Sales increased, profit generated – 30 percent price loss. The shares of the market leader for fitness trackers went down as quickly as the pulse curve of a patient with a heart attack yesterday. The rate sank to below nine dollars to 8.15 euros, only at the end of September was the rate at 15.39 euros. The reason for the unprecedented price loss in the history of the company from San Francisco: Bad prospects for the last quarter of 2016, the one in which the Christmas sales should have brought the company again strong profits.
But the success story of the company, which was co-founded in 2007 by today’s CEO James Park, has to be expanded by a few sad chapters. This is all the more astonishing because the market for so-called wearables, with which users can count their steps or have their heart rate measured, is growing and is expected to continue to grow. The market research company IDTechEx expects the segment to grow ten percent annually through 2026 until 2018 and then 23 percent for another five years before growth will definitely slow down again – IDTechEX estimates that the sales of wearables manufacturers will increase from 30 billion dollars in 2016 to 150 Billions will rise in 2026.
Fear of bottlenecks in the Christmas business
Parker had to admit the unexpectedly poor view. “We are continuing to grow and are profitable – but not at the rate previously expected.” According to Fitbit, there are problems ramping up production of its cheap Flex 2 bracelet. This could mean bottlenecks in the Christmas business. Fitbit sold 5.3 million devices in the past quarter. That was a significant increase from 4.8 million a year earlier. Sales grew 23 percent to $ 504 million. The quarterly profit fell meanwhile from 45.8 to 26.1 million dollars.
The bigger problem than delivery problems, however, could be that Fitbit is falling behind the competition in the battle for the wrist. In the early days of tracking tapes, it was mainly companies like Jawbone, but now companies provide the same services that come from the watch and computer industries.
Above all, the Applewatch with the latest Series 2 is not at the technological spearhead of sporty smartwatches. But for the casual athlete and people who just want an overview of their health metrics, the data is definitely sufficient. Nowadays the self-optimizer can choose from a whole range of measuring instruments, which more and more often no longer look like it.
The American company, formerly known primarily for its navigation devices, now covers a whole range of needs, from fitness wristbands for everyday use to special watches for runners and triathletes. And all of them contain the basic functions of a step counter by default. Garmin scored 722 million US dollars in sales in the past quarter, especially with wearables. The segment grew by 32 percent compared to the second quarter.
Market with potential and growing competition
The fact that the market for wearables still has room for improvement is evident from supposed niche providers. The French company Withings, which specializes in providing fitness trackers that look like traditional analog wristwatches with real digits, was acquired by in April.
Also wants to get involved in the market for smartwatches with fitness functions. The latest generation of the Gear S3 will hit the market on November 18th for a price of 400 euros. In addition to sensors, it also contains a GPS receiver.
The Android Wear operating system, on the other hand, has also been featured on the first combined sports and smartwatch from the Finnish family company Polar since autumn this year. Until now, Polar was particularly popular with endurance athletes, but the latest M600 model, with two operating systems running in parallel, is supposed to combine the sports functions of its own engineers with the smartwatch options of the Android realm.
In view of the growing competitive pressure, this means for industry leader Fitbit and its shareholders: Increased pulse rate when looking at the course, at least until the new year.