There's been some thought-provoking posts on this board that have been highly critical of the management of the direct side of the business. Most focus on the loss of key personnal that have been with the company for years. One post today talked about the perils of a company neglecting it's core competency. I was curious about what led such a direct marketing success story to seek new management in the first place, so I thought it might be interesting to look at the year preceeding Hammann's appointment in 2002. For a company staffed with direct marketing talent, they were having serious difficulties demonstrating that talent as the year wore on. As the company's price peaked at about $45 in the spring of 2002, ICON introduced the CrossBow, a lower-priced competitor to the Bowflex and by all accounts, a piece of junk. Regardless of the established brand position of the Bowflex and the great direct marketing expertise, the Crossbow seriously undermined the Bowflex. Growth projections were dramatically lowered. One analyst I spoke to talked about the Q3 conference call of that year saying he "couldn't believe what he heard". From ramping up guidance to high double digits in the prior two quarters, the company was now not only lowering guidance, but suggesting that there might be no growth in 2003, this all in the space of three months. The company's earnings peaked in Q4 at $2.84. By Q1, revenue had dropped from $135 mill. to $129 mill. y-y. Op. income had dropped from $36 mill. to $21 mill. and e.p.s. had dropped from $0.67 to $0.42. With the first competitive threat that the company had to deal with, the direct marketing stars were plainly floundering. The C.E.O. exited in July of 2003 when the stock hit a low of $10 and five months later annual earnings hit $1.06 from $2.84 the year before. So much for core competency in direct marketing. I'm not suggesting that the direct channel performance under Hammann can't be improved. As well, sustained earnings growth has yet to be demonstrated. There are valid issues here. However, a little more historical perspective is in order on just how imperiled and vulnerable the business was when he took over and how inadequate the old team proved itself to be when competition emerged.
Astral wrote: "...their inventory doubled last year. Stuff isn't selling..." Actually inventory is down $30M Dec vs March and is now <50% higher then last year at this time. They may be making good progress and after all sales are up quite a bit over this period as well.
I take a few days off and you guy come out of the wood work. Anyway,from the sound of this board I'd say the writing is on the wall.... or is it the proverbial wall of worry we have here? Somebody please let me in on the secret to have it all figured out before hand.
BTW- 3rd tow in water.
I have worked in the warehouse industry for 25 years. This is the worst I have ever seen. No accountability or support. Remember the DC is about 15 miles from the HQ, so they are just a bunch of loose cannons, goofing off and stuff. I can see the DC from were I work. I have seen pallets dumped outside in the rain. Run in the boxes with the forklift. I saw temps fired, then 2 months later, with a new boss re-hired. You have to see it to believe it.
I am not sure if warehouse employee turnover is the best measure to use when evaluating the future potential of a company. Specifically with Nautilus it is just a matter of time until the majority of the products are produced overseas and shipped directly to either the consumer or the big box retailer.
I would be much more concerned about turnover in their sales/marketing departments since their strategy is to build brand identity and loyalty. Rather than turnover, I would be looking at growth in new customers and growth in additional sku's with existing customers.
Thanks for the 'culture' insight from both of you. Can I challenge that a little bit? No company is perfect, I think some of the stuff you're talking about is found in any company, do you agree? Say normal is about 50% of employees' time and attention focussed on BS and about 50% getting work done. Where would you say Nautilus is? More than 50%? Less?