Nautilus, Inc. swung back to a slight loss for the fourth quarter even as the company’s recently maligned Direct business rebounded somewhat on a stronger credit environment.


Total sales for the quarter were essentially flat at $53.7 million. The net loss was $39,000, or $0.0 per share, compared to $5.7 million, or 9 cents per share in the prior-year quarter. Gross margins fell 460 basis points to 44.1% of sales.


The Direct segment, which consists primarily of the company’s Bowflex and Treadclimber products, slipped 2.3% to $28.2 million in Q4 from $289 million in the year-ago period, a sequential improvement versus the 14.8% decline recorded in the third quarter. Management said home gyms have become a less important product category and, as a result, sales of the Bowflex home gym dropped 32% for the quarter. Sales of the Treadclimber, however, jumped 17% in the aforementioned improving credit environment.


Gross profit margin in the Direct business was 52.1% of sales for the fourth quarter of 2010, compared to 60.7% for the 2009 fourth quarter, primarily due to the company’s decision to offer deep discounts on one specific end-of-life home gym
Total credit approvals from the company’s primary and secondary financing sources increased throughout the quarter, but averaged approximately 20% of applications processed compared to approximately 18% in the fourth quarter of 2009. The company expects that credit approval rates in 2011 will remain at the levels experienced late in the fourth quarter of 2010 or improve modestly as the company continues to optimize its consumer financing programs.


For the Retail channel, sales slipped by about half a percent to $23.9 million in Q4. Management said retail channel sales of  cardio-oriented products improved 9.6% on strength from Schwinn exercise bikes. Gross profit margin in the Retail business was 31.2% of sales in Q4 compared to 32.6% in the fourth quarter of 2009, due to changes in product mix.