Like with Peloton, but on a smaller scale, a partial shift in fitness activities from the home to the gym had an impact on the revenues of Nautilus for its second quarter, ended Sept. 30. Combined with shipping problems, which caused a shortage of $22 million in products that should have been delivered, it led to a 11.2 percent sales decline to $137.9 million for the period, or a drop of 5.4 percent excluding the divested Octane business.
As compared to the corresponding quarter of 2019, sales were up by 12.4 percent, however, and they are expected to be between 21 percent and 27 percent higher for the full year on a two-year compound average growth basis.
While the Direct segment fell by 38.1 percent to $37.9 million in the quarter as compared to a year ago, with drops of 49.4 percent in cardio and 8.7 percent in strength training, the Retail segment rose by 6.4 percent to $99.2 million, with an 89.8 percent jump in strength partly offset by a decline of 18.2 percent in cardio. Segment sales outside North America jumped by 57 percent excluding Octane. Meanwhile, the number of connected members in the company’s high-margin JRNY program reached nearly 200,000, about three times above the level of a year ago.
The quarterly gross margin was cut by 13.2 percentage points to 30.5 percent, with 8 percentage points attributed to the logistics problems and one point to increased investments in JRNY. Shortages of commodities and components and foreign exchange were responsible for the balance of the decline. The gross margin declined by 20.3 percentage points to 36.9 percent in the Direct segment and by 6.9 points to 27.4 percent in the Retail segment.
With operating expenses rising by 83.8 percent to $44.0 million, including normalized advertising expenses of $12.1 million, the company booked an operating loss of $2.0 million for the quarter versus a profit of $44.0 million a year ago. Operating margins fell to 4.8 percent of sales in the Direct segment and to 18.9 percent in the Retail segment.
On an adjusted basis, excluding the impact of a legal settlement and other extraordinary items, Nautilus generated an operating profit of $3.5 million overall, down from $35.7 million. The bottom line showed a net loss of $4.6 million compared with net earnings of $33.8 million.
