The decline in sales after the Corona boom is even more unpleasant than expected. The manufacturer of computer mice and systems for video conferencing faces new uncertainties.
With 1.9 billion computers worldwide, Logitech still has potential.
When a company is open about disappointment, investors have little reason to disagree. Shares in computer accessories maker Logitech fell 17 percent on Thursday after the SMI index member presented sobering figures for the important Christmas quarter and revised its forecast downwards. With mice, keyboards and other peripheral devices, Logitech had succeeded in the home office and video call boom of the Corona crisis. Now that the pandemic has lost its terror, it remains to be seen how difficult it will be to return to normal.
A cold shower for investors
It has long been clear that the Swiss-American company will not be able to set any records in the fiscal year from April 2022 to March 2023. The head of the company, Bracken Darrell, already predicted a drop in sales of 4 to 8 percent at constant exchange rates in the course of the year. But he started too low, as has now become clear: In fact, the minus could be 13 to 15 percent, as Logitech announced. This caught investors off guard. The sell-off in tech stocks also weighed on Logitech stocks last year. In the autumn, investors drew new courage – and now received a cold shower.
He was also disappointed, Darrell was quoted as saying in a statement, referring to poorer sales to corporate customers and a challenging economic situation. He also justified the corrected outlook with uncertainties in the supply chain due to the corona outbreak in China. Logitech wants to stabilize the business result through cost discipline. However, inflation and a weaker economy will continue to weigh on consumers in the coming quarters, Vontobel analysts noted. That will make itself felt at Logitech.
According to preliminary calculations, from October to December 2022 Logitech’s sales fell to almost 1.3 billion dollars, which is almost a quarter less than in the same period last year. Operating profit shrank to an expected maximum of $176 million, a decline of more than a third. Both amounts are still above the values that Logitech had achieved before the pandemic, in the Christmas quarter of 2019. But the pace of the decline is surprising.
Video collaboration and gaming will remain
However, observers credit the Lausanne-based company with the fact that it is agile and robust – i.e. financially sound and innovative. Recently, Logitech had expanded particularly in peripheral devices for video conferencing and gaming consoles. The latter segment is aimed at private customers and does not appear to be the reason for the weak sales. It remains to be seen what the reluctance among corporate customers mentioned by Darrell is all about. Devices for video conferencing accounted for almost a fifth of sales in the past financial year.
The fundamental trends towards digital collaboration and gaming remain intact. Analysts at Helvetische Bank therefore warn against “throwing the baby out with the bath water” and point to a worldwide installed base of 1.9 billion computers and an increasing number of video conference systems. Investors can take comfort in the fact that Logitech stocks are still trading above pre-pandemic levels, even after the recent correction.
You can refer to Benjamin Triebe, Editor for Business and Business Twitter follow.