Fitbit Beats Expectations, But Sales Remain Slow

Fitbit managed to slightly edge out analyst expectations for its earnings when it reported yesterday (May 2), pulling in $247.9 million as opposed to the $247.3 million the street was expecting.

That was the good news.

The bad news is that it is bringing in less revenue than it was at this time of year in 2017, when it was reporting $298.9 million.

“We expect results to be impacted by the reduced demand by the channel for trackers, partially offset by an increase in smartwatch revenue, driven primarily by Versa sales,” the company wrote in a release announcing earnings. “We expect smartwatches to grow as a percentage of revenue, but our overall mix to continue to be skewed towards trackers.”

The trouble, it seems, is fitness trackers as a category — they have fallen off precipitously in the last year. In the March quarter, Fitbit sold 2.2 million devices, missing analyst estimates of 2.33 million.

In response to the cooling consumer sentiment toward simple fitness trackers, Fitbit has moved its strategy to also include smartwatches, which alone among wearables have managed to make inroads with consumers that appear to be widening.  That is pushed, according to sources, in part by the success of a specific smartwatch — the Apple Watch — but that has created some room for other smartwatch makers to draft it.  Fitbit has invested heavily in its two smartwatch products — the Ionic and the Versa — which helped push higher revenue counts for the quarter with their high buy price.

And Fitbit is looking to expand the offering its smartwatch makes through partnerships.  The firm recently announced a pair-up with Google to make it easier for doctors to access health information as tracked on Fibit devices.

“We continued to deepen our relationship with our users, investing in software and services that deliver on our promise of helping people achieve better health outcomes,” CEO James Park said in a release tied to the earnings. “To this end, we closed the acquisition of Twine Health and, most recently, announced a long-term collaboration with Google that will accelerate innovation in digital health and wearables.”

Fitbit has also of late worked to level up the devices’ commerce capacities for the Ionic and the Versa, with new support for the British Airways app, Starbucks and Santander bank coming to the app.

The British Airways app will land on the wearables in May, with BA customers able to access flight information, status and a boarding pass straight to the wrist. Morning coffee drinkers will be able to add the 16-digit Starbucks card to their own watch app in order to buy their morning fix. And, for U.S. users, Fitbit Pay now includes Santander banking customers. Going forward, consumers with a debit or credit card issued by the bank will be able to use their Fitbit watch to tap and pay.

“We’ve really stepped up our game in terms of quality, and we’re seeing that across the board,” CFO William Zerella noted on the post-release call with analysts.