Nautilus 2015 Annual Report Download - page 27
Download and view the complete annual report
Please find page 27 of the 2015 Nautilus annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.The increases in Direct cost of sales in 2015 compared to 2014 , and in 2014 compared to 2013 , were almost entirely related to the growth in Direct net sales. In
addition, unusual items including an arbitration settlement of $2.5 million and write-off of nutrition inventory of $1.4 million contributed to the increase in the
year-over-year cost of sales for 2015 compared to 2014.
The 20 basis point decrease in the gross margin of our Direct business for 2015 compared to 2014 was primarily driven by the arbitration settlement and reserves
for nutrition product inventory discussed above, partially offset by improvements in product mix and improved supply chain efficiencies.
The 360 basis point increase in the gross margin of our Direct business for 2014 compared to 2013 was primarily driven by improvements in product mix coupled
with lower product costs related to lower royalty expenses.
Retail
The 13.9% increase in Retail net sales in 2015 compared to 2014 was driven primarily by increased sales of our cardio products. The 13.3% increase in Retail
cardio sales for 2015 compared to 2014 was primarily due to the strong acceptance of our new line of cardio products introduced in the third quarter of 2013, along
with additional cardio products launched in the third quarter of 2014. Net sales of strength products in the Retail business increased 14.8% in 2015 compared to
2014 , primarily driven by higher sales of SelectTech ® dumbbells.
The 21.4% increase in Retail net sales in 2014 compared to 2013 was driven primarily by increased sales of our cardio products. Net sales of strength products in
the Retail business decreased 7.8% in 2014 compared to 2013 , primarily driven by lower sales of home gyms. The 53.3% increase in Retail cardio sales for 2014
compared to 2013 was primarily due to the strong acceptance of our new line of cardio products introduced in the third quarter of 2013, along with additional
cardio products launched in the third quarter of 2014.
The increases in Retail cost of sales in 2015 compared to 2014 , and in 2014 compared to 2013 , were due to the increases in Retail net sales mentioned above.
The 10 basis point decrease in Retail gross margin in 2015 compared to 2014 was primarily due to unfavorable product and customer mix as increased treadmill
sales drove product mix and currency exchange rates negatively impacted international sales.
The 10 basis point increase in Retail gross margin in 2014 compared to 2013 was primarily due to greater absorption of fixed supply chain costs due to higher sales
volume, partially offset by higher allowances related to discontinued inventory and a less favorable product mix.
Selling and Marketing
Dollars in thousands Year Ended December 31, Change
2015 2014 $ %
Selling and marketing $101,618
$81,059
$20,559
25.4%
As % of net sales 30.3%
29.5%
Dollars in thousands Year Ended December 31, Change
2014 2013 $ %
Selling and marketing $81,059
$66,486
$14,573
21.9%
As % of net sales 29.5%
30.4%
The increases in selling and marketing in 2015 compared to 2014 , and in 2014 compared to 2013 , were primarily due to increases in media advertising of $12.1
million and $6.8 million , respectively, as well as increased variable sales expenses and program costs of $7.3 million and $4.8 million , respectively. In addition,
production costs for creative media increased $1.6 million in 2014 compared to 2013 .
The increase in sales and marketing as a percentage of net sales in 2015 compared to 2014 was primarily due to the increased investment in media advertising, as
well as new marketing initiatives intended to broaden the reach of Direct products to the consumer. The decrease in sales and marketing as a percentage of net sales
in 2014 compared to 2013 was primarily due to slower growth of media advertising compared to revenue.
24