Garmin Ltd (GRMN.O), a maker of GPS-based products, no longer expects sales to grow in its outdoor business after its new action camera, Virb, failed to resonate with customers.
The company's shares fell as much as 7 percent in morning trading.
Sales in Garmin's outdoor business fell for the second time in five quarters, weighing on the company's quarterly profit, which beat Wall Street estimates by the smallest margin in more than a year.
The outdoor business, which also makes GPS-based golfing and hiking gear and accounts for 14 percent of the company's total revenue, was previously expected to notch sales growth of 10-15 percent.
"I think it's a case of the Virb not doing well, that's their camera to compete against the Go-Pro," said Dougherty & Co analyst Charlie Anderson, referring to GoPro Inc's (GPRO.O) action cameras.
The company declined to break down sales of Virb.
Still, Garmin reported better-than-expected quarterly revenue and profit and raised its full-year profit and sales forecast as demand soared for its GPS-based fitness products.
Sales in its fitness business, which makes products such as GPS-enabled watches that count calories and monitor heart beats, rose 79 percent and accounted for nearly 20 percent of revenue in the second quarter ended June 28.
Garmin now expects full-year sales of its fitness products to grow 50-55 percent, higher than its prior forecast of 10-15 percent.
Garmin's fitness business was boosted by the rollout of new biking and running products in the quarter and the continued success of its first activity tracker, Vivofit, launched in January.
"Fitness can always grow faster than the others because it's fundamentally consumer products," Anderson said.
Strong demand for personal navigation and sport devices helped Garmin's Dutch rival TomTom (TOM2.AS) raise its full-year revenue forecast for the second time this year.
The growth in Garmin's fitness, aviation and other businesses in the past few quarters has been offsetting a fall in sales of personal navigation devices, a business the company once dominated and is still its largest revenue contributor.
The company raised its full-year pro-forma earnings forecast to $2.95-$3.05 per share from $2.50-$2.60. It raised its revenue forecast to $2.75-$2.85 billion, from $2.6-$2.7 billion.
Analysts on average were expecting a full-year profit of $2.77 per share on revenue of $2.71 billion, according to Thomson Reuters I/B/E/S.
The company's net income widened to $182 million In the second quarter from $172.5 million a year earlier. Its pro-forma earnings was $1.02 per share.
Revenue rose to $777.8 million from $696.6 million. Analysts on average had expected earnings of 76 cents per share on revenue of $710.5 million.
Garmin's shares were down 4.6 percent at $54.96 in afternoon trading.
(Editing by Maju Samuel and Savio D'Souza)