Logitech Holds to Full-Year Revenue Guidance Despite 'Tens of Millions of Dollars' Tariff Hit

Trade wars have had “tens of millions of dollars of impact on Logitech’s business,” said CEO Bracken Darrell. To offset the financial hit, the company put in place cost measures, relocated manufacturing and instituted price increases. “The macro environment is not getting any easier,” he said, but Logitech expects to “manage through” the headwinds and meet targets set earlier in the year.

Darrell didn’t disclose for competitive reasons the magnitude of price increases put in place in July, but said, “We didn’t fully reflect tariff pricing in here at all.” The company set a level it thought was "reasonable"; he noted it's the company's first price increase in over a decade.

Price increases cut Q2 growth by a percentage point “as certain U.S. customers took time to adjust” to the price boost, said Chief Financial Officer Nate Olmstead. The company had “pockets of delayed orders” in several categories resulting from the “relatively modest” increase.

On how price increases were received by the distribution chain, Darrell said some customers “don’t buy” at the outset of a price hike, but after a period of “digestion,” they “come back in.” In some cases, customers wait after the onset of new prices to see if the situation shifts in their favor so they can buy at lower prices, said Olmstead. A few customers “slow down or stop buying some products," said Darrell, and then over 30-90 days patterns return to normal. “We’re on our way there -- we’re not quite there yet,” he said, saying the company expects orders to return to normal in Q3.

Tariff pressures will continue in the second half, Olmstead noted, citing List 4A Section 301 tariffs that hit Sept. 1 and had little impact on the quarter’s financial performance. Olmstead expects “about one point” of margin impact sequentially from the Sept. 1 tariffs amid ongoing mitigation efforts.

Logitech’s guidance of single mid- to high-single digits in constant currency doesn’t reflect 4B tariffs announced for Dec. 15. On tariffs that haven't taken effect, Darrell said: “We never incorporate those in until they’re officially confirmed." The company is studying how it will mitigate costs if necessary through pricing, relocations and straight cost reductions. “So far they’re not in, but we’ll certainly be after it if they do get implemented,” he said.

Olmstead said if the Dec. 15 tariffs are implemented as communicated, they wouldn't have much impact on holiday quarter earnings. “We may look to pull in some inventory ahead of that to try to offset cost increases, so we may see a little of inventory build ahead of that.”

On concerns over a possible recession, Darrell touted Logitech’s “recession-resistant portfolio” that covers a swath of categories and geographies. In the quarter, gaming headset revenue was “soft” on challenging comps to Fortnight-inspired sales a year ago, while video collaboration sales jumped 60 percent year on year. Bluetooth speaker sales fell 24 percent, and the category is expected to remain soft near term, Darrell said. Smart home sales grew 3 percent, and audio and wearables rose 12 percent on growth in Blue mics, “stable performance” in headphones and gains in headsets; PC speakers declined, he said.

Logitech’s planned $89 million purchase of Streamlabs, expected to close in the next few days, is its first acquisition of a company with no hardware portfolio, Darrell noted. Streamlabs provides software and tools for livestreaming, allowing game streamers to engage with viewers, grow their brands and channels, and monetize their broadcasts across platforms such as Twitch, he noted. Darrell called the purchase a “direct hit” matching software tools for livestreaming with Logitech's webcams, mics and keyboard and mice used by streamers. He called Streamlabs the layer that sits between the podcaster and platforms such as Twitch or YouTube and a way for Logitech to expand into services.