Fitbit posts smaller loss on strong smartwatch sales

Fitbit Inc on Wednesday outpaced Wall Street estimates for quarterly results as its strategy of adding smartwatches to its product line got a boost in the second quarter with higher sales for ‘mass-appeal’ Versa.

Smartwatch sales in the second quarter accounted for about 55 percent of its total revenue of $299.3 million (227.97 million pounds), which beat estimates of $285.4 million.

Shares of the company rose 3 percent to $6.11 in after-hours trading, with the company selling a total of 2.7 million devices in the quarter, above FactSet’s average estimate of 2.5 million.

Fitbit, which is popular for its colourful fitness trackers, is a late entrant to the smartwatch market and has been facing stiff competition from tech players with deeper pockets such as Apple Inc and Samsung Electronics.

Versa smartwatch outsold Samsung, Garmin and Fossil smartwatches combined in North America in the quarter, Chief Executive Officer James Park said in a statement.

Earlier in the day, rival Garmin Ltd reported better-than-expected quarterly profit, signalling higher demand in the wearable devices market.

Fitbit, which makes use of Chinese contract manufacturers to produce most of its devices, said if the proposed U.S. tariffs on Chinese goods comes into effect, it would impact its material costs.

“We are navigating a number of different paths to reduce or eliminate the impact of the tariff,” Chief Financial Officer Ronald Kisling said on a conference call with analysts.

The company said its full-year revenue forecast of $1.5 billion excludes the impact of the proposed U.S. tariffs on $200 billion worth of Chinese goods.

Fitbit now expects third quarter revenue in the range between $370 million and $390 million, the midpoint of which was above the average analyst estimate of $377.6 million.

The company’s net loss widened to $118.3 million, or 49 cents per share, in the second quarter ended June 30 from $58.2 million, or 25 cents per share, a year earlier.

On an adjusted basis, the company lost 22 cents per share, smaller than the estimate of 24 cents, according to Thomson Reuters I/B/E/S.