Garmin (NASDAQ: GRMN) on Wednesday announced fiscal first-quarter results that continued its recent streak of solid sales gains and healthy profitability. The operating trends kept the GPS device giant on track for a solid fiscal 2019, although investors won't have a clear reading on what to expect for a few months, after Garmin's full product lineup has made its way to retailers ahead of the all-important holiday shopping season.
Still, the first-quarter results answered some important questions for investors about Garmin's improving position following last year's blockbuster result.
Data source: Garmin's financial filings.
What happened this quarter?
Sales growth was strong, with gains in each of Garmin's four nonautomotive divisions easily offsetting falling sales for car navigation products. The company's bottom-line profitability held steady despite declines in some key niches, including fitness trackers.
Image source: Getty Images.
Key highlights of the quarter include:
- Revenue growth was 8% to mark a slight increase from the 7% boost Garmin achieved through the full fiscal 2018 year. The auto segment was the only division to shrink, but its 10% drop was offset by double-digit spikes in both the marine and aviation units. Garmin's outdoor segment, home to its hiking smartwatches, was a relative laggard at a 7% sales increase.
- Gross profit margin fell to 59% of sales from 60% a year ago. Rising sales in the premium aviation and marine divisions supported profitability, but these gains were overwhelmed by slightly weaker results in the fitness tracker category.
- Selling expenses grew at a slower pace than sales, ensuring that operating margin held steady at 20% of sales through both periods.
What management had to say
CEO Cliff Pemble found a few things to celebrate about Garmin's record first-quarter sales result. "Revenue and profit grew," he said in a press release, "led by strong double-digit growth in marine, aviation, fitness, and outdoor [segments] on a combined basis." Management indicated that a successful launch lineup for the next few months will be key to protecting its positive momentum, though. "Our product portfolio is very strong," Pemble said, "bolstered by recent introductions, with more to come throughout the remainder of the year."
Garmin affirmed its 2019 outlook that calls for sales growth of about 5% to $3.5 billion and adjusted earnings of $3.70 per share compared with $3.69 per share in 2018. Investors might have been hoping for a modest upgrade to those predictions, given the solid start to the year. However, Garmin has to execute at a high level across many product releases over the next several months. And a few of its biggest consumer releases, in the smartwatch and fitness categories, haven't been unveiled yet.
Until that lineup takes concrete shape, and until retailers begin stocking Garmin's full range of products in advance of the holiday shopping season, it's impossible to judge just how well the company's devices will sell. If history is any guide, though, Garmin might update its outlook to reflect actual retailer inventories in the second half of 2019, just as it did in 2018 and 2017.
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