Garmin's revenue for first quarter of the year increased 28% to $158.3 million from $123.8 million in the year-ago quarter. Gross margins fell 950 bps to 50.8% for the 2004 first quarter compared to 60.3% last year. SG&A expenses were reduced 40 basis points as a percentage of sales to 10.5% compared to 10.9% last year. Net income was $34.7 million, or 32 cents per share, compared to $41.5 million, or 38 cents per share, in Q1 2003.
Much of the decline in gross margins was attributed to increased raw materials costs, particularly Flash memory chips. Product mix was also a factor; the company saw consumers gravitating towards lower margin products, but according to management, the introduction of 35 new products in Q2, all at higher margins, should alleviate this. Competitive price pressure was said to be insignificant.
Because of these sales and supply chain trends, the company has changed its guidance to reflect the decline in margins. Sales are expected to be “higher” margins are expected to be “lower,” and net income is expected to be on par with the previously issued guidance.
>>> Gross margin “fell” to 50.8%. Most should be so lucky…
