Has Fitbit Lost Its Way? Behind Plan to Slash Workforce

One year ago, Fitbit was gearing up to showcase its brand to consumers in one of the biggest—and most expensive—ways possible. The 10-year-old maker of fitness devices aired its first Super Bowl ad, featuring a new high-end tracker. But now, the brand, once a darling in retail fitness, is struggling to find its way with consumers. Citing "softer-than-expected demand," San Francisco-based Fitbit lowered its sales guidance for the fourth quarter—the crucial holiday-shopping season—on Monday. The company now expects revenue to be between $572 million and $580 million, rather than in the expected range of $725 million to $750 million. The brand will report actual results on Feb. 22. In order to save on costs, Fitbit is laying off 110 employees, or roughly 6% of its workforce, which Chief Executive and President James Park, who co-founded the brand, said should save about $4 million in costs for the first quarter of 2017. In order to stay in the game, Mr. Park noted in a release that Fitbit will be expanding into the $10 billion global smartwatch market and continue to use its customer data to offer more personalized experiences for customers. "We believe we are uniquely positioned to succeed in delivering what consumers are looking for in a smartwatch," said Mr. Park in a statement, noting recent acquisitions of assets from Pebble, Vector Watch and Coin. "Fitbit is in a unique position to stimulate new areas of demand." Yet fierce competition is finally catching up. For years, Fitbit, which generated $1.9 billion in sales in 2015, enjoyed the distinction of being first to market with its tracking devices. Now, as the market faces over-saturation with step-counting trackers, the brand is facing more competitors from a variety of directions as it tries to expand into the smartwatch category. Apple and Google's Android both offer watches, but fashion brands, including watch maker Fossil and designers such as Michael Kors, are starting to sell their own versions. "The market's maturing—it has to," said Ramon Llamas, research manager of wearables and mobile phones at IDC. "We're seeing new vendors get in there with different value propositions and approaches, smarter devices are getting smarter." He compared Fitbit's current plight to that of Motorola circa 2004, when the brand introduced the Razr cellphone to much acclaim before falling by the wayside with the debut of the iPhone a few years later. Already, investors are growing impatient. Shares of Fitbit, which went public two years ago, fell more than 16% to $6 by early afternoon on Monday—a far cry from the brand's 52-week high of $18.85 last May. The company has been ramping up its marketing efforts, and analysts expect robust campaigns to center around new devices—typically in the spring and fall. Last year, Senior VP-CMO Tim Rosa said the company is also focusing on younger consumers, which will be reflected in its marketing. Fitbit spent $78.6 million on measured media in the U.S. last year, a 228% increase over 2014, according to Ad Age's Datacenter. Though it has also worked with San Francisco-based Argonaut, Fitbit also has its own internal team, Fitbit Creative Lab.

Has Fitbit Lost Its Way? Behind Plan to Slash Workforce

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