Nautilus Inc. reported revenues in the first quarter totaled $158.8 million, down 14% from $185 million last year. The Vancouver-based exercise equipment maker warned last month that it would miss its first-quarter sales and profit projections due to a slow home fitness market. On a conference call, Gregg Hammann, Nautilus' CEO, said heavy promotions on electronic items such as flat screen TVs pulled discretionary spending away from fitness equipment. Direct revenues were off 12% to $73.9 million, while retail was down 45% to $27.6 million.
Nautilus' international, apparel and commercial businesses performed well in the quarter. Sales of apparel, which includes Sugoi, rose 13% to $21.9 million. The commercial business increased 1% to $18.2 million, but would have been stronger if not for the late timing of the Ursa commercial show. Gross margins improved to 46.1% from 42.9%, but operating expenses increased to 42.9% of sales from 38.2%. Net profit fell 52% to $2.5 million, or 8 cents a share, from $5.2 million, or 16 cents, last year.
Separately, Nautilus reached a settlement with ICON Health and Fitness that ended four years of legal disputes around intellectual property issues. Details of the settlement were not released. But Hammann said the company did receive what he called intellectual property and patent tools that will streamline products, drive innovation and improve margins, and the resolution will save the company about $1 million to $1.5 million in legal expenses this year. The complaint alleged the name on ICON's CrossBow strength machine was too similar to the Bowflex badge. The two companies had been negotiating since September 2006.
