Nautilus Inc. saw a boost from three out of four distribution channels during the third quarter as well as the acquisition of Pearl Izumi and subsequent formation of the Nautilus Apparel Group. But the gains were partially offset by chaotic consumer spending habits throughout the third quarter caused by the active hurricane season and ensuing CNN effect.

Net sales for the quarter increased 32.5% to $163.3 million, compared to $123.2 million. Pearl Izumi contributed roughly $15.1 million in sales to Nautilus during the quarter and was said to be “right on plan.” Excluding Pearl’s contribution, organic sales would have increased 20.3% for the quarter.

Gross margin was 44.3% of sales, a decrease of 330 basis points compared to 47.6% for the year ago quarter. This reflects Nautilus’ expansion into the retail segment, which carries lower margins and lower selling and marketing expenses than the company’s traditional consumer direct business. Selling and marketing expenses were 27.3% of sales, down 360 basis points from 30.9% for the year ago quarter.

The company’s Retail division saw net sales increase roughly 80% to $29.7 million in the third quarter. The company now has product in about 2,800 doors of about 15 major retailers such as Sears, Dick’s SG, and The Sports Authority. Nautilus is now in 600 of Sears’ 870 U.S. doors in some form or fashion, with the home gym getting the broadest distribution. They are also in the Sears fitness catalog. TSA’s assortment includes 13 to 14 products in the large format stores and a merchandising display in 215 doors. Dick’s Sporting Goods is featuring four to five products in all doors, up from one or two last year, and will test a large merchandising display in 25 doors featuring 11 products.

The Specialty retail channel net sales were up 37%to $17.8 million. Management said that they started to cross-sell equipment and apparel through independent bike dealers at Interbike this year, where the company shared a booth with Pearl Izumi. NLS wants to expand its equipment and apparel presence at independent bike dealers beyond the 2,000 doors currently served.

Third quarter net sales for the Commercial channel, which includes clubs, hotels, and living complexes, were $18.2 million, down 2%. The Direct channel‘s third quarter net sales were $68.4 million, up 9%. NLS management said that the company experienced “an unusually large amount of volatility” in the day-to-day sales of this segment caused by hurricanes, interest rates, and “other non-controllable factors.” International third quarter sales were $14.2 million, up 15% over last year.

Net income for the quarter was $8.3 million, up from $7.5 million. Diluted EPS climbed to 24 cents compared to 22 cents last year. The year ago quarter included a pretax $1.8 million gain on the sale of land, which contributed 3 cents per share.

For the fourth quarter, Nautilus predicts that net sales will increase 25% with earnings climbing to 44 cents to 48 cents per diluted share, compared to 42 cents per share last year. Full-year 2005 earnings are anticipated at $1.06 to $1.10 with sales of roughly $660 million.