Garmin has announced its results for the quarter ended 27 June 2015. Total revenue reached US$774 million in Q2 2015. This was down 1% year on year due to a weaker performance in Garmin’s auto division. However, Garmin saw its fitness, outdoor, aviation and marine categories deliver 61% of total revenue and collectively grew 11% year on year.
Revenue for Garmin’s fitness segment reached US$159 million, up 5%. Q2 saw Garmin roll out the Forerunner 225 with wrist-based heart rate monitoring, and the Edge 20/25, billed as ‘the world’s smallest GPS enabled bike computers.’
The relative strength of the US Dollar compared to other major currencies negatively impacted revenue by approximately US$59 million, or 8%, in the second quarter of 2015. Gross and operating margins were 54% and 22%, respectively, and were impacted by ‘unfavorable currency movements and the higher mix of promotional products sold during the quarter.’
The company shipped over 4 million units in the quarter, an 8% increase year on year. Garmin saw a GAAP and pro forma EPS (earnings per share) of US$0.72 for the period.
Cliff Pemble, President and Chief Executive Officer of Garmin said, “Like many global companies, Garmin has experienced downward revenue and profit pressure due to recent unfavorable currency movements. In light of this reality, we feel positive about our first half revenue performance.”
He continued, “With our ongoing research and development efforts and exciting advertising plans, we believe that the foundation for long-term success is being established now.”
The fitness segment posted revenue growth of 5% in the quarter driven by activity trackers and multisport products. While the growth rate is below that of recent quarters, Garmin noted that it experienced significant sell-in during the second quarter of 2014 as it established its retail presence in the mass-market activity tracker category.
Gross margin for the fitness segment fell to 56% in the quarter, while operating margin declined to 21%. The gross margin decline was driven by both the unfavorable currency movements and competitive pricing dynamics in the activity tracker category. The operating margin decline reflects the significant investment in advertising and research and development to support Garmin’s long-term goals in the segment.
A company release added, ‘We believe these investments are appropriate and timely given the sizeable opportunity that exists in the global fitness and wellness industries. During the quarter we introduced the Edge 520 which adds Strava segment integration and smart notifications when paired to a smart phone. We also introduced the Varia family of cycling products, including smart lights and radar, which are new product categories for Garmin.’
