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Computer mouse maker Logitech hit by supply chain problems

Computer mouse maker Logitech hit by supply chain problems

Logitech mouse is placed on the keyboard in the computer shop in Zenica, Bosnia and Herzegovina October 20, 2020. REUTERS/Dado Ruvic

Logitech International SA shares plunged 6 per cent on Tuesday (Oct 26) after the computer peripherals maker reported a steep fall in operating profit and said it was facing "unprecedented" supply chain problems.

The maker of keyboards, mice and headsets became the latest company to warn about the difficulties getting enough semiconductor chips due to clogged up transport links and stuttering factory restarts by suppliers.

Swiss engineering firm ABB and Sweden's Ericsson last week flagged problems getting enough parts to make their products.

"In Q2 we delivered record sales which beat last year's exceptional sales levels, growing 4 per cent in the quarter and 82% compared to two years ago," Chief Executive Bracken Darrell said in a statement.

"We are confirming our full-year outlook, despite unprecedented supply chain industry challenges."

Logitech has cashed in on the work from home trend during COVID-19 to sell more products to staff working remotely.

Players of games such as League of Legends and Fortnite have also been a driver of growth, purchasing specially adapted keyboards and controllers.

During its quarter to the end of September Logitech sales rose 4 per cent to US$1.31 billion, beating a forecast of US$1.25 billion in a Refinitiv poll of analysts.

But the Swiss-US company, the first to manufacture and sell computer mice in the 1980s, said it was now being hit by a shortage of components and higher logistics costs.

"Logistics bottlenecks and supply dynamics will remain challenging for at least the rest of this year," it added.

It also said it was spending more on promotions and marketing in stores compared with last year, when many retailers were closed.

As a result non-GAAP operating income declined 40 per cent to US$211 million during the quarter. Net profit fell 48 per cent to US$139.5 million. Shares were down 6.4 per cent at 0948 GMT (5.48pm, Singapore time).

Still, Logitech maintained its outlook for the financial year through March 2022, still expecting full-year non-GAAP operating income of US$800 million to US$850 million and flat sales growth plus or minus 5 per cent.

Zuercher Kantonalbank analyst Andreas Mueller said he thought the share price reaction seemed exaggerated, while Logitech would be able to deal with supply chain bottlenecks.

"Maybe there was an expectation that they increase the guidance, which would have been premature given the supply chain situation," said Mueller.

"They are well prepared with plenty of inventory into the Christmas season. And they can afford it given the healthy balance sheet," he said.

Source: Reuters/gs


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