Garmin Focusing on Fitness Market As Other Segments Tumbled in Q4

A 2 percent dip in revenue for the year at Garmin came in below expectations, as the company reported declines in three of its four segments, the company said on an earnings call Wednesday. Compared with Q4 2011, Garmin’s automotive/mobile segment dropped 25 percent to $437 million, outdoor sales slipped 2 percent to $119 million, aviation declined 2 percent to $70 million and marine revenue fell 9 percent to $39 million, the company said. Garmin had 10 percent growth in its fitness segment, to $104 million, it said.

For the year, Garmin delivered 15.4 million units in 2012, a decline of “only 3 percent” year-over-year, said CEO Clifton Pemble. A decline in personal navigation device (PND) unit shipments was offset by growth in the company’s automotive OEM business and in the outdoor and fitness segments, he said. For 2013, Overall PND unit shipments are expected to decline about 20 percent both industry-wide and for Garmin, Pemble said. The company doesn’t anticipate any price increases, he said.

The fitness category was “not as robust as prior years,” Pemble said, but the company maintained the top spot in the GPS fitness category, largely on the debut of the entry-level Forerunner 10 GPS watch for the “value-conscious” customer, he said. A “return to double-digit growth” in Q4 portends growth ahead, Pemble said, and gives the company “confidence that the market remains underpenetrated.” In 2013, Garmin is projecting 5-10 percent revenue growth in the fitness segment by expanding its cycling offerings, Pemble said.

Looking beyond this year, Garmin expects growth from the fitness segment as “society becomes increasingly health conscious and data-driven,” Pemble said. The company will focus on “compelling” form factors and innovative products incorporating wireless connectivity, measurement sensors and a “well-developed Web portal,” he said. The company will also add peripheral sensors that leverage the company’s knowledge of hardware, software and connectivity, Pemble said.

In Garmin’s automotive/mobile group, revenue fell 6 percent for the year, as market share gains couldn’t offset overall declines in the PND industry that “accelerated in the fourth quarter,” Pemble said. The company estimates its share of the North American PND market at 70 percent, and 32 percent in Europe, the Middle East and Africa. Despite PND industry “headwinds,” margins were strong, Pemble said, generating $220 million of operating income. “The sustained profitability of the segment highlights the value of market share gains within the segment,” he said. The company expects to announce additional tier-one automotive deals, such as the one it announced in 2012 with Suzuki for an infotainment head unit system, although the opportunity was “somewhat diminished” by Suzuki’s announcement last fall that it would exit the North American market, he said.