Nautilus, Vancouver, Washington, reported first quarter 2018 sales of $114.8 million, a 1.4 percent increase year-over-year, according to financials released May 7.
Retail segment sales increased 13.7 percent to $43 million, representing growth across multiple product lines and with specialty and commercial customers.
Due to an expected decline in TreadClimber sales, the company's direct segment sales decreased 4.7 percent to $71.2 million. This loss was partially offset by new product growth, including the Bowflex HVT, according to the report.
The quarter's business exceeded Nautilus' initial guidance range, primarily due to solid momentum in the retail segment, according to Nautilus CEO Bruce M. Cazenave.
"New products introduced during the middle of last year such as the Bowflex Results Series and HVT products continued to meaningfully contribute during the first quarter, and we are on track to launch additional Direct and Retail segment products later this year," he said in the media release announcing results. "The introduction of the commercial Max Trainer product at the recent IHRSA show has been extremely well received, and we look forward to the anticipated uplift in Octane sales when the product starts shipping during the third quarter of this year.”
The commercial Max Trainer, which was specifically designed for the functional training area of the commercial club space, will come to market in the fall.
Gross margins decreased by 320 basis points to 51.3 percent, as a result of lower direct gross margins and a shift in segment revenue mix. Retail and direct margins decreased by 80 and 250 basis points, respectively, during the quarter.
Nautilus' operating income also decreased 15.7 percent to $10.7 million partially due to new investments in strategic initiatives, according to the company. EBITDA from continuing operations dropped 11.3 percent to $13.1 million.
“Implementation of the multi-faceted 2018 plan we described in previous communications is proceeding as planned and on schedule," Cazenave said of the next three fiscal quarters. "This includes systems integration, consolidation of warehousing facilities, supply base realignment and restructuring of our international sales and support teams. ... Based on our first quarter results, planned rollout of new offerings and operational improvements, we are well positioned to return to full-year top-line growth in 2018, and reaffirm our full-year guidance range on revenue and operating income.”
Additionally, Nautilus' new digital technology platform, still in development, is advancing as planned, Cazenave said.
"These initiatives are anticipated to enhance and support our growth initiatives, including new product introductions and improved margins, going forward," he said.
In February, Nautilus reported virtually flat 2017 growth.