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Logitech predicts further deterioration

Logitech on Tuesday warned that trading conditions would deteriorate before they improved, as one of the world’s leading makers of peripheral equipment for computers and electronic entertainment systems reported worse than expected results for its crucial third quarter, covering Christmas.

“All indications point to an even weaker retail environment in the coming months” said Gerald (Jerry) Quindlen, chief executive.

The comments came as the Swiss founded, but Californian run, group said net profits had fallen by 70 per cent to $40m in the third quarter, compared with the previous year, on a 16 per cent drop in sales to $627m.

Mr Quindlen attributed the steep fall in gross margins from 36.9 per cent to 29.9 per cent to the strength of the US dollar and the large number of special promotions by retailers, particularly in the US.

Sales fell most heavily in the US and Europe, the Middle East and Africa, with falls of 21 per cent and 19 per cent respectively. Only in Asia did the company report a modest 8 per cent increase.

Contrary to tradition, Logitech gave no guidance for the forthcoming year. “It’s such a difficult environment to make predictions. It’s too hard to forecast the March quarter, let alone the next financial year”, Mr Quindlen told the Financial Times.

“Our plans assume that in Q4 we will see year over year declines in sales, operating income before restructuring charges and gross margin that are similar to or worse than the year over year declines we experienced in Q3”, he noted. Logitech confirmed it would shed 550-600 direct employees, in line with a profit warning two weeks ago. The restructuring, forecast to achieve annual savings of $50m from 2009-10, will involve a charge of $20-24m over the next 12 months, with $16-18m to be taken in the fourth quarter of the current financial year.

“We’re taking these steps in anticipation of an environment we think will get worse before it gets better”, said Mr Quindlen.

The third quarter figures, and the gloomy fourth quarter outlook, were both below analysts’ consensus. “These results were much worse than we had expected”, noted Tomas Hilfing of Helvea, the Swiss brokerage.

Logitech stressed its precautionary measures and strong balance sheet would leave it well placed to bounce back when economic conditions improved. Net cash stood at $482m at the end of December, providing a valuable cushion.

“This is the sort of time you want to have cash”, noted Mr Quindlen.

Источник: Financial Times

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