Logitech drops from heavenly sales heights after lucrative Corona years

After two lucrative years in the corona pandemic, Logitech has collapsed economically: the well-known manufacturer of computer accessories in French-speaking Switzerland suffered a decline in sales and profits in the important Christmas quarter. The outlook for the full year 2022/23 was also lowered again. The stock went under the wheels.

How bad are the business numbers?

In the third quarter of its fiscal year (September to December), Logitech reported revenues of between $1.26 and $1.27 billion, according to preliminary figures. The group surprisingly announced on Thursday that it was a drop of between 22 and 23 percent. The appreciation of the dollar also weighed on the result.

In addition, Logitech has suffered a slump in earnings. Operating income (Non-GAAP) is between $198 million and $203 million. This equates to a diver of about a third compared to the same quarter last year, it said. And this despite the fact that Logitech is curbing spending.

What does the executive floor say?

“We are disappointed with the preliminary results for the third quarter,” Bracken Darrell, CEO of Logitech, said in the statement. The figures would reflect difficult macroeconomic conditions, including a slowdown in sales to corporate customers.

However, the crash occurred from previously unattainable heights and therefore needs to be put into perspective. With a turnover of 1.26 billion, turnover in the past Christmas quarter is still almost 40 percent higher than in 2019 before the outbreak of the corona pandemic. And the operating result exceeds that of the Christmas quarter of 2019 by a third.

Why have the numbers plummeted?

In the two years of the pandemic, the group had benefited from an explosion in orders from customers all wanting to upgrade their computers because they were stuck at home. For example, keyboards, gaming devices or computer mice were blockbusters.

With the relaxation of the corona measures and the partial return of employees to the office, it was clear that this turnover could not be sustained.

Businesses were also hit by the outbreak of war in Ukraine, skyrocketing inflation and the deteriorating economic outlook, which made companies more cautious.

What’s next?

“Due to weaker-than-expected Q3 results and the uncertain ability to perform related to the current corona outbreak in China, we are downgrading our full-year outlook,” the American continued. This is already the third reduction of our own targets within a year.

For the full year 2022/23, the company expects a sales decline of between 13 and 15 percent at constant exchange rates. Non-GAAP operating income target lowered to $550-$600 million.

Previously, Logitech had forecast a currency-adjusted revenue decline of between 4 and 8 percent and non-GAAP revenue of between $650 and $750 million. In the previous fiscal year 2021/22, Logitech had an operating profit (non-GAAP) of $904 million.

“We will continue our cost management to deliver solid operational performance,” Darrell said. With the publication of the final figures for the third quarter on January 24, the company wants to disclose further details.

And the stock?

Analysts were particularly surprised by the magnitude of the profit decline in the third quarter. Even the fact that Logitech is now falling back on the annual targets was not well received by expert groups.

At the end of October, the company had confirmed its annual targets when it published its second-quarter results, while some analysts already expected at least a slight reduction.

In retrospect, Logitech management’s stance on the holiday quarter proved overly confident, analysts noted. There is even talk of a “Tolggen im Reinheft” by company manager Bracken Darrell.

Shareholders reacted with shock to the renewed profit warning. When the stock market opened, Logitech shares fell more than 18 percent to CHF 51. After that, the titles were able to contain the price losses. At 10:42 a.m., the stock was still down 12.3 percent to CHF 54.98.

(dsc/sda/awp)