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Gaiam Reports Drop in First Quarter Revenue

7 May, 2009 By: Angelique Flores


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Gaiam Inc. remains optimistic for the coming year, despite reporting a revenue drop for the first quarter.

The lifestyle and fitness company announced a 14.2% decrease in first-quarter (ended March 31) revenue from the same period last year, to $55.9 million from $65.2 million. The dip came primarily from a drop in consumer spending; closure of businesses; reporting of international revenue, affected by the transition from product sales to licensing; and a planned reduction in catalog circulation and conservative retail buying.

“While our first-quarter results reflect the broader market trends, we remain committed to our strategic plan,” said Lynn Powers, president and CEO of Gaiam. ”In this difficult economic climate, we are focused on the appropriate balance of cash conservation and investing in the growth strategies that will build our brand and partnerships.”

One new strategy the company announced during the call was a new licensing deal with Reebok. The new partnership will allow Gaiam to produce and distribute fitness DVDs and accessories using the Rebook brand for specific retail channels, including specialty, department and sporting good stores.

Gaiam, which is primarily known as a fitness brand for women, hopes this move will expand its reach into the men’s and younger women’s demographic, Powers said. By using the Rebook brand, Gaiam will be able to enter new distribution channels such as department stores, in which the company doesn’t already have a footprint, she said.

“We expect this licensing deal to impact revenue the beginning in fourth quarter of this year,” Powers said.

DVD in general was a bright spot for the company in the first quarter, traditionally a popular one for fitness titles. Growth in fitness DVDs at retail increased 22% in the quarter, according to Nielsen VideoScan. Gaiam’s controlled distribution market share, which includes both company-owned and distributed titles, was about 45% for the quarter.

The company credits some of that success to rollouts of category management partnerships with retail stores. These deals were key in securing shelf space, which in turn fueled growth in sales, said Lynn Powers, president and CEO of Gaiam.

“We intend to add titles and a new brand to the Conscious Media library of titles, which will help us continue to grow market share in the non-theatrical sector,” she said.

Gaiam generated free cash flow of $7.1 million, a $10.5 million improvement from cash use of $3.4 million during the same period the previous year.

“We continue to use the current macroeconomic environment as an opportunity to further expand our branded store within store presence at retail, which we have increased to 10,500 and focus on the free cash flow," said Gaiam chairman Jirka Rysavy.
 


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