High Inventory Hurts Garmin’s First Quarter

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By Amy Gilroy
Garmin suffered from high inventories in portable navigation devices (PNDs), reporting lower sales and earnings for its first quarter ended March 27.
But sell through at retailers on Garmin PNDs remained strong through the quarter and average selling prices actually climbed in the quarter by 7 percent, it told analysts today. For that reason Garmin is not adjusting its guidance for the year.
“Some of the major retailers did have excess inventory of our products as well as some others. But it was, in our view, common to more than one player,” said Garmin president and COO Cliff Pemble.
The company also claimed that its latest Garminfone due this quarter is getting strong acceptance from carriers.
In PNDs, overall North American sell through for all brands is tracking up in single to low double digits. Garmin itself sold 1.5 million PNDs in the quarter, it said.
Garmin reported total revenue for the quarter of $431 million, down one percent from $437 million. Earnings per share decreased 21 percent to $0.19 and net income dropped to $37.3 million from $48.5 million for the quarter last year. The automotive/mobile segment saw a revenue decline of 15 percent to $221 million while all other segments increased. Outdoor/fitness sales were up 28 percent to $103 million, marine was up 9 percent and aviation was up 12 percent.
“While excess channel inventory led to a decline in the sell‐in of PNDs, sell‐through trends of our major United States retail partners continued to show year‐over‐year growth. In addition, we generated strong revenue and margins in our outdoor/fitness, aviation and marine segments…” said Garmin chairman and CEO Dr. Min Kao.
Garmin said 20 to 30 percent of its PND business is now in replacement models. Also 80 percent of its PND unit sales are at the low end and 20 percent in premium products—a statistic which has become fairly stable.
Garmin said it will soon launch in Q2 what it claims is the thinnest PND on the market—the nuvi 3700 series—as well as the Garminfone A50 in partnership with T-Mobile.
Source: Garmin

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