Pacific Northwest fitness, outdoor companies thrive in the pandemic, but will their sudden success endure? – OregonLive

Posted: November 13, 2020 at 9:57 am

After suffering its worst year ever in 2019, Nautilus is enjoying its best in 2020.

The Vancouver maker of home fitness products enjoyed record operating profits and a huge, 152% increase in sales in its third quarter, the company announced Monday. Its stock had leapt twentyfold in a matter of months.

What happened? Strangely enough, the global pandemic.

The virus that has crippled portions of the economy has created unprecedented opportunities in others. While hotels, countless bars and restaurants and even the nations airlines struggle to stay aloft, purveyors of home fitness products, outdoor gear, bicycles and boats are struggling to meet demand.

Consumers are looking for ways to stay fit and active that also offer some safety from the coronavirus, said Matt Powell, a prominent analyst of consumer retail trends. Companies that fulfill both needs are enjoying insanely good times, he said.

Its not just home fitness companies like Nautilus. Millions of stir-crazy Americans are desperate to get out of the house and yet stay safe.

If youre not going to Italy or Croatia, what are you going to do? said Jess Turner of the Outdoor Recreation Roundtable in Washington, D.C. People chose camping, they chose the outdoors. Its a fun and safe way to socialize with your friends and control your environment.

The question now is whether these pandemic beneficiaries can transform their sudden burst of success into something durable. Mondays news that a prospective vaccine may be nearly ready, and that it may be far more effective than many observers anticipated, sent the Dow soaring more than 800 points in one day but pulled Nautilus down more than 20%.

Jim Barr, Nautilus' CEO, argues that the pandemic has changed the fitness business much like it has changed the commercial real estate business. Working remotely has shown everyone that a traditional office is not absolutely necessary. Closures of commercial gyms have shown people that working out at home is a viable option.

We have surveys in which 25 to 30% of people say theyll never go back to a gym, Barr said.

The Vancouver companys dramatic turnaround seemed highly unlikely just a year ago. The company lost $92.8 million in 2019. Sales declined 21%, to $309 million, its lowest total in six years.

From the outside, the company looked out of ideas, out of momentum and nearly out of money. It had just $11 million in cash on hand, compared to more than $63 million the year before. Barr said the company had missed the trend toward connected fitness -- digitally enabled equipment that links users to coaches or other users.

Pelotons rise to the top of the market was largely due to its pioneering role in connected products, with people meeting up online to ride stationary bikes much as gamers meet over the internet to find Xbox opponents.

Then came the virus and the coronavirus recession. Nautilus' stock hit a low of $1.20 a share on March 23.

The companys phones lit up as the pandemic hit. A nation of gym rats who saw their commercial gyms locked up or in liquidation needed to equip their home gyms. Nautilus shares climbed as high as $28.

Two new stationary bikes introduced the prior fall sold in numbers beyond the companys most optimistic projections. The company unveiled adjustable dumbbells, kettlebells and barbells that allowed the user to set the weight. Barr has dubbed the dumbbells the toilet paper of Nautilus because the company cant keep them on the shelves.

Like many other fitness executives, Barr said the unprecedented sales surge led to complex supply chain issues. Nautilus finished its dynamite third quarter with $72.8 million of backorders.

Barr said the company was both lucky and good. It was ideally positioned to capitalize on the unexpected jump in demand.

Impacts stemming from COVID-19 are changing consumers' exercise habits and preferences in profound ways, he said. Our teams strong sustained execution has enabled us to capitalize on in-home fitness trends and elevated demand.

Some local executives are reluctant to talk about their success when so many others are suffering.

Dave Slover, owner of Alder Creek Kayak & Canoe, said his company was in the right space at the right time, which was a function of luck as much as business acumen.

His chain of kayak retail shops and rental locations had a strong summer and a reasonable year under the circumstances. The Portland companys biggest problem right now is it cant keep enough boats in stock. Customers as far away as Florida are calling looking for specific makes and models.

Going into the next year, our inventory is low, Slover said. Were trying to restock. But the manufacturers cant deliver. This whole just-in-time global supply chain is a disaster.

But Slover echoed the sentiments of other executives when he said in the COVID-19 era, his problems are minor. One of Slovers best friends had to shut down his brewpub, a victim of the virus and associated business restrictions on bars.

Hes a COVID loser, Im a COVID winner, Slover said. We dont talk about business anymore.

Things looked grim last spring for Metolius Climbing in Bend when the virus shutdown was extended to most of the significant rock-climbing sites in the state.

Sales of the companys cams, carabiners and other technical hardware cratered, said Metolius vice president Brooke Sandahl.

But Metolius also sells climbing wall footholds and handholds, hang boards and other home training products for climbers.

Unable to climb on actual rock and also unable or unwilling for safety reasons to go to the neighborhood climbing wall, climbers improvised. Many built their own climbing walls in their garages or backyards.

Metolius was perfectly positioned to capture the fast-expanding home market.

The company started selling kits dubbed a climbing wall in a box. They couldnt keep up with demand. The company is headed toward record sales this year, Sandahl said.

Metolius Climbing Inc. enjoyed a record year in 2020, despite the coronavirus. It sells the colorful plastic holds used in climbing walls.

After years of ho-hum sales, bicycles became one of the hottest products in all of retail in 2020.

Dave Guettler, owner and founder of River City Bicycles in Southeast Portland, said before there was any sign of a boom there was a bust in March, echoing the experience of many other businesses. The virus had hit, Oregonians had been asked to stay home, and River Citys sales plummeted.

Guettler, whod been expecting a strong year, had a huge inventory of new bikes on his shelves. That was when I had my freak-out phase, he said.

But customers soon returned. Guettler improvised to try to keep everyone safe. River City didnt allow customers into the store but rather set up a tent in the adjoining parking lot where customers would wait for his staff to show bikes that they thought would fit customers' needs.

The fact that weve had so little guidance on what to do and how to do it ... It forced us to make it all up as we go, Guettler said. Were not infectious-disease experts.

The enormous inventory that had been keeping Guettler awake at night seemed to vanish overnight. Instead of too many bikes, River Citys problem soon became a shortage. And it wasnt just bikes.

There were no parts, there werent any tubes or tires, Guettler said. This is something unlike weve ever seen before.

He got on the phone with employees who didnt feel comfortable working retail during a pandemic and begged them to return.

His staff was overwhelmed by the volume. At one point, his mechanics faced a backlog of 120 newly sold bikes that needed final assembly.

For those who want to go farther and faster than a bike can reasonably get them, there are motorcycles, power boats and the rig of choice for the outdoors intelligentsia the sprinter van.

Greg Storm has been in the van business since 1973 -- back to the days when a customization meant installing green shag carpet and porthole windows in the back of a Ford Econoline and then spray-painting a mural on the back quarter-panel.

He now works for Van Specialties of Tualatin, which builds custom interiors for sprinter vans. Business has been brisk for years and got even more so in 2020. People just got cabin fever real bad, Storm said. People wont fly. But they want to escape, whether its an RV or a bicycle.

Sprinter vans are not cheap. An empty van costs $40,000 to $70,000, he said. A full custom buildout of the interior can be another $50,000. Want a bathroom? Add another $12,000.

Many of these well-heeled customers are plainly surprised to find themselves considering buying a van. The COVID customer, as Storm calls them, has typically never towed a trailer and has never owned an RV.

I dont think they could probably spell van a year ago, Storm said. But theyre good people. Theyve got the beans.

-- Jeff Manning

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Pacific Northwest fitness, outdoor companies thrive in the pandemic, but will their sudden success endure? - OregonLive

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