Garmin experienced a double-digit decline in revenues from its fitness segment for a second consecutive quarter. That decrease was the primary contributor to an overall 6 percent sales decline to $1.24 billion from nearly $1.33 billion for the period ended June 25. Overall, double-digit sales improvement for its outdoor and aviation segments was offset by sales declines in fitness, marine and auto. By geography, sales in the EMEA and APAC regions, each impacted by foreign exchange rates, both fell. Americas’ region revenues were flat.
President and CEO Cliff Pemble told analysts that “the rapid and relentless strengthening of the U.S. dollar will be a significant headwind” to the Switzerland-based company for the remainder of 2022. The group has lowered its prior fiscal year revenue forecast of $5.5 billion by 9.1 percent to about $5 billion, about flat year-on-year, with annual EPS pegged to decline about 16 percent to $4.90 a share.
During the second quarter, Garmin continued to experience some supply chain constraints that restricted order fulfillment within its marine and aviation segments. In some instances, the company has been forced to increase its weeks of supply for raw materials to 26 to 52 weeks on hand from 13 to 26 before the pandemic. And to combat higher freight costs, Garmin has shifted more inventory shipments to boats, which are lower cost but require the company to carry more inventory.
Operating income declined 21 percent in the second quarter to $292.7 million from $371.2 million. Net profits were down by 18.7 percent to $257.9 million and are off 12.6 percent for the year’s first half at $469.5 million.
Fitness segment revenues were down 34 percent at $272.1 million versus $413.2 million, after a 28 percent drop in Q1, with an operating income of $23 million. Pemble confirmed markets are heavy with inventory from every manufacturer within indoor cycling. Retailers will need time to work through that merchandise. But sell-throughs within the cycling computer side are described as very good with appropriate channel inventories. Overall fitness segment sales should improve in the second half as winter approaches in the Northern Hemisphere, Pemble said. Garmin celebrated Global Running Day during the period by launching its Forerunner 255 and Forerunner 955 watches.
Outdoor segment sales climbed 18 percent higher in the period to $381.9 million from $323.4 million, with the growth led by adventure watches. Segment operating income was $154 million. Citing the segment’s strong year-to-date performance, Garmin estimates its annual revenue growth rate at approximately 20 percent.
Marine segment sales sunk 7 percent to $242.8 million from $261.8 million, with the group unable to satisfy all the market demand due to supply chain constraints. Elsewhere, aviation segment sales flew 13 percent higher to $204.7 million on growth in OEM and aftermarket categories, and auto declined 6 percent to $139.3 million as lower orders from supply chain-challenged automakers impacted segment sales.
