Fitbit Off to Slow Start in 2017 as Devices Pile Up

Fitbit isn’t starting off 2017 on a high note, according to Bloomberg. The maker of wearable fitness trackers halted production in mid-December because the devices were piling up at retailers and suppliers amid disappointing sales, according to a report by the firm. Demand so far this year is “characterized as weak,“ Cleveland Research said, suggesting analysts’ estimates for 2016 fourth-quarter earnings may be too high.

“The start of the year has been bad with Fitbit,“ research analyst Ben Bollin wrote in the note. “There are some concerns partners may not get paid for all of the product they have built because demand is so weak," he wrote, citing comments from a supplier. “Partners had to completely stop production for Fitbit because they are swimming in product.“

Fitbit had already slashed its sales forecast in November for the crucial holiday season when retail companies generate most of their sales. But a report just after Christmas that noted Fitbit’s app topped the list of free apps in Apple’s iOS store suggested the device was a popular present, sending its shares up the most in three months.

The Cleveland report only reaffirmed investors’ lingering concerns about Fitbit’s long-term outlook, which had driven its shares down about 43 percent since the third-quarter earnings report, when Fitbit cut its fiscal earnings outlook. Demand for wearables has been waning and Fitbit is getting squeezed by rivals like Apple on the high end and China’s Xiaomi on the low end. Another supplier cited in Bollin’s note said that Fitbit is losing share within its business, while Xiaomi is gaining.

Fitbit has also canceled several new product initiatives targeted for this year, according to the note. Investors had been expecting Fitbit to roll out a new product this year at CES, but they announced only partnerships and software updates.