Boosted by a strong response to its new line of cardio products at Retail as well as continuing strong sales in its Direct segment, Nautilus, Inc. reported sales for the third quarter climbed 27.7 percent to $59.1 million. Net income jumped 79.9 percent to $2.5 million, or 8 cents a share.

Gross margins improved 170 basis points to 48.8 percent, reflecting margin increases in both the Direct and Retail segments. The bottom-line gains came despite an increase in R&D costs to $1.7 million from $1.4 million to support product development.

Sales for the Direct segment climbed 34.5 percent to $34.5 million, benefiting from the strong performance of the new Bowflex Max Trainer product line and continuing gains at TreadClimber. Those gains offset ongoing declines in the strength category. Operating income for the Direct segment more than doubled to $4.1 million from $1.3 million a year ago. Profits benefitted from higher gross margins and improved expense leverage.

Sales for the Retail segment grew 21.2 percent to $23.5 million because of continued strong retailer and consumer acceptance of the companys lineup of cardio products launched last fall, along with additional new products introduced this fall. Retail results also benefited from a few customers accelerating some of their fourth quarter orders into the third quarter to get their supply chains in desired position for the upcoming peak selling season. Operating income rose 28.8 percent to $3.7 million.

We are particularly pleased with this increase, given the very challenging growth comparison we had from the third quarter of last year, said Bruce Cazenave, Nautilus CEO, of the retail gains on a conference call with analysts. Our strong retail performance underscores the success of last year’s new product lineup, as well as positive customer receptivity to the additional new products that were launched this September.

Bill McMahon, COO, said the company later this month will launch a new line of Schwinn and Nautilus treadmills, which represent its first entry into the treadmill category at retail in several years. Early feedback on a new Nautilus line of cardio products, featuring extensive use of Bluetooth technology to help users measure their performance, has been positive. Another prominent retail launch will be the Bowflex SelectTech 560 Dumbbell, which will feature digital integration and rep-counting technology.

It’s important to note that even with the gains weve made to-date, we still represent a small share of the overall retail market, said McMahon. We feel that there is still more work to do and ample space available to gain further market share and floor space at our key retail partners through ongoing product innovation.

The company will also enter the nutritional products category with a line of Bowflex Body energy supplements. McMahon said depending on the source, the size of the nutritional supplement market in the U.S. is 5 to 20 times larger than the fitness equipment market, but he also said Nautllus customers have been asking for an option from the company. Said McMahon, The space is crowded and confusing and our customers trust us to provide one solution with no confusion.

Cazenave said Nautilus will continue to focus on expanding internationally, investing in its newer platforms, and acquiring intellectual property and product lines that could accelerate growth and leverage its existing platforms. He added, We are following a highly disciplined process as we look at potential acquisition opportunities and will seriously consider only those opportunities that we believe enhance shareholder value.