Satellite navigation equipment maker Garmin Ltd. (GRMN) reported Wednesday a 67% drop in earnings for the first quarter on sharp revenue declines across all geographies, hurt by significant slowdown in consumer discretionary spending and ongoing channel inventory reductions by the company's retail partners in the portable navigation devices industry.
The Camana Bay, Cayman Islands-based company's net income for the first quarter plunged to $48.54 million or $0.24 per share from $147.78 million or $0.67 per share in the previous year. During the immediately preceding fourth quarter, the company had reported a profit of $157.73 million or $0.78 per share.
Excluding foreign currency transactions, net income for the first quarter was $50.51 million or $0.25 per share, down from $151.02 million or $0.69 per share in the earlier year.
On average, 21 analysts polled by Thomson Reuters expected the company to report earnings of $0.42 per share for the quarter. Analysts' estimates typically exclude special items.
Net sales for the quarter declined 34% to $436.70 million from $663.81 million in the earlier year, missing analysts' consensus revenue estimate of $531.58 million. The company had reported fourth-quarter net sales of $1.05 billion.
Segment-wise, Outdoor/Fitness sales for the first quarter increased 13% to $80 million from $70.49 million a year earlier, driven by further penetration of fitness products and market share gains across the category.
Marine net sales declined 32% to $38.02 million from $56 million in the previous year.
Revenues generated by Automotive/Mobile segment were $259.59 million, down 43% from $451.86 million a year ago, negatively impacted by price protection credits offered to the company's major retailers and significant channel inventory reductions. Aviation segment revenues decreased 31% to $59.09 million from $85.44 million in the prior year.
Geographically, North America revenues declined 36% to $265 million from $411 million in the same quarter last year. Revenues from Europe were $144 million, down 32% compared to $211 million in the previous year. Asia revenues decreased 33% to $28 million from $42 million last year.
Gross margin for the quarter increased sequentially to 44.9% from 41.1% in the immediately preceding fourth quarter, but declined from 48.2% in the prior-year quarter.
The company noted that operating margin for the overall business declined 12.7%, driven mainly by the decrease in revenues in auto/mobile segment. The company also said it reduced advertising expense by almost 40% and held other selling, general and administrative costs flat when compared to the year-ago quarter.
Min Kao, chairman and chief executive officer commented, "As always, we remain committed to taking appropriate steps to reduce costs while maintaining our aggressive approach to the development of new products and technology."
The company said it generated $286 million of free cash flow during the quarter, resulting in cash and marketable securities balance of over $1.2 billion at the end of the quarter. Cash and cash equivalents at end of the period was $922.33 million, compared to $598.81 million last year.
GRMN is currently trading at $22.98, down $2.68 or 10.44%, on a volume of 165 thousand shares.
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