NAUTILUS, INC.

Written by Jonathan Nelson
Columbian staff writer
Photo courtesy of Nautilus Inc.

Overview
Nike and Adidas grab plenty of attention when talk locally turns to fitness companies. But Vancouver-based Nautilus Inc. is increasingly raising its profile as a player in the industry with its line of products that range from sports equipment to apparel. Nautilus has used a blend of acquisition and product development to drive growth the past several years. That expansion meant a short-distance move from its cramped headquarters at Northeast 136th Avenue to a new, expansive campus on Southeast 164th Avenue in east Vancouver. The layout includes a football field, basketball courts, track and softballfield, and a 35,000-squarefoot exercise room for employees. Almost 600 people work at the world headquarters.

Roots
Nautilus started as a tiny company that essentially sold one product: the Bowflex, a strength training machine that used rods for resistance rather than traditional weights. The machine was sold through direct television advertising. It was a successful combination, creating rapid sales increases. In the 1990s, the publicly held company acquired the Nautilus, Schwinn and StairMaster brands and set the stage for its continued evolution.

Strategy
Nautilus is undergoing a transition that began four years ago from the leadership of founder Brian Cook to new CEO and board president, Gregg Hammann.

Hammann has directed a corporate overhaul in terms of production e ciencies, market strategies and product mix.

The first move was to get the company focused and stop relying on Bow ex, which remains a strong seller, to carry the business.

The company adopted the corporate name of Nautilus, (formerly Direct Focus) and brought the existing brands under that umbrella. Hammann poured money into research and development, a move that means a steady stream of new fitness-related products are introduced each year. In the process, Nautilus realized its line of fitness machines were weighted toward strength training and ignored the fact that the majority of consumers are looking for cardiovascular machines.A new series of products, including the TreadClimber, have been developed to create a better balance.

The company also is relying less on direct advertising by selling its machines in sporting good stores and to commercial customers, such as fitness clubs.

Nautilus' latest acquisition, PEARL iZUMI, now allows the company to dress its customers in work out clothes and shoes.

Results
Net sales have grown from $498.8 million in 2003 to $681.5 million in 2006, a 36.6 percent increase. Hammann's tenure hasn't been all success. He spent most of 2006 repairing the company's image after a disastrous fourth quarter in 2005 hurt the bottom line and sent the stock price plummeting.

The hiccup occurred because of production problems that prevented several new products to get to market during the crucial holiday shopping season.

Nautilus addressed those issues by consolidating domestic production plants, restructuring the management team overseeing that work and taking tighter control of suppliers. Sales rebounded in 2006. Still, some analysts are wary, citing longterm concerns and Nautilus' purchase of a manufacturing plant in China. Hammann believes the $72.2 million deal to buy the plant will ultimately reduce production costs and protect the company's intellectual property.