Fitbit’s sales plummet as device’s popularity fades

Bloomberg

Fitbit Inc.’s fourth-quarter revenue fell 19 percent, hurt by fading consumer demand for its once-popular wearable fitness trackers.
Revenue in the quarter — which includes the holiday shopping season — dropped to $573.8 million, the company said in a statement. Fitbit in January had forecast sales of $572 million to $580 million. Before then, analysts had been predicting $736.4 million, the average of estimates compiled by Bloomberg. The company’s loss excluding certain costs was 56 cents a share. Analysts on average had projected a loss of 53 cents a share.
Chief Executive Officer James Park has been trying to prove that Fitbit is more than just a maker of trendy gadgets. The appeal of its wristbands has waned with consumers as the company faces competition from Apple Inc.’s higher-end watch and cheaper Chinese models, and last month Fitbit said it would eliminate 6 percent of its workforce. Park is seeking to diversify the business, including expanding into the smartwatch category and pushing its corporate-wellness offerings. His goal is to turn Fitbit into a digital-health company — one that relies less on consumers and focuses on selling to the health-care industry — but that strategy will take years to unfold.
Sales in the current period will be $270 million to $290 million, with the loss before some items projected to be 18 cents to 20 cents a share, Fitbit said. Analysts on average predicted first-quarter sales of $307.6 million and a loss of 16 cents. Fitbit reiterated the annual revenue forecast it gave in January, for $1.5 billion to $1.7 billion. The company sold 6.5 million devices in the fourth quarter. That compares with more than 8.2 million in the quarter a year ago. About two-thirds of the company’s total quarterly sales were generated in the US Revenue in Europe, the Middle East and Africa increased 58 percent to $134 million; Asia declined 56 percent to $24.9 million and the Americas, excluding the US, fell 12 percent to $33.4 million. The company disclosed it spent $23 million for intellectual property and employees from smartwatch startup Pebble Technology Corp. and $15 million for those assets from Vector Watch. Fitbit shares were little changed in extended trading at 6:19 p.m. in New York after closing at $5.88. The stock has tumbled 64 percent in the past year.
“We plan on expanding into smartwatches. If you look at any industry data in the market in terms of sell-through, we think entering this market will double our addressable market,” Park said in a conference call. “Our acquisition of Coin, Pebble and Vector have accelerated our efforts.” “We are looking at developing form factors beyond the wrist to build a full ecosystem of products that support a consumer’s health-and-fitness journey,” he said. “M&A will play a role in health-care opportunities,” Park said. “We’ll definitely be looking at M&A to accelerate our efforts.”