Fitbit releases Q4 financial results, misses target revenue
Fitbit, the maker of popular fitness trackers like the Flex and the Blaze, released their Q4 2016 financial statement today. The company stated that they missed both Q4 and fiscal year 2016 (FY 2016) revenue targets by fairly wide margins.
Fitbit reported retail sales of 6.5 million devices in the fourth quarter, resulting in revenue between $572 and $580 million. This falls short of its prediction of between $725 and $750 million in revenue. For FY 2016, Fitbit is estimating total revenue growth of 17%, missing forecasts of 25-26%.
In response to the disappointing numbers, CEO and co-founder James Park said, “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.”
The company blamed slow holiday sales for the missed targets, saying, “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.”
Fitbit plans to “reduce the expense basis of the company.” Essentially, this boils down to reducing target costs for 2017 and “conducting a reorganization of its business.” Usually, a company’s mention of reorganization signals layoffs. Fitbit will indeed terminate about 110 employees, which is 6% of their global workforce.
Fitbit spent 2016 acquiring several smaller wearable companies, including Pebble and Vector Watch. These acquisitions have yet to pay off, but Fitbit is looking to continue to push its market share in 2017. The company is predicting 2017 revenue in the range of $1.5-1.7 billion.
Surprisingly, the company is predicting a net loss per share of $0.22-0.44 which may signal heavy investment by the company in both technology and manufacturing. Park said the following:
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. 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.
Only time will tell whether Fitbit’s push will pay dividends or result in more financial woe.