Led by a strong performance by its aviation, marine, outdoor and fitness segments, Garmin recorded a significant improvement in gross and operating margins for the fourth quarter.
Total revenues were up by 4 percent to $932 million, with marine, aviation, fitness and outdoor collectively growing by 13 percent from the year-ago quarter.
Sales in Garmin's so-called outdoor segment jumped by 25 percent to $254.6 million, with significant contributions from adventure watches. The gross margin in this segment was up by 4 percentage points to 67 percent, and the operating margin also gained 2 percentage points to 38 percent, which resulted in an increase of 31 percent in operating income. During the quarter, Garmin launched Instinct, its newest line of adventure watch, and the GPSMAP 66 series of outdoor handhelds.
Revenues from Garmin's fitness segment remained stable at $277.0 million. The gross margin was down by one percentage point to 52 percent, while the operating margin remained stable at 21 percent, resulting in operating income growth of 2 percent. The company has introduced the Vívoactive 3 Music with 4G LTE device, which includes connected safety features.
The management said that the pending acquisition of Tacx, which it announced on Feb. 12, is an “exciting” opportunity to expand into the year-round indoor cycling and training market. Headquartered in Wassenaar, the Netherlands, with a distribution center in Vogt, Germany, Tacx is best known for its line of indoor smart trainers, including the Neo 2 and the Neo Bike, which measures speed, power and cadence. The completion of this acquisition, which is subject to customary conditions, is expected to occur in the second quarter of 2019.
Garmin's marine and aviation segments also performed well, with sales rising by 13 percent to $94.7 million and by 22 percent to $158.3 million, respectively. However, revenues were down by 28 percent to $147.6 million in the automotive segment, primarily due to the ongoing contraction of the PND (Personal Navigation Device) market.
By region, the company's overall revenues increased by 3 percent to $443.4 million in the Americas, by 17 percent to $145.9 million in Asia-Pacific, and by 1 percent to $342.9 million in Europe, the Middle East and Africa (EMEA).
Overall, Garmin's gross margin for the quarter advanced by 2.8 percentage points to 59.1 percent, while the operating margin advanced by 1.4 percentage points to 23.3 percent. Net income rose by 33.5 percent to $190.2 million.
For the full year, sales advanced by 7 percent to $3,347 million, with aviation, marine, outdoor and fitness collectively increasing 16 percent over the prior year. The gross margin was up by 1.5 percentage points to 59.1 percent, while the operating margin improved by 3.5 percentage points to 23.9 percent.
Moving to 2019, the company anticipates a further increase in revenues to about $3.5 billion, with the gross margin expected to reach 59.5 percent, based primarily on higher expectations for its fitness, aviation, outdoor and marine segments, again offset by the auto segment.