TomTom lowered its full-year sales target to €980 million from €1,050 million, after preliminary figures showed sales of its personal navigation devices (PNDs) dropped more than expected in the quarter ended September 30, 2016.
Noting that the European PND market is experiencing a faster rate of decline in terms of units than in the first half of 2016, TomTom is predicting that it will be down by about 20 percent for the whole year. The North American market should fall by around 23 percent.
Total consumer sales were down by 15 per cent to €137.1 million as compared to the year-ago quarter for the Amsterdam-based company, with a drop of 14 percent to €126.2 million outside the automotive hardware sector. The drop occurred in spite of a doubling in Sports revenues, however.
The company's total sales declined by only 6 percent to €239 million as revenues from the Automotive and Telematics segment jumped by 21.0 and 15.0 percent, respectively, while sales from the Licensing segment dropped by 2.0 percent.
In the Consumer category, the company recently launched its new GPS Outdoor Watch, the first PND for scooters and a fitness tracker device that measures steps and provides sleep and heart rate data. The GPS watch features dedicated modes for hiking, trail running, skiing and snowboarding. The fitness tracker also measures body fat and muscle mass.
PNDs accounted for nearly 60 percent of TomTom's total sales in the quarter, but the company said that its other services, which offer higher margins, continued to grow.
TomTom has focused on reducing its dependence on hardware products by growing recurring contents and service. It has made establishing a “Sports Business” a strategic priority. Its MySports activity tracking service reached one million users in the last quarter, while sports watch activations nearly doubled year-on-year.
Across all categories, the company's quarterly gross margin jumped by seven percentage points to 60 percent - thanks to stronger sales of higher-margin products - while the operating margin gained one percentage points and reached 14 percent before amortization (Ebitda). Net earnings fell by 67 percent to €0.6 million, but on an adjusted basis they grew by one percent to €11.7 million.