While still expecting to achieve sales and profit improvement in its second half due to seasonality and higher advertising to drive demand, Nautilus lowered its second-half and FY outlook yesterday on current macroeconomic and retail concerns. The fitness equipment and technology company cut its annual revenue range forecast by 17-20 percent to $315-365 million and its annual gross margin forecast range to 24-27 percent from a prior 27-30 percent.
“While we have temporarily slowed some elements of our North Star investment as we responsibly balance long-term ambitions with short-term objectives, we remain steadfast on our path to Nautilus digital transformation, CEO Jim Barr told analysts.
In Q2 ended Sept. 30, the group’s operating loss widened, and gross margin plummeted as sales plummeted 53 percent to $65.5 million from $138.0 million. Direct segment sales slipped 35 percent to $24.5 million on a return to pre-pandemic seasonal demand, and Retail segment revenues declined 60 percent to $39.9 million on lower cardio sales as retailers worked through higher-than-normal inventory levels. There was also lower demand for bikes and the brand’s SelectTech weights in the period. Retail sales outside the U.S. and Canada fell 80 percent year-over-year. The net loss was $13.2 million against a loss of $4.6 million, as the operating loss came in at $14.3 million versus a loss of $1.95 million. The period’s gross margin rate was 17.5 percent against 30.5 percent in the year-ago period as the group dealt with increased product discounting at retail, unfavorable overhead, inventory adjustments and higher investments in JRNY, its digital platform. Nautilus added 40,000 JRNY members during the period to pass a membership threshold of 400,000.
The group said it is tracking and assisting with the destocking of existing retail inventories, and its seeing some re-orders. Meanwhile, Nautilus is making progress in making its supply chain a strategic advantage. The company, which has renegotiated inbound freight rates and contracted manufacturing costs for its top products, shuttered its Portland, Oregon, distribution center in late October and transferred the inventory to two other U.S. distribution centers.
