You probably know someone who has a Fitbit—or maybe you have one yourself—but the company is, apparently, not doing as well as you might think. Actually, the whole of the wearables market is slowing and Fitbit’s numbers simply reflect this. The company shared that its holiday sales were much lower than expected and now anticipates the posting of an adjusted loss per share between 51 and 56 cents for the quarter. Originally, the expectations were a profit guidance between 14 and 18 cents.
Fitbit chief executive James Park comments, “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.”
Indeed, the company has long struggled to maintain its early momentum in the emerging wearables industry. They were quite popular as a way to encourage exercise by, initially, tracking the number of steps you take, but the trend has waned the wristbands have been somewhat downgraded to just gadgets and not “fitness trackers”.
Of course, fitness tracking bands—as a whole—have to face competition from Apple Inc’s Apple Watch, which offers the same features (and then some). Also, every popular industry—particular in the tech sector—will face stiff competition from cheaper models coming out of China.
Longbow Research analyst Joe Wittine notes, “The magnitude of the miss is surprising. This is nothing that Fitbit screwed up on necessarily, it’s just that like all consumer products, eventually you hit maturity. The question is how does Fitbit respond here.”
As such, the company said it is taking “clear steps” to diversify its revenue streams. Tis will including expanding into the smartwatch category (which makes a lot of sense, considering Apple’s competition). And with that intention, the company has also recently acquired software assets from tech startup Pebble and the digital payments startup Coin which could help the fitness tracker to add more features to put it in line with rivals like the Apple Watch.
Overall, the company is saying it is currently in the reorganizing process, which will hopefully result a more efficient operating model. This reorganization, though, is not cheap, as they expect it should cost about $4 million in the first quarter of this year, alone.