Garmin reports 2Q results

Garmin Ltd. reported second-quarter revenue of $773.8 million and a profit of $137.8 million.
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Garmin Ltd. reported second-quarter revenue of $773.8 million and a profit of $137.8 million, or 72 cents a diluted share, both of which lagged the company’s results from the quarter a year earlier.

The Swiss company said revenue for the quarter that ended June 27 compared with $777.9 million in the 2014 quarter and its profit compared with $182 million, or 93 cents a share, last year.

Garmin said the relative strength of the U.S. dollar, compared with other major currencies, negatively affected revenue by about $59 million, or 8 percent, during the 2015 quarter.

The company said gross and operating margins were 54 percent and 22 percent, respectively, and were affected by unfavorable currency movements and a higher mix of promotional products sold during the quarter.

“Like many global companies, Garmin has experienced downward revenue and profit pressure due to recent unfavorable currency movements. In light of this reality, we feel positive about our first-half revenue performance,” Garmin president and CEO Cliff Pemble said in a statement. “With our ongoing research and development efforts and exciting advertising plans, we believe that the foundation for long-term success is being established now.”

Garmin said its marine segment posted revenue growth of 41 percent during the quarter as response to its new products was strong and the company continued to benefit from its acquisition of Fusion Electronics in the third quarter last year.

Gross margin in the segment declined year-over-year, to 56 percent, in the quarter as the effects of unfavorable currency movements and the mix of lower-margin Fusion products were largely offset by a higher mix of new products with less discounting and higher-margin profiles, the company said.

Even with the currency-driven gross margin pressure, operating income grew 35 percent in the segment. Because of the positive results in the first half of the year, Garmin raised its full-year revenue growth guidance for the segment to 15 percent.

The company said revenue grew 5 percent in its fitness and aviation segments and 4 percent in its outdoor segment.

Garmin said the global currency situation is expected to continue to create downward pressure on revenue growth and profitability for the remainder of the year. The company also said it expects to incur higher advertising costs in the back half of the year to further solidify its position in key markets.

The company said it continues to anticipate 2015 revenue of about $2.9 billion, unchanged from previous guidance despite about $160 million of currency-driven impact that is now built into its forecast. Because of unfavorable currency movements and competitive pricing dynamics in fitness, Garmin now expects gross margin to be in the range of 54 to 55 percent, with additional advertising resulting in an expected operating margin of 20 to 21 percent.

The expected effective tax rate increases to 18 to 19 percent because of lower operating income and geographic income mix. The company said the result of these changes is expected pro forma earnings per share of about $2.65.

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