Fitbit Reports Unhealthy Sales, Cutting 110 Jobs

 

SAN FRANCISCO — Fitbit, maker of wearable fitness devices, reported sales and revenues below projections for the fourth quarter ended December 31, 2016.

Fitbit said it expects to report 6.5 million devices sold and revenue for the fourth quarter of 2016 to be in the range of $572 million to $580 million, compared to the company’s previously announced guidance range of $725 million to $750 million. For the full-year 2016, Fitbit expects annual revenue growth to be approximately 17% from the previous forecasted growth of 25% to 26%.

Shares in Fitbit fell 16% on the news, down $1.16 to an all-time low of $6.06. The company went public on June 18, 2015 at $20 per share.

“Fourth quarter results are expected to be below our prior guidance range; however, we are confident this performance is not reflective of the value of our brand, market-leading platform, and company’s long-term potential,” said James Park, Fitbit co-founder and CEO. “While we have experienced softer-than-expected holiday demand for trackers in our most mature markets, especially during Black Friday, we have continued to grow rapidly in select markets like EMEA, where revenue grew 58% during the fourth quarter. To address this reduction in growth and what we believe is a temporary slowdown and transition period, we are taking clear steps to reduce operating costs. Looking forward, we believe Fitbit is in a unique position to stimulate new areas of demand by leveraging the data we collect to deliver a more personalized experience while developing upgraded versions of existing products and launching additional products to expand into new categories. As the overall wearable category leader, we exited the year with an engaged community of over 23.2 million active users, making us uniquely positioned to be the partner of choice for the healthcare ecosystem, which is a key component of our long-term strategy.”

Fitbit said it will take the following actions to reduce expenses:

  • Reduce expenses this year by approximately $200 million, to $850 million for 2017, which includes realigning sales and marketing spend and improved optimization of research and development investments.
  • Conducting a reorganization of its business that will eliminate 110 employees or 6% of the company’s global workforce. The cost of these reorganization efforts is expected to be $4 million to be recorded in the first quarter of 2017.

“We believe the evolving wearables market continues to present growth opportunities for us that we will capitalize on by investing in our core product offerings, while expanding into the smartwatch category to diversify revenue and capture share of the over $10 billion global smartwatch market,” said Park. “We believe we are uniquely positioned to succeed in delivering what consumers are looking for in a smartwatch: stylish, well-designed devices that combine the right general purpose functionality with a focus on health and fitness. With the recent acquisition of assets from Pebble, Vector Watch and Coin, we are taking action to position the company for long-term success.”

Fitbit plans to announce full earnings and hold a conference call on February 22, 2017.