Logitech Sales Jump 25% on Stay-at-Home Business; CEO Cautions on 2nd Half

Logitech rode the COVID-19 stay-at-home wave in fiscal Q1, ended June 30, posting a 25% year-on-year sales hike to $792 million, it said Monday. Sales of video conferencing equipment soared 70% to $130 million; webcam revenue jumped 116% to $60.9 million, it said.

Logitech is ramping capacity to meet demand for webcams to overcome component shortages resulting from COVID-19 factory shutdowns in Asia, said CEO Bracken Darrell on a Tuesday call. The company expects the current quarter supply to improve, though Darrell expects the “underlying market tailwind to continue for some time.” The stock reached a 52-week high Tuesday before retreating to close 1.4% lower at $70.41.

Logitech raised its fiscal 2021outlook in constant currency from mid-single digits to 10%-13% for the year ending March 31, but Darrell was cautious on the second half: “COVID shutdowns and a related economic slowdown will likely create uncertainty in the quarters, and perhaps even the year to come.” He referenced global unemployment “that’s going to drag on through Q3 at levels we haven’t seen in long time."

Darrell was bullish on the company’s prospects despite the uncertainties, citing four trends Logitech considers favorable to the company: 1) continued work at home trends, at the same time companies are expanding video conferencing infrastructure for a return to offices, 2) video calls replacing audio calls; 3) the rise of esports that will “become bigger than conventional sports,” and 4) “billions” of people around the world continuing to create content as movie theaters and live entertainment venues remain closed during the pandemic.

Movie theaters and restaurants will begin to reopen, giving people the chance to do things they haven’t been able to do since the pandemic began, said Darrell. “There could be a reallocation of spending in some of those other discretionary things,” he said. Pull-forward spending for gaming products that might have been in holiday season budgets could have taken place in the June quarter, he said. Considering uncertainties and possibilities, Logitech is looking at Q3 and Q4 “as a possible moderation period,” but the company will be “set up to deliver” if sales are more robust than expected, he said.

Some trends were already underway, said Darrell, citing work-at-home Fridays, the popularity of esports and creators posting online in what he called the “democratization” of content. “Video everywhere” seemed like a long way off when Logitech identified it as a company direction several years ago, he said: “Because of COVID-19, video calls now, for most people, have simply exploded.” Trends will continue post-pandemic, he maintained, citing a Siemens announcement last week that the global company will let its 140,000 employees “work from anywhere” two or three days a week.

In addition to video gear, headsets and mics benefited from stay-at-home mandates, said Darrell. Together, the two categories grew 70% in Q1. Supply for Blue mics will “continue to be tight” in Q2, but Logitech is working on alternate manufacturing sources in Asia to meet demand.

Chief Financial Officer Nate Olmstead cited “multiple challenges” Logitech had to overcome in the June quarter, including “significantly higher air freight costs, supply constraints in multiple product SKUs” and currency headwinds. The reduction in consumer air travel has “taken a lot of capacity out of the industry, which has pushed up the rates,” Olmstead said. Competitors, too, are making up for supply chain shutdowns in February, he said, taking up air freight capacity.

On the gaming console launches due in the holiday quarter, Darrell said historically its headset business has had a slowdown at the beginning of a new gaming cycle due to incompatibilities with the new platforms. That could play out this year, too, though Microsoft announced forward compatibility in the latest Xbox console, he said: “We’re optimistic that’s also going to be true on the new Sony console.”

PC keyboards and combos sales grew 13% in the quarter to $145 million; pointing devices slipped a point to $120 million; tablets grew 20% to $46 million; gaming advanced 35% to $182 million; and audio and wearables increased 22% to $71 million.

Mobile speakers continued their drop-off, sinking 42% to $29 million in the June quarter. Given the struggles of the category, Logitech is continuing to reallocate resources toward “other initiatives,” he said. Jaybird headphone sales were down in the quarter, hit by CE store closures. The company is transitioning the Jaybird business to true wireless earphones, he said.