ICON Health & Fitness said the decline in fiscal fourth quarter and full year sales was due primarily to “a consolidation of customers in the department store channel of distribution, the timing of buying patterns in that channel and a decline in the direct to consumer channel.” The company’s bottom line also took a hit from the divestiture of the outdoor recreation business.

Sears represented 40.4% of sales in fiscal 2005, which made the retailer ICON’s largest customer over the last 20 years, making up as much as 68% of total sales at its peak in 1989. Sears expanded its share of the ICON business by 3.6% in fiscal 2005.

Total sales in the U.S. declined 12.2% for the year to $777.2 million from $885.3 million in the prior year. International revenues increased 13.2% to $120.9 million from $106.8 million in fiscal 2004.

Net sales for the fiscal fourth quarter ended May 31 slipped 4.2% to $190.7 million, compared to $199.0 million for the year-ago period. The company’s net loss was $70.3 million in the period, compared to net loss of $8.5 million in Q4 last year. Roughly $28 million of the loss can be attributed to taxes, minority interest and discontinued operations.

The loss from discontinued operations for 2005, net of a tax benefit of $19.4 million, was $31.7 million compared to a loss on discontinued operations of $3.1 million, net of tax benefit of $1.9 million, for fiscal 2004.

During the fiscal 2005 second quarter, ICON management determined that the company's JumpKing subsidiary would discontinue manufacturing, marketing, and distributing all outdoor recreational equipment since it was not making a positive contribution to earnings and also required a substantial investment in working capital. The loss from operations, net of tax, for the outdoor recreational equipment was $31.7 million for the 2005 fiscal year and $3.1 million for 2004. ICON expects to complete this discontinuation of operations by fiscal Q2 2006 and is in the process of finding a buyer for the remaining assets.

Icon Health & Fitness
Fiscal 2005 Results
(in $ millions) 2005 2004 Change
Total Sales $898.1  $992.2  -9.5%
Strength $133.9  $205.1  -34.7%
Cardiovascular $764.2  $787.1  -2.9%
Gross Margins 25.3% 32.1% -680 bps
Net Income ($110.0) $23.4  -570%
Inven @ Qtr-end $158.6 $171.9 -7.8%
Acc Rec @ Qtr-end $123.5 $174.3 -29.2%