Logitech International shares tumbled after the Swiss hardware maker said rising logistics and material costs would dent profitability in the key holiday period.
The group on Tuesday posted sales of $1.22 billion for its fiscal second quarter that closed at the end of September, up 2% in constant currency from a year earlier. Meanwhile, its adjusted gross margin--a key measure of pricing power and profitability--came in at 45.2%, up 140 basis points from a year earlier.
However, Chief Financial Officer Matteo Anversa said in an earnings call that Logitech was projecting a year-over-year decline of roughly 200 basis points in its adjusted gross margin for the quarter that closes in December, citing rising logistics and material costs as well as modestly higher spend for the holiday season.
Logitech shares fell more than 10% in European morning trade, taking the stock down about 8% over the past 12 months as investors digested Anversa's remarks. J.P. Morgan's Craig McDowell wrote in a note to clients that Logitech's guidance shows gross margins have peaked as costs for the company were rising.
For the current quarter, Logitech is projecting sales between $1.36 billion and $1.43 billion, ranging from flat to a decline of up to 5% at constant currencies. The company said its forecast included an estimated hit of $70 million to $80 million after one of its semiconductor suppliers shut a manufacturing facility in June because of an incident.
Logitech said its supplier had reopened the facility in September and that it should resume full production by the end of the calendar year. The company said it expects the impact of the supplier incident to be largely resolved by its fiscal fourth quarter that closes at the end of March.
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