’s smartwatch business is running low on power in the battle for arm space with rivals
Shares of the fitness-wearables maker fell 21% Thursday, its second-worst decline in a single day since it started trading in 2015. That knocked its market cap below $1 billion after executives lowered guidance for the year, citing disappointing watch sales due in part to fierce competition.
Fitbit launched a new smartwatch, the Versa Lite, earlier this year and sold it at a lower price than its other models. But Chief Executive James Park told analysts on an earnings call late Wednesday that sales were tepid, as consumers were willing to pay higher prices for smartwatches that have additional features. Fitbit’s revenue from smartwatches fell 27% in the second quarter, while the average selling price of all of its devices declined 19%, crimping the company’s profit margin.
Fitbit’s disappointing product launch coincided with a period of strong growth for the wearables market. Global shipments of wearable devices hit nearly 50 million in the first quarter, up 55% from a year earlier, according to International Data Corp. Apple controls 26% of the wearables market, according to IDC’s data, while Huawei and Samsung account for 10% and 9%, respectively. Fitbit’s market share stood at 6%, down from 9% at the end of last year.
Mr. Park says Fitbit won’t be caught flat-footed again, promising the company is re-evaluating its pricing and promotional strategy for future launches, and plans to shift to an annual product-launch cycle in an effort to make sales more steady and predictable.
Investors don’t appear convinced of the company’s quick recovery. Shares are down 24% since the end of June, extending its decline so far this year to 33%. Apple, meanwhile, is up 32%, while Samsung has risen nearly 17%.
Write to Michael Wursthorn at Michael.Wursthorn@wsj.com
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