Fitbit’s new smartwatch is helping the company dig itself out of a financial hole. The San Francisco outfit beat expectations in the latest quarter and is hoping to return to profit by the end of this year.
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Wall Street had projected quarterly revenue of $285 million, which equates to a 20% year-on-year sales decline. Fitbit’s actual revenue came in at $299, a drop of only 15%. Despite better than expected sales, the company was still $54.2 million in the red, versus ‘just’ $19.3 million a year ago.
Smartwatches now represent the bulk of Fitbit’s revenue, accounting for a 55% share compared to 30% in the previous quarter. In fact, its latest smartwatch Versa was so popular that Fitbit says it had difficulties meeting demand. Rather impressively, Versa sales outpaced the combined sales of Samsung, Garmin and Fossil smartwatches in North America during the quarter.
On the earnings call James Park, Fitbit CEO, highlighted the success of the device.
“We saw continued momentum for our mass-appeal smartwatch, Fitbit Versa, which sold out in the quarter,” he said.
“The introduction of Versa strengthened our brand relevancy and highlights the opportunity to regain market share as we progress in the smartwatch category and continue to deliver both hardware and software offerings that consumer finds compelling.”
Fitbit expects to break even in the third quarter of 2018, and return to growth and profitability in the latter part of the year. Strong smartwatch sales and new devices such as Charge 3 should no doubt help in this endeavour.
Here are the numbers.
Fitbit sold a total of 2.7 million fitness trackers and smartwatches in Q2, down on the 3.4 million sold in Q2 2017. The average selling price, however, increased 6% on last year due to the growing mix of more expensive smartwatches.
The star performer regionally was the Asia-Pacific market which saw a 66% year-on-year increase in revenue. The biggest decline was in Europe, the Middle East and Africa, where revenue dropped some 40%. US sales were fairly steady reporting an 8% drop.
The stock jumped 8% in after-hours trading following the report. The shares have since pared gains, and are now trading around 3% higher.
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