Garmin Ltd. reported that its Outdoor segment again outpaced its other three segments in the second quarter by increasing sales 24 percent to reach the $100 million milestone. The performance helped Garmin grow earnings 70 percent far beyond analyst’s expectations.
In the Outdoor segment growth was driven by golf, dog tracking and training products and Garmin's recently refreshed eTrex series of handheld GPS devices, which are sold at many sporting goods stores. Gross margin increased 200 b.p. to 67 percent and operating income grew 23 percent, driven by new products and category expansion. In the golf market, for instance, Garmin’s high-end wrist watch, the Approach S3, and its newest hand-held, the Approach G6, both contributed to the strong results. The strong performance of golf and dog products prompted GRMN to increase its guidance for the segment. In late July, the company introduced its latest outdoor product, the $400 MSRP fçnix wristwatch, which offers an altimeter, barometer and compass for the outdoorsman and styling that is appropriate for everyday use.
The Fitness segment operating income surged 35 percent on a 5 percent increase in sales over the prior quarter thanks to promotions that focused on discounting the end-of-life Forerunner 305 to make way for the launch of the Forerunner 610 watch. Gross margin surged 1,100 b.p. to 69 percent and operating margin increased to 42 percent. The Forerunner series are favored by many serious runners. Demand for high-end Forerunner 910XT and 610 and the Edge 500 remains strong and helped drive margin expansion. Garmin expects sales to accelerate in the back half as Fitness launches new products for the holidays, including the Garmin Swim, which tracks stroke type, stroke count, distance, pace and length for swimmers. Nevertheless, GRMN lowered its guidance for the Fitness segment due to product delays.
