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Q1 2011 Results - Cardio Growth In Direct Business (Graphic: Business Wire)

Stocks in this article: NLS

Nautilus, Inc. (NYSE: NLS) today announced unaudited results for the first quarter ended March 31, 2011. Continuing operations include the Company’s direct and retail fitness businesses. The Company’s former commercial fitness business is reported as a discontinued operation. Unless otherwise noted, all information regarding the Company’s operating results pertains to continuing operations.

The Company reported net sales of $48.3 million in the first quarter of 2011, a 5.8% increase from $45.6 million in the first quarter of 2010.

Comparative Q1 net sales by segment:

    Three Months Ended           Mar 31, 2011       Mar 31, 2010      

$ Change

      % Change
 
(in thousands)
Direct $ 30,254 $ 28,503 $ 1,751 6.1 %
Retail 16,963 15,931

1,032

6.5 %

Unallocated Corporate Royalty Income

  1,084         1,210        

(126

) -10.4 %
Net Sales $ 48,301       $ 45,644       $ 2,657   5.8 %
 

Direct Channel:

Total sales in the Company’s direct channel in the first quarter of 2011 were $30.3 million, an increase of 6.1% from sales of $28.5 million in the comparable 2010 period. Continuing the sales trends in recent quarters, direct channel sales of the Company’s cardio products in the first quarter of 2011 increased by 24.0% or $4.0 million, over the first quarter of 2010, primarily due to increased sales of its proprietary Bowflex® TreadClimber® cardio product line. The increase in cardio sales reflects strong product offerings, improved consumer credit availability, and the Company’s new creative media, which resulted in a decrease in cost-per-lead. As anticipated, improved cardio sales offset sales declines of the Company’s legacy strength oriented products, including Bowflex® rod-based home gyms, which fell 19.3% or $2.3 million in the first quarter of 2011 compared to the first quarter of 2010. For the first quarter of 2011, cardio sales represented approximately 69% of total direct channel sales versus approximately 59% in the first quarter of 2010. As previously announced, the Company will continue to focus more of its advertising efforts around the Bowflex® TreadClimber® product line to gain greater consumer awareness of the product with the goal of increasing market share in the cardio oriented fitness market, which the company believes to be several times larger than the strength market. Based on year-to-date trends, the Company anticipates that increases in cardio sales should more than offset continued future sales declines of the Company’s legacy strength oriented products in 2011. Sales in the first quarter of 2011 were also favorably impacted by the Company’s new consumer financing programs, including its program with Tier I credit provider, GE Money Bank, which was implemented in September 2010. During most of 2010, the Company experienced significantly reduced credit approval rates from its previous consumer financing source from levels typically attained in prior years. Total credit approvals from the Company’s primary and secondary financing sources averaged approximately 21% of applications processed in the United States in the first quarter of 2011, compared to approximately 13% in the first quarter of 2010. Credit approval rates in the first quarter of 2011 were favorably impacted from the introduction of expanded secondary consumer finance programs.

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