Garmin Ltd. saw a mixed performance from its sports-related segments as tough comparisons and supply chain disruptions distorted results. For the current year, Garmin predicted flat sales for the Fitness segment but growth of 20 percent for the Outdoor and 15 percent for the Marine segments.

Fitness Segment Sees Flat Sales In Fourth Quarter
In the Fitness segment, Garmin’s largest segment, sales in the full year reached $1.53 billion, up 16 percent as strong demand for advance wearables and cycling products fueled the growth, said Cliff Pemble, Garmin’s president and CEO, on a conference call with analysts.

Full-year gross and operating margins were 53 percent and 24 percent respectively, resulting in operating income growth of 17 percent over the prior year in the Fitness segment.

In the fourth quarter, Fitness revenue was flat over the prior year at $470.1 million as growth in wearables was offset by lower revenue in cycling. Gross margin and operating margins were 49 percent and 22 percent, respectively, resulting in $104 million of operating income.

A standout product has been the Lily Sport smartwatch for women with a display that hides when not in use. Pemble said, “Customers buying Lily are overwhelmingly new to the Garmin brand, demonstrating the power of differentiation to attract new customers.”

During the quarter, Garmin’s Fitness segment also announced multi-year sponsorship agreements at both the high school and collegiate levels to showcase its running watches. Garmin also recently released its 2021 Connect Fitness Report which showed double-digit growth in nearly every activity category.

However, Pemble said the cycling category has more than doubled over the past two years, fueled by pandemic-driven demand for both indoor and outdoor cycling products, and the market is starting to normalize at levels below recent peaks. Sales remain “well above” pre-pandemic levels.

Said Pemble of the segment’s 2022 outlook, “With this in mind, we expect Fitness revenue to be flat year-over-year, as growth in wearables is offset by lower revenue in cycling products.  In addition, we expect revenue to decline in the first half as we compare against stronger periods in the prior year. In the back half of the year, we expect to return to growth as the cycling market stabilizes and with contributions from new products.”

Outdoor Segment Sales Decline 8 Percent In The Fourth Quarter
In the Outdoor segment, full-year revenue increased 14 percent to $1.28 billion with growth across multiple categories, driven by demand for adventure watches. Full-year growth and operating margins were 65 percent and 38 percent respectively, resulting in operating income growth of 9 percent.

In the fourth quarter. Outdoor revenue decreased 8 percent primarily due to component constraints in its traditional handheld and dog product categories. Pemble said, “We ended the year with unusually high back orders, which were pushed into the new year.”

Gross margin and operating margins in the fourth quarter for the Outdoor segment were 65 percent and 37 percent, respectively, resulting in $142 million of operating income.

Highlights for the Outdoor segment last year included the Descent Mk2i dive computer and Descent T1 transmitter featuring its SubWave sonar-based communication named one of 2021’s greatest innovations by Popular Science.

Recent developments include the announcement on January 18 of major updates to the Phoenix adventure watch series featuring a new design in the touchscreen display. Last week, Garmin’s Outdoor segment announced the launch of its Instinct 2 series in two sizes, expanding the model’s market.  Select Instinct 2 models with solar technology can operate indefinitely, which Pemble called “a breakthrough achievement” in the smartwatch space.

Garmin also introduced the Epix multisport smartwatch with an Amoled touchscreen display and battery life of up to 16 days.

Said Pemble, “Demand for these new products has been very strong and we expect them to be a significant catalyst for growth in the coming year. With these things in mind, we anticipate outdoor revenue will increase approximately 20 percent for the year.

Marine Segment Sales Climb 14 Percent In The Fourth Quarter
In the Marine segment, sales revenue increased 33 percent in the year to $875.2 million with broad-based growth across all categories led by strong demand for chart plotters. Said Pemble, “We’ve benefited from both market expansion and share gains driven by our strong product portfolio.”

Full-year growth and operating margins were 57 percent and 28 percent respectively, resulting in operating income growth of 39 percent.

In the fourth quarter, Marine revenue increased 14 percent to $196.4 million as trends experienced throughout the year continued. Gross margin and operating margins were 54 percent and 20 percent, respectively, resulting in $39 million of operating income.

During the quarter, the Marine segment launched the GPSMAP 79 marine handheld series, as well as the GMR Fantom range of dome radars. These radars offer a broad range from 20-feet to 48 nautical miles, improved target detection and features to enhance situational awareness on the water. Also during the quarter, Garmin’s Surround View Camera System was named the 2021 DAME Design award winner.

Garmin recently acquired Vesper Marine, a company specializing in the design of modern VHF radio systems for the marine market to support the segment’s growth.

Pemble said, “Looking forward, we anticipate this strong interest in boating and fishing will remain strong. Boatbuilders continue to report strong sales and retail partners are preparing for another year of growth. With these things in mind, we anticipate revenue from the Marine segment will increase 15 percent, surpassing the $1 billion threshold for the year.”

Fourth-Quarter Results Top Estimates
In its other segments,  revenue from the aviation segment grew 13 percent in the fourth quarter to $177.6 million Revenue from the auto segment grew 21 percent in the fourth quarter to $169.2 million.

Companywide revenues reached $1.39 billion in the quarter, a 3 percent increase over the prior-year quarter and just ahead of analyst expectations of $1.37 billion. GAAP EPS was $1.48 and pro forma EPS was $1.55 against $1.73 on both a reported and adjusted basis a year ago. Adjusted EPS was down 10 percent but topped Wall Street’s consensus estimate of $1.41.

For the full year, Garmin recorded consolidated revenue of $4.98 billion, a 19 percent increase over the prior year. GAAP EPS was $5.61 against $5.17 a year ago. Pro-forma EPS was $5.82 versus 5.14 a year ago, representing 13 percent growth year over year.

Garmin expects full-year 2022 revenue of approximately $5.5 billion, an increase of approximately 10 percent over 2021. Garmin expects its full-year pro forma EPS to be approximately $5.90.

Photo courtesy Garmin