Vancouver-based exercise equipment company Nautilus released its fourth quarter and end-of-year financial results on Monday, detailing what CEO Jim Barr described as signs of improvement at the tail end of a challenging year that saw a loss of more than 20 percent of the company’s revenue base, continuing a multi-year trend.
The bright spot was a change in Nautilus’ retail segment trajectory, which achieved a 4.8 percent year-over-year growth during the fourth quarter. But it wasn’t enough to balance out other losses, and Barr cautioned that a return to profitability wouldn’t happen overnight.
“We must be realistic that we still face considerable challenges,” he said in a conference call with investors.
Net sales for the fourth quarter were $104.2 million, a 9.7 percent year-over-year decline. The 4.8 percent growth in the retail segment was offset by a 28.1 percent decline in the direct-to-consumer segment.
The retail segment gains were propelled by strong sales of the Nautilus Schwinn IC bike and SelectTech weight lines, as well as some third-quarter shipment delays that caught up in the fourth quarter. In the direct segment, the company saw increased sales for Bowflex bikes and its Max Total product line, but those gains were offset by decreased sales in the Max Trainer product line.
Net sales for 2019 overall were $309.3 million, compared with $396.8 million in 2018.
Nautilus’ stock, which trades under the symbol NLS, fell 8.9 percent on Monday to close at $3.16, although the drop came on a day in which markets overall saw dramatic declines across the board due to concerns about the coronavirus outbreak. Nautilus stock jumped to $3.38 in after-hours trading.
New direction
Barr took over as Nautilus CEO last summer with a mandate to reverse the company’s flagging sales numbers and lead its “digital transformation” by refreshing its product lineup to integrate electronic features such as fitness-tracking software.
That effort is well underway, Barr said on Monday, as evidenced by the strong sales of the Schwinn IC bike and other products, as well as the October launch of the “JRNY” fitness platform, a digital fitness tracker that is available cross-platform on multiple Nautilus products and includes features such as a virtual personal trainer.
“We are becoming a more digital version of our former selves,” he said.
Operational expenses were also trimmed in the fourth quarter due to reductions in sales and marketing expenses and administrative costs, Barr said, and he touted Nautilus’ recent announcement that it had secured a new $70 million credit facility that will allow it to refinance its debt.
Barr described 2020 as the company’s “transition year,” and cautioned that a return to profitability will take time.
“Now that we have exited the key selling season … we now turn more attention toward a deep dive strategic assessment,” he said.
Barr also briefly discussed the impact of the COVID-19 coronavirus outbreak in China. The outbreak led to delays in the reopening of some of Nautilus’ factories after the Lunar New Year holiday, he said, but the company’s major facilities have now returned to operation, and no Nautilus employees have been diagnosed with the virus.
However, he said, the company will still face challenges with shipping and other logistics in China, which will likely impact its performance in the first quarter of 2020.
“Many of our products are manufactured in factories in China, so there will be some impact on the supply side of our business,” he said.
