Voxx Standing by Forecasts of Returning to Profitability in Fiscal 2nd Half, Says CEO
Voxx had an $18.6 million sales decline in its fiscal Q2 ended Aug. 31, and 70 percent of that decrease was attributable to the company’s automotive OEM segment, said CEO Pat Lavelle on a Friday call. Though Voxx still expects new-car sales to decline year over year, it’s standing by forecasts of returning the company to an operating profit in the fiscal second half ending February, he said. Voxx narrowed its fiscal Q2 operating loss 33 percent to $7.7 million.
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Automotive OEM long term “will be one of the key growth drivers for our business,” despite short-term pessimism about new-vehicle sales, said Lavelle. Voxx landed a lucrative rear-seat-entertainment contract in the quarter with one of the Big 3 U.S. automakers, he said. The program will launch in calendar 2021 on 2022 model year vehicles and is worth $275 million over the five-year term of the contract, he said. Voxx will disclose more specifics at CES, he said.
Gross margins in fiscal Q2 were down 220 basis points, mainly due to the weakness in the automotive OEM segment, said Chief Financial Officer Mike Stoehr. The Section 301 tariffs on Chinese goods also reduced margins in the Voxx consumer electronics segment, said Stoehr, without saying how much.
Margins in the CE space were lower because the “early tariff increases were not passed on to the customer,” said Stoehr. “The latest round of tariff increases have been passed on in the form of price increases to our customers, but certain customers have a time bar before these increases go through.”
Most of the products “within the competitive field” on which Voxx plays are sourced from China, including printed circuit assemblies tariffed on List 3, said Lavelle last October about a month after List 3 took effect (see 1810120023). Voxx also imports a number of articles from China with 15 percent List 4A tariff exposure, including Bluetooth headphones.
Voxx is "working to lower the impact of the tariffs by moving production out of China in conjunction with our manufacturers,” said Stoehr. “Not all products can be moved.” Even products “we’re successful in moving will still carry higher labor costs” than goods sourced from China, he said.