Nautilus, Inc. reported sales dipped 7.1% to $38.5 million in the third quarter ended Sept. 30 as significant weakness from the company’s Direct business continued to offset solid results from the Retail segment.
Tight consumer credit continued to hamper Direct sales in the quarter, with the segment recording a sales decline of 14.8% to $21.5 million versus the year-ago period, due primarily to a 35% decrease in the rate of credit approvals from the company’s primary consumer credit financing provider. Management noted that as a result of implementing a new consumer credit financing program, September Direct sales were actually up 4.3%. The segment swung to an operating loss of $2.7 million due to the company testing various pricing levels of the TreadClimber.
For the Retail segment, sales improved 3.0% to $16.1 million on strong demand for the company’s newly designed fitness bikes along with sales to new customers. Profits for the Retail segment fell 10.2% due to steeper discounts of treadmill products.
Consolidated gross margin declined 580 basis points to 43.2% of sales due to a higher proportion of sales generated by the lower-margin retail business.
The company narrowed its Q3 net loss to $4.3 million, or a loss of 14 cents per share, compared to a net loss of $24.4 million, or 80 cents per share, in the prior-year period.
NLS decreased inventories 12.2% to $11.0 million at quarter-end.
The company’s commercial segment was reported as a discontinued operation.
