Brunswick Corp., Mettawa, Illinois, reported $252.2 million in 2018 second quarter revenue for its Life Fitness Division, which includes Life Fitness and Cybex International, according to financial earnings released by the company on July 26. This represents a year-over-year increase of 1 percent.
International sales accounted for 48 percent of the division’s total sales for the quarter. Life Fitness also reported a decrease in operating earnings—$18.5 million to $14.3 million year over year. This included $1.6 million in costs affiliated with a product field campaign and various restructuring charges.
"In our Fitness segment, we continue to focus on stabilizing our operating performance and executing against our digital initiatives, with growing acceptance evidenced by our recently announced technology-enhanced partnerships with Retro Fitness, Apple, and Orangetheory Fitness,” Brunswick Chairman and CEO Mark Schwabero said in a media release. “Steady market conditions resulted in slight top-line growth and sequential quarterly gross margin performance is beginning to stabilize, which is consistent with the plan discussed on our first quarter call.”
Schwabero attributed the quarter’s growth to successful domestic health club sales, offsetting declines in cardio products due to weak Cybex sales. He noted that higher freight costs and cost inflation contributed to the decrease in operating earnings.
“The fitness business continues to address challenges related to the launches of new cardio equipment, which have contributed to higher freight cost and cost inefficiencies and can be partly attributed to initial complexities around the manufacture, shipment, and installation of the new products,” William L. Metzger, Brunswick senior vice president and chief financial officer, said in the company’s July 26 earnings call. “We expect these factors to improve over the second half of 2018.”
Life Fitness will no longer be the exclusive preferred vendor for Planet Fitness after the health club chain's decision to offer broader equipment choices to its franchisees starting in the year’s third quarter, Schwabero announced in the call. (As of July 26, Planet Fitness has not made a formal media announcement regarding its preferred vendors.)
“We continue to have a strong relationship with Planet Fitness, and despite the decision to offer broader equipment choices to its franchisees starting in the second half of this year, we remain confident that we are well-positioned to be the leading partner to support their goals for growth, technology development, and improved club operator and user experience,” Schwabero said.
Schwabero said Brunswick intends to execute its planned spinoff of the Life Fitness brand by the end of the first quarter of 2019. The spinoff was approved on March 1, 2018, by Brunswick’s board of directors, just over a month after activist investor Owl Creek Asset Management issued a scrutinizing letter to Brunswick executives encouraging them to separate Life Fitness from its parent company.