Garmin Ltd.’s Outdoor/Fitness segment was its most profitable by a wide margin in the fourth quarter and helped offset a 31.1% drop off in sales to the auto/mobile segment, where its personal navigation devices, or PNDs, continue to lose market share to OEM systems and smartphones.
Net sales for the segment reached $170.6 million for the 13 weeks ended Dec. 25, 2010, up 14.7% from the fourth quarter of 2009.
Operating income rose just 2.2% to $81.5 million, or 47.8% of net sales. Full year sales of fitness products for running and cycling grew 42% and sales of more traditional outdoor products up 7%. Garmin is forecasting the fitness and more mature outdoor segments to grow 25% and 5% respectively this year, when it will begin reporting financial results for fitness and outdoor separately. Gross operating income in the Fitness/Outdoor segment, meanwhile, rose 18% to $251 million in 2010, or nearly 40%, of the company’s operating income in 2010. Gross margins for outdoor/fitness reached 66% in the quarter, even as they declined to 13% from 35% in the auto/mobile segment.
Executives said the company’s GTU 10 tracking device is creating incremental revenue opportunities in the outdoor business. The device, which REI sells for $199.95, allows users to track the whereabouts of children, pets, vehicles or other objects using smartphones, Garmin’s nuvi GPS units or computers.
Garmin expects revenues from the sale of personal navigation devices, or PNDs, to decline by about 20% in 2011 due to lower unit sales and lower ASPs. The company said growing sales of its lifetime maps will also require it to defer more of its revenues and income moving forward.
In 2011, these headwinds will cause total revenue to decline as declines in the PND market overwhelm growth in the other markets.
