Fitbit Inc (NYSE:FIT) featured in the list of best-selling items during the Thanksgiving weekend and Cyber Monday at a number of retailers including Amazon.com, Inc. (NASDAQ:AMZN) and Target Corporation (TGT). While that should raise hopes that the company may exceed its December quarter revenue target, it is raising questions instead.
It turns out that steep discounting helped drive uptake of Fitbit wearables over the Black Friday weekend and Cyber Monday. Without them it seems Fitbit would have registered a lackluster Thanksgiving weekend compared to the prior year.
Amazon offered up to 40% discounts
At Amazon, Fitbit devices were offered at generous discounts of between 30% and 40% on Black Friday and Cyber Monday. Target wooed customers with discounts of about 15% on Fitbit devices across its stores. As per Target, the uptake of Fitbit devices at its stores countrywide rose 50% at the Thanksgiving weekend compared to the same period a year ago. Because of these discounts, Fitbit products made the best-seller list at both retailers.
However, the propped up sales put question marks on the future of Fitbit and its fitness tracking products. Among the steeply discounted items was the newly issued Fitbit Charge 2. The fear of customers losing interest in Fitbit devices is backed by the findings by Longbow Research analysts who said online search of Fitbit dipped 11% this Thanksgiving weekend compared to last year.
Besides steep discounting raising questions about Fitbit’s future, such discounts also narrow profit margins and may hurt the company’s bottom line.
Expect downbeat results in 4Q
The December quarter is a crucial period for Fitbit as it accounts for almost 40% of the company’s annual sales. Yet, this holiday season is proving to be difficult for the company as the management guides for revenue to rise only 2% to 5% in 4Q. That would mark the slowest holiday quarter for the company in history.
Fitbit shares rose less than 1% in the last session to close at $8.36. The stock is down more than 70% this year.
