Vancouver-based exercise machine company Nautilus Inc. released its preliminary first quarter results on Monday, showing a $10.2 million operating loss for the quarter due to a 26.5 percent decrease in net sales compared with the first quarter of 2018.
In a conference call with investors and analysts on Monday afternoon, interim CEO Carl Johnson emphasized new products and a new marketing strategy that the company plans to roll out this year. The investor call was the company’s first since the March 1 resignation of former CEO Bruce Cazenave.
“The same issues that affected us in the fourth quarter of 2018 continued into 2019,” Johnson said.
Net sales for the first quarter were $84.4 million, down from $114.8 million in the first quarter of 2018 and $115.4 million in the fourth quarter. The decline was primarily attributed to a decrease in direct sales of the Bowflex Max Trainer.
Retail sales were down, as well, which Chief Financial Officer Sid Nayar attributed to lower-than-expected sales in the fourth quarter of 2018 — retailers were still trying to clear their existing inventories in the opening months of 2019, he said, resulting in fewer new orders for equipment.
“We ended 2018 with more inventory than planned for,” he said, “and we are strategically reducing inventory throughout 2019.”
The company’s biggest priority at the moment is to revamp its messaging and marketing strategy to spur consumer interest in its Bowflex and Max Trainer product lines, as well as its Max Intelligence digital platform, which is intended to pair with Max Trainer products to provide personalized fitness plans.
Johnson also mentioned three new products for 2019: the Max Trainer M10, which includes a built-in screen to connect with the digital platform, the Octane Commercial Max Trainer and the Octane XR6000S elliptical.
“We know what the temporary challenges are, and they’re certainly solvable,” Johnson said.
The company intends to have its new marketing strategy in place in time for the “fitness season” in the second half of the year, Johnson said, he forecasted retail growth beginning in the third quarter of 2019 and a return to profitability by the end of the year.
Several analysts asked about the marketing plan, such as whether the problem has been with the message or the choice of channel, and whether the new marketing efforts would involve new platforms.
Johnson replied that Nautilus officials believe the primary issue with the company’s marketing was its own message, and it intends to work with an outside creative agency to help develop a new messaging approach.
“The key thing is, we’ve got to get the positioning and messaging right,” he said.
Nautilus’s stock fell by 4 cents on Monday to close at $5.28 per share on the New York Stock Exchange. It continued to fall in after-hours trading, landing at $4.50 per share by 6:30 p.m. Eastern time.
