New products for golfers, dog training and outdoorsmen propelled Garmin Ltd.’s Outdoor segment to double-digit growth in the third quarter, while the absence of new products caused Fitness revenues to drop. 



In the Outdoor segment revenue rose 11 percent to $105 million during the third quarter ended Sept. 29. Growth was again driven by Garmin’s golf line-up, dog tracking and training and the recently introduced fenix, a GPS-enabled watch for hunters, hikers, and outdoor enthusiasts. During the quarter, Garmin delivered the Alpha GPS Track and Train System, its first product to incorporate electronic dog training technology from Tri-Tronics, which Garmin acquired last year. Segment operating income grew 17 percent, gross margin rose 300 basis points (b.p.) to 69 percent and operating margin rose 200 b.p. to 46 percent.

In the Fitness segment revenues declined 6 percent to $65 million as growth in cycling and multi-sport could not offset slowing sales of running watches. Garmin again faced a difficult year-over-year comparison due to 2011 discounting on the end-of-life Forerunner 305 and strong early shipments of the Forerunner 610. Less discounting this year enabled the Fitness segment to expand gross margins 500 b.p. to 65 percent and operating margins 300 b.p. to 33 percent. With the third quarter 2012 launch of the Forerunner 10 – a $129 running watch – Garmin expects the segment to regain market share in the value price category vacated by the 310 at the cost of lower margins in the fourth quarter.


Gross margin for the overall business was 53 percent in the third quarter improving from 52 percent in the prior year with all segments posting improved or steady gross margins. Gross profit increased 4 percent to $359 million. The outdoor segment made the largest contribution to the gross profit improvement, posting a 69 percent gross margin and over $72 million in gross profit. We also had strong gross margin expansion in fitness, aviation and marine where product mix has shifted toward high margin business in the current quarter.