Sales at Garmin’s fitness division rose by 30 percent to $56 million, outpacing other businesses, in the first quarter ending on March 26. This is the first time that the Swiss group, which specializes in personal navigation devices, reports its fitness and outdoor activities separately.
The fitness business was supported by sales growth in North America and other markets. The division experienced strong demand for its high-end cycling products, especially in Europe.
Based on feedback from the Boston Marathon held on April 18, Garmin anticipates strong demand for the new “Forerunner 610” GPS fitness watch. The outdoor division increased sales by 12 percent to $67 million driven by the “GPSMAP 62” handheld navigator and the “Astro” dog tracking system.
Overall group revenues were up by 18 percent to $431 million bolstered by double-digit growth in all regions. North America rose by 15 percent to $280 million, Europe by 18 percent to $171 million and Asia by 34 percent to $57 million.
Group gross margin declined to 46.9 percent from 53.6 percent a year earlier largely due to a sharp drop in profitability at the automotive/mobile division. According to the broker Oppenheimer & Company, the division had to sell old and obsolete inventory, which helped boost sales by 20 percent by $265 million but hit margins. All divisions suffered a decline in margins except the aviation business.
Gross margins at the outdoor division narrowed to 62.2 percent from 64.8 percent and to 59.9 percent from 62.4 percent for fitness.
Group operating income fell to $74.8 million from $83.3 million. But the outdoor division increased its operating profit to $24.8 million from $24.4 million along with the fitness segment, up to $15.5 million from $14.2 million.
Net income rose to $95. 5 million from $37.3 million thanks to foreign currency gains and lower taxation. Garmin generated a free cash flow of $200 million and finished the quarter with a balance of cash and marketable securities balance worth nearly $2.3 billion. Part of the cash will be used to pay $2 per share in dividends and finance the acquisition of its distributor in South Africa.