Garmin has just recently reported excellent figures covering the Christmas period. Although this is one of the most profitable times of the year it’s also a volatile one where fickle customers just might spend their dollar elsewhere.
But not this time.
These results must surely put any lingering doubts to bed about what kind of company Garmins is. Back in 2007, Garmin got 73.6% of revenue from automative and that figure is now 15.9%. Aviation and Marine are currently important to Garmin but not far off half of revenue comes from the combined fitness and outdoors sectors and much of that is sports-related tech that I regularly talk about here.
Q4.2019 saw Garmin hit sales of $1bn for the first time in a single quarter with that quarter up 18% on Q4.2018. That growth came from Fitness (34%), Outdoor (16%) and elsewhere, with automotive continuing to decline. Garmin has had several new products starting to contribute to earnings but of specific interest is the TACX business that is now included within Fitness. Clif Pemble noted that TACX was “slightly dilutive to the overall gross margins of the segment” ie it’s a slightly lower margin product.
That might seem a minor point but the last quarter was the first time that gross margins dipped below 50%. Sure TACX is a part of that but I would also guess that market pressures might be starting to set a ceiling of what customers will pay. Garmin will be acutely aware of this moving forward and we might not see quite so many sales of Garmin products as we have previously.
Shareholders loved all of this with the share price briefly flicking through $100 for the first time in many years.
CTD below…
Garmin has set clear investor expectations of further growth in 2020 and that means new products to us all. There is, however, a note of caution as Coronvirus/Corvid-19 is dramatically impacting on some firms in Asia. In some areas people are simply being told to stop congregating, I would imagine races for the likes of you and me will be stopped and that coupled with people simply not going out and buying stuff will mean that fewer consumer electronics will be bought. Clearly there will be an impact on the supply of components and finished goods too.
ALL good things come to an end. It’s just a case of “when“.
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