Garmin Banking on Positive Fitness, Outdoor Trends Continuing Post-Pandemic

By segment, fitness rose 26% to $471 million on demand for wearables and cycling products; outdoor grew 40% to $412 million, led by strong demand for adventure watches; marine jumped 48% to $172 million, led by chartplotters; and auto increased 11% to $140 million, driven by consumer specialty categories and OEM programs. Aviation revenue hit pandemic headwinds, falling 19% to $157 million, Pemble said. For 2021, Garmin forecast growth across all categories: 5% for auto and aviation; 10% for fitness and outdoor; and 15% for marine.

Responding to an analyst’s question on how Garmin is looking at the impact of COVID-19 vaccines and a return to pre-pandemic activities, Pemble called the rollouts “a highly speculative thing,” saying “any normalization is going to take some time.” In the year since the pandemic began, “people have adjusted lifestyles.” Some priorities “have probably changed permanently,” he said, and “it remains to be seen how much the vaccine really makes people feel free to do those kinds of activities.” Indications are “that the vaccines help, but they don’t necessarily ensure that people won’t get sick or couldn’t infect someone else,” said Pemble. “These are all things that people are still processing.” Garmin believes the trends it’s seeing from the past year “are solid and will continue.”

On the company’s product road map post-pandemic, Pemble said, “As people have focused on healthier lifestyles, active lifestyles and adventure, these are things that are getting ingrained and embedded in their thinking.” Garmin sees those trends as positive for the company, and enduring.

In automotive, Q4 declines in personal navigation devices were offset by growth in specialty products and revenue from new OEM programs, said Pemble. Garmin had an operating loss of $19 million on investments in auto OEM programs, he said, saying the business reached an “inflection point,” as the company ramps up OEM programs over the next few years.

Pemble cited successes with software, navigation and infotainment programs for Honda, Toyota, Daimler and Peugeot and said the company is in production with an infotainment system for the Daimler Vito van. Garmin, a build-to-print supplier for BMW, is also developing a next-generation program for BMW as lead supplier for all aspects of design including hardware, operating system and system integration, he said.

Moving into the lead supplier role on future programs is “testament to the progress we’ve made as a Tier One supplier to the auto industry,” Pemble said. The programs require a “significant investment in R&D prior to realizing revenue,” he said, “and not all costs are reimbursed by the customer.” The 5% growth Garmin forecasts in auto for 2021 will be driven by specialty consumer products and new OEM programs; it expects continued losses in the OEM segment from investments in future programs expected to launch in late 2022. The company is separating its auto business into consumer and OEM for better transparency, he said.

Garmin has seen strong demand for indoor cycling products and is leveraging its Netherlands facility to boost capacity, said Pemble. It has a strong backlog and is “working hard to fill orders.” On its June acquisition of health data analytics company Firstbeat, Pemble said Garmin will use Firstbeat's expertise to add health-sensing and health data feedback capabilities to provide customers guidance about leading a healthier life.