Nautilus flexes its muscle [The Seattle Times :: ]
(Seattle Times (WA) Via Acquire Media NewsEdge) June 10--You've seen the infomercials. The ones with sweating athletes working out on a personal elliptical trainer. You may have asked yourself: "Who actually buys those things?"
It turns out lots of people.
Nautilus Inc., maker of Bowflex, Nautilus, Schwinn and Universal fitness equipment, posted $218.8 million in revenue last year, selling mostly directly to consumers through TV ads and social media.
After operating in the red for four years, the Vancouver, Wash., company's financial performance over the last two years was strong enough to land it at No. 4 on The Seattle Times' 23rd annual ranking of publicly traded companies based in the Northwest.
Since its introduction in 2004, The Bowflex TreadClimber, the split-tread machine that combines an elliptical, treadmill and stair-stepper workouts into one, has been the company's best-seller. It has a price tag between $1,000 and $3,200 and is only available through direct sales to consumers.
"Usually direct products have a little bit of a flash and then they are gone. This one is going strong after nine years," said CEO Bruce Cazenave, who has a TreadClimber in his Vancouver condo. "We do offer returns within the first six weeks, but we get back less than 1 percent."
Originally founded in 1986 as Bowflex, Nautilus specializes in designing, developing, sourcing and marketing cardio and strength fitness products. Bowflex changed its name to Direct Focus in 1997, and, between 1999 and 2002, acquired Nautilus, Schwinn and StairMaster before changing its name to the current Nautilus Inc.
The company struggled during the Great Recession. Between 2007 and 2010, Nautilus saw almost $225million in losses. Its stock hit bottom at 45 cents in February 2009, and bounced between $1 and $4 until 2012.
"A decade ago Nautilus was buying companies, aggressively trying to build itself to be the global fitness company," said Andrew Burns, a senior research analyst for active lifestyle consumer products with D.A. Davidson in Oregon. "That all started to fold and unravel during the economic downturn; it was dark times for the company."
By 2011, Nautilus had quit selling commercial-grade equipment to gyms. The company turned its focus on home-use equipment and decided to license the brand name and commercial-equipment technology to other manufacturers.
The company finished 2011 with a $1.4 million profit and the stock has climbed since 2012 back to more than $11 a share.
Cazenave said when he stepped into the CEO role in May 2011 he put in place a plan to get the company to release more, better, cost-effective retail products.
"In this mature category, you differentiate yourself through innovation," Burns said about personal-fitness equipment. "There is never a shortage of fitness fads to be had in the market."
Cazenave has hired more staff and increased research and development to figure out trends, spending from $2.9 million in 2010 to $5.6 million in 2013. Nautilus is finally starting to see the benefits of those changes, he said.
Nautilus sells equipment through two channels -- direct to consumers and retail. Direct offers products to consumers through television ads, catalogs and Internet; the retail channel offers products through a network of independent retail stores and websites.
Last year Nautilus released a new retail line of Schwinn cardio equipment, including an upright bike, a recumbent bike and an elliptical. The equipment is sold at Walmart, Sports Authority, Dick's Sporting Goods and Amazon.com ranging from $299 to $999.
Amazon.com made up 11 percent of retail sales for the company in 2013.
This line has dual screens on the consul, so a person can still see calories burned or miles gone with a tablet or magazine blocking the main screen. The speakers also were improved to account for mothers and fathers who can't wear ear buds because they need to hear their kids.
With the help of the new products in the third and fourth quarters of 2013 retail sales were up 20 percent and with a $33 million tax benefit, profits were up to $48million.
Nautilus' biggest competitors are other well-known brands, including NordicTrack and Pro Form. However, home gyms -- like the Bowflex Total Body Gym -- see the most competition from used equipment being sold on eBay, Cazenave said.
"The home gyms have been around forever and they last even longer," he said. "People have had them for 10 years and now they are selling them."
He said he doesn't see used equipment affecting other Nautilus lines because people always want the newest models.
"You go back more than three years, and you don't have any of the technology for the connectivity -- that is what is attractive to people today," he said.
Later this year, a new Nautilus line will hit the market, including a treadmill, which the company hasn't made since 2009.
By the summer of 2015, the company will open a new building across the street from its current 2-year-old headquarter building to house its growing research and development team and continue to create new products.
"We've got to feel good about what we are doing, but we are not where we want to be yet," Cazenave said. "But we are not being forgetful of where we were four years ago."
Coral Garnick: 206-464-2422 or firstname.lastname@example.org. On Twitter @coralgarnick
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