Garmin , best known for its personal navigation device business, is forecasting a strong year ahead for sales, citing increased demand for its outdoor and fitness GPS products.
Garmin’s traditional personal navigation device, or PND, business has been in decline as consumers turn to GPS-enabled smartphones that offer turn-by-turn navigation, but the drop in popularity of PNDs forced the company and its European rival TomTom to look for new areas of growth. The latter invested in software and apps, while the former focused more on its fitness and outdoor products and high-margin mapping services — a move that has paid off handsomely.
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Shares of the company jumped as much as 12 percent to a near four-year high of $49.93 today as the company cited particularly strong demand for its fitness products in forecasting healthy 2012 sales. In fact, along with the outdoor segment, which makes hiking gadgets and dog trackers, the fitness business is expected to contribute nearly 30 percent of revenue in 2012, compared with 12 percent in 2008.
It seems athletes and joggers don’t mind coughing up the extra cash for watches with GPS sensors, golfing accessories with preloaded courses, and cool fitness apps. Garmin expects its outdoor segment to grow 5-10 percent in 2012, while its fitness segment is forecast to grow 20-25 percent.
Meanwhile, the PND segment is expected to decline 7-10 percent this year, and contribute just over half of the company’s total revenue, down from almost 80 percent four years ago. The one bright spot is the company’s strategy of bundling personal navigation devices with high-margin mapping services, which seems to be paying off. Last year, Garmin predicted that the shift in strategy wouldn’t help results until the latter half of 2012, but it seems the move has been more lucrative that expected.
Garmin’s fourth-quarter results blew expectations out of the water. Even though Garmin continued to sell fewer PNDs in the fourth quarter, higher selling prices helped boost revenue at the segment by 4 percent, and accounted for 70 percent of total sales during the three months.
Fourth-quarter revenue at the outdoor-fitness segment increased 35 percent to $121 million. Revenue from the automotive/mobile segment increased 4 percent to $579 million, compared to a 31 percent decline last year. Excluding items, Garmin earned 96 cents a share, while revenue rose 9 percent to $910 million. Garmin expects 2012 profits of $2.45 to $2.60 a share, excluding items, and revenue of $2.7 billion to $2.8 billion.
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To contact the reporter on this story: Emily Knapp at staff.writers@wallstcheatsheet.com
To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com
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