March 6, 2019 / 9:09 AM / a year ago

UPDATE 1-Logitech's new guidance gives shares a boost

(Adds CEO comment, analyst, share price reaction and detail)

By John Revill

ZURICH, March 6 (Reuters) - Logitech International SA raised its long-term profit targets and said it expects sales to increase at a mid- to high-single-digit pace in constant currencies in the year to March 2020, sending its stock to the highest level since November.

The Swiss-U.S. company -- which makes ultra-fast keyboards and computer mice used by esport gamers of Fortnite, League of Legends and Starcraft -- said on Wednesday it expects non-Gaap operating income in the range of $375 million to $385 million for the fiscal year ending 2020.

It increased its long-term outlook, saying products for cloud computing, egaming and peripherals used by the creative industries could achieve constant-currency growth in the high-single-digit range.

"Our diverse and innovative portfolio continues to deliver, driven by the horsepower of our gaming, video collaboration and creativity & productivity market opportunities," Chief Executive Bracken Darrell said.

Computer mice and peripherals for PCs generated most of Logitech's business when Darrell took over in 2013, but now account for less than half of its sales.

Since then, Logitech has "invested in new product categories, we attached our peripherals to cloud platforms and exited low-margin business," Darrell told the company's investor day in Zurich.

"We have had three years of double-digit growth and improving our gross margin to the high end of our range," he said.

"We have the engine rolling and we are going to keep doing this year after year. The ultimate aim is not short term, it is consistent growth across major categories."

Logitech, which enjoyed an upbeat performance over the past 12 months, forecast operating income of $340 million to $345 million in its current financial year that ends on March 31.

It expects annual sales to increase by 9-11 percent in the 2019 financial year when currency swings were removed.

Logitech increased its guidance twice during the current financial year due to robust sales in its devices for gaming, video conferencing and tablet computers, although a decline in mobile speaker sales has been a sore spot.

The company, whose stock has surged more than 20 percent so far this year, saw its shares rise as much as 2.2 percent in early trading.

Analysts were upbeat about the outlook, especially the higher margin corridor Logitech now targets.

"The new FY20 guidance and the higher long-term margin corridor reflect the strength of Logitech's proven business model and the confidence of management to consistently and sustainably deliver on that model," said Michael Foeth at Bank Vontobel, who confirmed his "buy' rating. (Reporting by John Revill in Zurich and Shubham Kalia in Bengaluru, Editing by Sherry Jacob-Phillips)

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