Garmin Ltd. reported its Fitness segment grew twice as fast as its Outdoor segment in fourth quarter, when both segments delivered record revenues and accounted for half the company’s top line and profit growth.
Sales at the Outdoor segment, which focuses on the hikers, hunters, golfers, law enforcement and dog owners, grew 7 percent to $126.6 million compared with the quarter ended Dec. 29, 2012. Gross and operating margins within the segment remained at 62 percent and 38 percent respectively. Segment sales reached $411.0 million for the full year, up 2 percent.
Revenue at the Fitness segment 14 percent to $118.6 million, thanks in part to the launch of the Forerunner 220 and 620 for runners and the Vector power meter and the Edge Touring devices for cyclists. Gross and operating margins improved 90 and 270 basis points to 62.0 and 37 percent respectively as sales shifted toward the higher- margin, new products. Sales reached $356.3 million for the full year, up 11 percent.
Garmin reported overall net sales declined 1 percent to $759 million during the quarter due to a 12 percent drop at its Automotive/Mobile segment, which generates more than half its revenue. Net sales increased 25 percent at its Aviation segment and 13 percent at it Marine segment. Revenues declined 3 percent to $2.72 billion for the full year.
In its initial guidance for 2014, the company said it expects revenues of $2.6-$2.7 billion as growth in the outdoor, fitness, marine and aviation segments largely offsets ongoing declines in the PND market.
“We anticipate gross margins will improve to 54-55 percent as segment mix continues to shift toward higher margin segments,” said Pemble. “Operating margins are forecasted to decline slightly to 21 percent due to ongoing research and development investment. This results in a currently forecasted 2014 EPS range of $2.50 – $2.60.” The EPS range assumes a full-year EUR/USD currency exchange rate of 1.35.
Garmin’s new products for 2014 include the Vívofit fitness band shown to the the immediate right. Garmin launched the Vivofit in January with an MSRP of $129, or $20 below the Nike+ Fuelband Nike , (far right) launched in January, 2012. Garmin claims the Vivofit’s battery can last up to a full year compared to just four days advertised for the Nike+ Fuelband. The Vivofit also is the first band to assign personalized daily fitness goals based on the user’s activity. Garmin also expects its Approach S4, G7 and G8 devices for golfers, its growing line of VIRB series action cameras and further penetration in the sport dog and pet market will drive growth in 2014.
“With these exciting products and our strong cycling and running line-up, we enter 2014 with an expectation for continued growth,” said President and CEO Cliff Pemble.
