Garmin has released its trading results for the third quarter ended 26 September 2015, with the strong US Dollar creating a head-wind for the company. Summary items for the quarter and recent product announcements include:
- Total revenue of US$680 million in Q3 2015 – with fitness, outdoor, aviation and marine delivering 61% of total revenue
- The relative strength of the US Dollar compared to other major currencies negatively impacted revenue by approximately US$52 million, or 7%, in the third quarter of 2015
- Gross and operating margins were 53% and 18.5%, respectively; gross margin was impacted by a geographic revenue mix shifting toward countries with weaker currencies relative to the US Dollar and lower average selling prices; operating margin was further impacted by strategic investments in R&D and advertising
- Shipped approximately 3.9 million units in the quarter, a 4% increase over the year ago quarter
- Pro forma EPS (Earnings Per Share) of US$0.51 for third quarter 2015
- Announced new products available for the fourth quarter including fitness and wellness devices incorporating Garmin Elevate wrist-based heart rate technology and the babyCam serving a new product category
“The global economic environment and intensified competitive landscape have challenged our ability to repeat the strong financial performance of 2014,” said Cliff Pemble, President and CEO of Garmin.
“However, we have a solid plan to improve our results over the long term. Our plan includes compelling new products, some of which have already launched in the fourth quarter with many more to come in 2016. We look forward to once again meeting the expectations of our investors and ourselves while creating long-term sustainable value.”
The fitness segment posted revenue growth of 23% in the quarter. The company noted that the sequential acceleration in growth reflects the strength of wellness, multisport, and cycling product offerings.
Gross margin fell to 54% in the quarter, while operating margin declined to 19%. The gross margin decline was driven by both the unfavourable currency movements and a competitive pricing environment for certain product categories. The operating margin decline further reflects ongoing investment in advertising to support Garmin’s long-term goals in the segment.
Cliff Pemble added, “We continue to view these investments as appropriate given the sizeable opportunity that exists in the global fitness and wellness markets. We recently introduced a new line-up of Forerunner products including the 230, 235 and 630.
“The Forerunner 235 is Garmin’s first product to incorporate Garmin Elevate wrist-based heart rate monitoring technology. The Forerunner 630 builds off our prior advanced running watches with the addition of new running metrics and physiological measurements. Each of the new devices are compatible with Connect IQ, our smartwatch platform.
“Also new for the fourth quarter is the vívosmart HR, offering wrist-based heart rate via Garmin Elevate, along with an always-on display, smart notifications and activity intensity levels. To support these products and many others, we recently launched an update to Garmin Connect Mobile. The update offers a new modern and colourful interface, the ability to customize based on individual needs and improved social capabilities.”
