A lack of key new products in Q2, including...
A lack of key new products in Q2, including iPad and iPhone products from Apple, hurt ZAGG earnings, the company said on an earnings call. Prior to the earnings announcement, the company had lowered its annual sales outlook of $274…
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million-$280 million to $245 million-$252 million. Net sales fell 17 percent to $51.2 million, down from $61.6 million in Q2 2012, it said. Net income for Q2 2013 was $2.8 million vs. $5.8 million in the year-ago quarter, it said. CEO Randy Hales said in a statement that in response to lower 2013 sales, the company “focused aggressively on cost management,” which resulted in improved gross margin and EBITDA and net income in Q2. Among its product lines, ZAGG’s invisibleSHIELD represented 38 percent of net sales versus 41 percent in the year-ago quarter, keyboard sales slipped to 25 percent of net sales and iFrogz audio products, the lowest-margin products in the line, increased in share from 15 percent to 21 percent, the company said. Analyst David Strasser of Janney Capital Markets cited the shift in the customer for ZAGG products as sales declined at Best Buy while sales increased at Walmart. The rise at Walmart sales indicates the strength of the iFrogz brand, but is also “something that needs to be monitored from a gross margin perspective,” Strasser said. Part of the shift was due to Walmart ramping up on ZAGG products, while lack of new introductions “disproportionately hurt Best Buy,” he said. ZAGG is also struggling to further penetrate other existing retail accounts with new products, he said, which also contributed to weakness. Executives were optimistic that new ZAGG product introductions linked to upcoming high-profile tablet and gaming products for Q4 will lead to stronger second-half results. “We're confident in what we're seeing shape up for the fourth quarter,” Hales said. ZAGG shares closed up Friday 4 percent to $4.93.