Logitech is struggling with a huge profit drop in the Christmas business

Two weeks after Logitech shocked investors with a profit warning in the important Christmas business, the computer accessories manufacturer is now presenting its final figures for the third quarter of 2022/23: net profit has fallen by a third to $140.2. million.

Operating profit (non-GAAP) fell 32 percent to $204.2 million in the months of September through December 2022, the Swiss-American group announced on Tuesday. Sales also fell 22 percent to $1.27 billion. The appreciation of the dollar left its mark: at constant exchange rates, turnover would have fallen by only 17 percent.

Two weeks ago, Logitech announced a revenue drop to $1.26 to $1.27 billion and a one-third EBIT dip to between $198 million and $203 million. As a result, the share fell by 20 percent to about 50 francs. Since then, the title has been floating at this level.

Demand weaker than expected

Business demand was weaker than expected, Logitech explains the sales decline. Purchases by private consumers have also fallen and are concentrated on action weeks.

Turnover fell in all product categories. Sales of gaming accessories, the largest category, shrank 16 percent. While simulation products stagnated, accessories for PC and console games declined.

Keyboards and combos were down 22 percent. Demand for video equipment in conference rooms fell at about the same rate. Computer mice were also less popular (-14 percent). PC webcams even dropped by half.

The biggest setback occurred in America, where sales plummeted by almost a quarter. In Europe, the minus was 22 percent, while Asia yielded almost a fifth less sales. In Asia, sales in China suffered, partly offset by stronger performance elsewhere.

crash from the stratosphere

However, the crash occurred from previously unattainable heights and therefore needs to be put into perspective. With a turnover of 1.27 billion, turnover in the quarter under review was almost 40 percent higher than in 2019 or before the outbreak of the corona pandemic. And the operating result exceeds that of the Christmas quarter of 2019 by a third.

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

In the first nine months, sales fell 15.8 percent to $3.58 billion. Operating income (non-GAAP) fell nearly a third to $506.2 million. Net income (GAAP) declined nearly 40 percent to $323.1 million.

Full year targets lowered

For the full year 2022/23, the company lowered its targets two weeks ago: Logitech now expects a revenue decline of between 13 and 15 percent in constant currency. The target for non-GAAP operating income has been lowered to between $550 million and $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. (sda/awp)