Garmin Admits Profit Will Drop In 2020
Garmin Australia who last reported a $4.4 million profit on revenues of $176 million are facing several challenges including Coronavirus supply issues alongside a predicted downturn following three strong years of growth.
Garmin global executives recently told investors that it sees financial challenges in the year ahead with sales tipped to fall due to a ‘slow year’ and a fall in profitability.
The comments were made ahead of the Company facing new supply issues due to the Coronavirus.
CEO Clifford Pemble said the tech GPS Company and maker of smart watches forecast a slowdown in sales and reduced profitability because of uncertainty in consumer trends.
‘We anticipate consolidated revenue will reach approximately $4 billion, up 6 per cent over year as growth in fitness, outdoor and marine more than offset a slight decline in the auto segment,’ Pemble said during his conference call.
Garmin’s 2020 outlook predicts a growth slowdown as gains drop from 12 per cent last year to 6 per cent this year.
The prediction is driven in part by uncertainty around consumer trends – a factor that will become clearer as the year progresses and the full impact of Coronavirus supply issues are absorbed.
The tech company also predicts a slump in operating margin due to an ‘increased level of investment to support long-term growth initiatives.’
Their investment is set to fall to 23.5 per cent of sales from 25 per cent in the previous year.
Garmin also expects to see a major headwind in the aviation segment, resulting in little room for growth in the ultra-profitable segment.
The aviation division accounted for 27 per cent of profits last year, up from 26 per cent in 2019 and 20 per cent in 2016.
The prediction of zero growth is set to impact their overall results.
The shrinking auto segment, which accounted for almost one third of sales in 2016, continues to lose ground to fitness and smartwatch markets.
Chief financial officer, Doug Boessen, said: ‘We achieved strong double-digit growth in four of our five segments, led by fitness segment with 34% growth, followed by the aviation and marine segments [with] growth of 22%, and outdoor with growth of 16%.’
‘For the full year, we achieved 12% consolidated growth [including] double-digit growth in four of our five segments,’ he said.
Executives further credited blockbuster growth in the four sales divisions outside of the automotive unit, with two standouts being from the fitness segment that brought in $1 billion in annual sales for the first time. The marine unit, which grew into a $500 million annual business, was also a standout.
‘2019 was a remarkable year of accomplishments,’ Pemble concluded.
David Richards also contributed to this story.
UPDATE: An original mistake was made relating to revenues this has since been updated to reflect the right revenues.