscribers online streaming of more than 6,000 video titles.

 

 

Last week, company executives disclosed they will split the video subscription business into a separately traded public company by later this fall, probably through a tax-free special dividend payment to shareholders. This will enable the company to focused on launching the apparel line and expanding in Europe, where its sales are already growing 15 percent annually with no marketing budget.

 

 

“The proposed spin-off represents a final step that will allow Gaiam to present a clear strategic path and define our goals solely around what we believe to be one of the most unique, authentic, well respected and recognized yoga, fitness and well-being brands,” said GAIA CEO Lynn Powers. “I believe that organic revenue growth of 21.7% during the year reflects the strength of our brands.”

GAIA reported gross margin for the quarter remained essentially flat at 42.5 percent compared with the fourth quarter of 2012, while SG&A expenses increased 280 basis points to 46.0 percent of net revenue. Loss from operations reached $11.9 million, compared with a loss of just $347,000 a year earlier due to $10.1 million of non-recurring charges related primarily to the sale of GVE and the closing of the DRTV business. That was partially offset by a gain on the sale of GVE of $4.7 million that resulted in a loss before taxes of $2.85 million compared with a loss of $1.15 million in the fourth quarter of 2012. When added to a $4.85 million loss from discontinued operations, the company generated a net loss for the quarter of $7.29 million, compared with a gain of $1.55 million a year earlier.

 

For all of 2013, net revenue from GAIA’s Business segment, which includes contributions from the manufacture and wholesale distribution of branded products, increased $19.0 million, or 22.5 percent, to $103.4 million. At its Direct-to-Consumer (DTC) segment, which includes contributions from e-commerce sales, eco travel and the Gaiam TV subscription service, net revenue increased $9.2 million, or 21.5 percent, to $52.0 million. Gross margin was 42.0 percent, down 240 basis points from the comparable year-ago period, due primarily to changes in sales mix as the company experienced stronger growth in the lower-margin fitness accessory business than in the higher-margin media business.

 

 

Income from continuing operations swung to a profit of $3.1 million compared to a loss of $19.2 million in 2012, however, thanks primarily to a gain of $27.0 million on sales of the company’s RGS Energy stock earlier in the year. Loss from discontinued operations was $2.0 million for the year, compared to income of $6.6 million in 2012 due primarily to impairment charges taken within the DRTV entity, offset by slight business improvement in some of the discontinued entities.

 

Pending an assessment of deferred tax assets, GAIA preliminary estimates project net income for 2013 will come in at $400,000, or 2 cents per diluted share, compared to a net loss for 2012 of $12.9 million, or 57 cents per share, which included an accounting flow through loss on equity method investment for RGSE.

CFO Steve Thomas disclosed that the company is exploring whether to monetize its 13-acre campus in Boulder, including its 150,000-square-foot headquarters building.

 

 

Other initiatives for this year include expanding distribution of the Restore line of herbal supplements as drugs stores like

Walgreens and CVS expand into the health and wellness space and SPRI by Gaiam, a fitness and workout accessories brand it launched at Sports Authority and Australia’s Rebel Sports in 2012. Finally, GAIA is redesigning gaiam.com with input from the global design consultancy IDEO. Powers said she expects to start shifting marketing dollars from mailing catalogs to product innovation and e-commerce marketing by year’s end.