Logitech Scraps Jaybird Headphone Line as Audio Declines Continue

While Logitech is cutting back its positions in headphones and mobile audio, it's beefing up efforts in wireless audio products such as its Zone Wireless Bluetooth headset and Ultimate Ears Fits earbuds, said CEO Bracken Darrell. He highlighted the UE Fits for their customization feature that lets users tailor the fit to their ears “in under 60 seconds,” saying the UE Fits launched direct-to-consumer “in a small way.”

Logitech will continue to concentrate on what it considers fast-growing categories, taking advantage of current trends, said Darrell. He cited products designed for the “video everywhere” trend, gaming, hybrid work and the “explosion of creators.” The company is well positioned in the four growing categories for the next decade, he said.

Supply chain issues continue to be a problem, leaving the company "a little frustrated we couldn’t get better supply,” Darrell said. “In some areas, we just couldn’t get as much as we needed from a component standpoint.” Logitech is diversifying manufacturing geographically, he said: “We have more production than ever in China, but we have a lot more production than ever out of China,” including in multiple countries in Southeast Asia. Logitech first started diversifying sourcing to mitigate the Section 301 tariff increases several years ago, said Darrell. Now it's ramping those efforts so it can respond to “whatever could happen down the road."

Logistics remain a challenge, said CFO Olmstead. He expects supply constraints to continue through the current quarter, particularly with components for keyboards, mice and gaming products. Predictability in the supply chain is beneath typical levels: “You’re getting more delays as things come in, both on ocean and on air,” Olmstead said. The company has had to expedite more shipments via air “to make sure that things are in stock” as demand across growth categories remains “resilient." Shipping costs are up three to four times via water and air, and Olmstead expects that to last until spring 2023: “I don’t see any short-term release on those pressures.”

Higher logistics costs and a return to promotions in the holiday sales quarter led to a 4.6-point drop in gross margin, to 40.3% for the quarter, Olmstead said. The company's strategy is to rely less on promotion to drive sales and more on marketing to drive awareness: “I think that’s a healthier way to grow," he said.

Logitech continues to innovate and explore new markets, Darrell said, noting a lot of products on the drawing board “don’t make it out the door.” Others come to market in “a quiet way,” he said, referencing the Litra Glow accessory light for video conferencing that launched this month. “Being in the lighting business makes a lot of sense for us,” Darrell said, saying hybrid work continues to provide home office upgrade opportunities for the firm.

Revenue fell 2% year on year to $1.63 billion for the quarter ended Dec. 31, after an 80% spike in constant currency in the year-ago quarter. Keyboards grew 29% year on year and pointing devices and gaming products 8% each. Webcam sales dropped 12% in the quarter; video collaboration sales slipped 1% after posting 200% growth in the year-ago quarter.

Executives believe trends forged during the COVID-19 pandemic will continue. After two years, “people’s way of working has changed, their ways of learning have changed, their ways of communicating have changed,” said Olmstead. Video was a trend before the pandemic, but people have gotten much more comfortable with it and some prefer it to in-person meetings, he said. Logitech raised the FY ’22 revenue growth outlook from flat, plus or minus 5%, to 2%-5% sales growth with a range of $850 million-$900 million. Shares closed 4.47% higher Tuesday at $77.78.