Lifted by its recent acquisition of the Tacx brand of cycling accessories and by gains in running, Garmin's revenues for the second-quarter ended on June 29 reached a record level of $955 million, an increase of 7 percent over the year-ago quarter. The company has raised its outlook for the full-year as a result.
In the fitness division, sales climbed by 12 percent to $251.6 million, with under half of that growth coming from the company's acquisition of Tacx, the management said. The management said it expects Tacx's revenues for the full year to be about half of the year-over-year growth in the fitness business.
Garmin started distributing Tacx's products during the quarter, highlighting the acquisition as an “exciting” opportunity to expand into the year-round indoor cycling and training market. Headquartered in Wassenaar, the Netherlands, Tacx is best known for its line of indoor smart trainers, including the Neo 2 and the Neo Bike, which measure speed, power and cadence.
However, the fitness segment's gross margin contracted by 2.5 percentage points to 53.7 percent and its operating income declined by 4 percent to $50.4 million.
Meanwhile, the outdoor segment rose by 4 percent to $210.4 million, driven by higher sales of golf wearables. The Instinct adventure watch also sold well. The segment's gross margin grew by 0.5 percentage points to 64.4 percent, but operating income declined by 1 percent to $71.3 million.
The aviation and marine segments went up by 20 percent and 13 percent, respectively, while the auto segment declined by 13 percent.
Overall, the group's gross margin improved by 1.8 percentage points to 60.3 percent, while the operating margin progressed by 2.5 percentage points to 26.8 percent. Net earnings increased by 17.5 percent to $223.6 million.
Because of its strong performance, Garmin is projecting full-year revenue growth of about $3.6 billion, instead of the previously forecast $3.5 billion. It has maintained its guidance for 13 percent revenue growth from Fitness and 10 percent from Outdoor.