After a strong start to its fiscal year, the fortunes of ICON Health & Fitness, Inc. have faded over the past two quarters, as the company posted sales declines of 6.4% in Q2 and 3.9% in the most recent quarter. Thats a tough nut to swallow when the two periods are supposed to be the companys high points for the year. Nonetheless, news is not all bad for the company as work on the back-end has allowed the company to swap the net loss it posted during last years third quarter for a respectable net income this time around.
Sales for both of ICONs reporting segments, strength training equipment and cardiovascular and other equipment, were down. The company reported that the sales decreases were “primarily due to lower customer demand for certain products.”
The 300 basis point improvement in gross profit came as a result of timely product releases, the realization of manufacturing efficiencies, and reductions in air freight. SG&A expenses decreased 300 basis points to 20.3% of sales from 23.3% last year. The combination of the increased gross margin and the decrease in SG&A expenses lead to the companys net income for the quarter.
| Icon Health & Fitness | |||
| Fiscal Third Quarter Results | |||
| (in $ millions) | 2006 | 2005 | Change |
| Total Sales | $299.4 | $311.5 | -3.9% |
| Strength | $49.2 | $57.8 | -14.9% |
| Cardio | $250.2 | $253.7 | -1.4% |
| Gross Margins | 28.8% | 25.8% | +300 bps |
| Net Income | $10.3 | ($0.8) | vs. loss |
| Inventories* | $156.3 | $156.5 | -0.1% |
| Receivables* | $197.6 | $247.9 | -20.3% |
| *at quarter-end | |||
