Garmin's fitness wearable business is heating up, accounting for 26 percent of the company’s overall growth thanks to the launch of several new wearables and increasing downloads on the company’s Connect IQ app store.
Garmin’s fitness segment grew 34 percent, with revenue for 2016’s second quarter at $213 million, compared with $159 million in Q2 2015. THe company's gross profit margin was consistent year-over-year at 56 percent, while operating margin improved to 25 percent, up four percent from the previous year. While the company reported growth in every sector, they consider wearable products to be the major contributor to growth.
“Fitness and outdoor achieved impressive revenue and product growth, driven by our strengthening position in the wearables market,” Garmin CEO and president Cliff Pemble said during a recent call with investors.
Garmin has made a concerted effort to put up a stronger fight in the highly competitive consumer activity tracker market. Over the year, the company has launched several new products, including the vivoactive HR, which brings heart rate monitoring from the wrist to the original vivosmart band (which required a wireless chest strap for such monitoring).
Pemble said the company has focused on expanding the availability of Garmin Elevate wrist heart rate technology across the wearable product line, with the technology employed across multiple models of running products, activity trackers, and the Fenix series of outdoor “adventure” watches.
“Customers have embraced Garmin Elevate and the feedback we are receiving is very positive,” said Pemble. “The second important objective is to increase customer engagement by offering applications, widgets and watch faces to our Connect IQ app store.”
The app store offering, Connect IQ, has over 2,000 apps, watch faces and widgets, comprising more than 13 million downloads from the store since its launch last year.
In the past year, Garmin also launched the vivofit 3, which can recognize different activities. Additionally, Garmin released the Forerunner 735XT, a lightweight multi-sport capable running watch, and the vivosmart HR+, the smart activity tracker with GPS. It also launched a more fashion-focused analog watch, the vivomove, with activity tracking features and a one-year battery life. The company also began shipping Approach X40, an activity tracker specifically tailored to golfers.
“As a result of these and many other recent product releases, we estimate that our share of the GPS-enabled smart wearable market in the United States has grown from approximately 43 percent a year ago to approximately 57 percent today, according to market share data,” said Pemble.
Overall, Garmin reported total revenue of $812 million, growing 5 percent over the prior year, with all non-auto segments – fitness, outdoor, marine and aviation – collectively growing 20 percent year over year and contributing a combined 70 percent of total revenue.
Looking forward, Garmin anticipates an annual revenue of about $2.9 billion driven primarily by a stronger outlook for outdoor and fitness segments. Nike Kyrie 4