Nautilus, Inc. reported Q1 sales from continuing operations declined 5.4% to $129.6 million from $137 million a year ago. On a conference call, Nautilus's management said the commercial business saw sales decrease 10% to $16 million. Direct sales were down 6% to $69 million. Retail sales moved up 9% to $25 million. Its international business grew 6% to $18 million, primarily driven by currency exchange benefits. Nautilus also recorded $1.1 million from royalty income, up from $700,000 in the same period last year.
Gross margins eroded to 43.2% of net sales from 45.6% primarily due to lower margin sales and increased inventory reserves as the company reduces SKUs to simplify its product portfolio. Higher warranty cost also contributed to lower margins compared with Q107.
The loss from continuing operations widened for the quarter to $6.9 million, or 22 cents a share, from a net loss from continuing operations of $100,000, or one cent, a year ago. The 2008 quarter includes pre-tax charges of $8 million in connection with the cancellation of the agreement to purchase Land America Health & Fitness Co., NLS Chinese factory, and $2.4 million for costs associated with the departure in March of the company's former CEO. Results from continuing operations exclude the company's Pearl Izumi apparel business, which was sold during the quarter.
The net loss (including Pearl Izumi) was $6.4 million, or 20 cents a share, compared to net income of $2.5 million, or 8 cents, a year ago.
