Garmin recorded better-than expected results for the third quarter, driven by its outdoor segment, prompting the company to raise its full-year guidance.
Sales rose by 2.9 percent from the year-ago quarter to $743.1 million, above Wall Street's average estimate of $721.2 million. The company said it experienced particularly strong demand for its F?nix 5 watch series, featuring Garmin Elevate wrist heart-rate technology, and expects this trend to continue throughout the holiday quarter. In addition, there was solid growth for inReach devices and subscription services.
Garmin recently introduced two entries in its so-called outdoor segment with the launch of Descent, its first wearable for the diving market, and the Impact bat sensor, its first product for the baseball market. The latter's sensors deliver instant feedback, while coaches and players can see further details using the Impact mobile app associated with the device.
The outdoor segment was the shining star in Garmin's results for the quarter, with sales jumping by 31.2 percent to $184.9 million, driven by strong demand for wearables, especially the F?nix 5 watch series and the QuickFit band replacement system. The division also generated a 38 percent increase in operating income. The gross margin in this segment improved by 1 percentage point to 64 percent, while the operating margin gained 2 percentage points to 37 percent.
The fitness segment, which includes sales of Garmin's cycling products, fared less well. Sales fell by 11.6 percent to $167.1 million. However, the gross margin gained 3 percentage points to 58.0 percent. The operating margin lost 4 percentage points to 20.0 percent. Garmin said the decrease in segment revenues was primarily due to a decline in the basic activity tracker market and the timing of recent product introductions, partially offset by growth in the running category.
During the quarter, Garmin's fitness segment launched several new wearables including a contactless payment solution, Vívoactive 3; Vívomove HR, an analog watch with wrist heart rate and smart notifications; and Vívosport, a slim activity tracker with built-in GPS and smart notifications.
Sales gained 10.4 percent to $77.3 million in Garmin's marine segment, but were down by 11.9 percent to $189.1 million in the automotive segment, primarily due to the ongoing contraction of the PND (Personal Navigation Device) market. In contrast, the aviation segment rose by 16 percent to $124.6 million.
Overall, Garmin's gross margin advanced by 2.2 percentage points to 58.4 percent, while the operating margin improved by 0.7 percentage points to 22.8 percent.
Based on its performance so far this year, Garmin now anticipates revenues of about $3,070 million for the year, driven primarily by higher expectations for its outdoor, aviation and automotive segments, partially offset by lower expectations for the fitness segment. Under its prior guidance, Garmin's sales were expected to be $3,040 million. The company said it remains focused on the wearable opportunity and expanding into new product categories.