What just happened? It’s almost become a weekly occurrence where a technology company has issued a statement regarding supply chain complications impacting their products. Despite reporting record sales, Logitech has now said it will also be affected by logistical problems moving forward.
The computer peripheral manufacturer reported sales of $1.31 billion for the quarter ending September 30, 2021. That represents an increase of 4 percent from the same period last year, comfortably beating a forecast of $1.25 billion by analysts. Furthermore, the figure was a huge 82 percent jump compared to the second quarter of 2019.
It’s the company’s highest-ever Q2 sales, which shouldn’t come as too much of a surprise when considering workforces and students have migrated to a work-from-home role due to the pandemic. In addition to mice, Logitech also sells keyboards, headsets, and speakers.
Still, Logitech shares dropped by 6 percent after it reported a significant decline in operating profit, as well as confirming it’s experiencing “unprecedented” supply chain problems.
“This supply chain challenge will continue throughout the rest of this year,” Logitech Chief Executive Bracken Darrell told Reuters. “We will have some issues delivering at the levels of demand that are out there. On the logistics side, we just have to do the best we can, and plan well.”
Non-GAAP operating income fell 40 percent to $211 million during the quarter, while net profit was reduced by 48 percent to $139.5 million. The sharp drop is attributed to a boost in spending on promotions and marketing in stores compared with 2020, which saw the majority of non-essential retailers being closed.
Bottlenecked supply chains have resulted in the time to air-freight components increasing to two weeks, Darrell added. Previously, it would take around four or five days to ship such parts. To make matters worse, costs have also soared, the CEO stressed. Logitech is responding by working with more suppliers, on top of expanding current inventory levels of components.
Darrell noted that there’s still strong demand for their peripherals thanks to employees working from home, as well as gamers. With hybrid work models becoming more commonplace, Darrell believes the work from home trend won’t disappear just yet, as evidenced by consumers continuing to upgrade their home office PC equipment.
Alongside supply chain issues, the global chip shortage has been compounded by several other problems, including reduced silicon output in China, in addition to aluminum disruption in Malaysia. Moreover, DRAM prices could rise with an earthquake affecting Micron’s Taiwan operations.
The general consensus of when the chip situation will improve seems to be sometime during the latter stages of 2022, with some industries facing shortages until the first half of 2023.