Swimming against the tide, Nautilus recorded one of its best results in the second quarter, thanks to strong demand for home fitness equipment. Sales surged by 94 percent to $114.2 million.
Cardio and strength product proved popular from the start of the coronavirus-related lockdowns, particularly connected-fitness bikes, the company’s Max Trainer line and treadmills. Notwithstanding an increase in factory capacity for leading products by as much as 500 percent, Nautilus entered the third quarter with $34.2 million in back orders.
This strong performance was slightly offset by declines in the commercial business - a sector that the group is down-playing now - due to gym closures related to the pandemic.
In the Direct segment, sales rocketed by 142.1 percent to $50.4 million, led by the company’s cardio products such as connected-fitness bikes, the Bowflex C6 and Schwinn IC4 products, and the Max Trainer. The American fitness equipment supplier said that the growth in sales of strength products was limited by inventory scarcity. The Direct segment’s performance also benefited from the re-launch of the company’s digital platform under the new JRNY name on Oct. 30, featuring a personalization engine driven by artificial intelligence that suggests customized workouts and adjusts to individual fitness levels.
In the Retail segment, the company’s sales soared by 68.1 percent to $62.9 million, also boosted by cardio sales, including the Schwinn IC4 connected-fitness bikes and the Max Trainer. Excluding sales related to the Octane brand, which is being divested, the Retail segment’s revenues grew by 95 percent. As previously reported, Nautilus is looking to sell the Octane Fitness business, which it acquired in 2015. After a strong start under Nautilus’ ownership, Octane’s growth levelled out, and it has underperformed in recent quarters, leading the group to book an impairment charge of $72.0 million last year, primarily on Octane’s goodwill and intangible assets. Nautilus has now decided to refocus on home fitness products and connected fitness experiences with its Bowflex, Nautilus and Schwinn brands.
Overall, the group’s gross margin jumped by 11.8 percentage points to 41.5 percent, despite extra U.S. tariffs on Chinese-made equipment. The net loss narrowed to $5.1 million in the quarter, down from a loss of $78.9 million last year.
While these results have exceeded expectations, the management is remaining prudent, given the highly volatile environment and the fact that these results did not follow the typical seasonality of the business. It is not providing any specific guidance for the remainder of the present fiscal year.
The group will unveil several new strength and cardio product offerings in the autumn, including an expansion of the JRNY personalized connected fitness digital platform with the rollout of a next-generation JRNY that will include an updated user interface, new content, and the integration of the Explore The World and Apple Health programs.