Digital health and fitness company Fitbit reported its third quarter earnings earlier today, and shortly thereafter its shares fell off a cliff. Its guidance for the fourth quarter was especially weak, with the company citing softer demand for its products, a 45 percent contraction in growth in Asia-Pacific markets, and supply constraints around its new Flex 2 wristband.
The Flex 2 supply constraints are stemming from production issues, with Fitbit chairman and chief executive officer James Park pulling the curtain back a little bit on Fitbit’s manufacturing process. Even though the Flex 2 looks like a simple wristband, Park said, "it’s fairly complex and that’s due to its incredibly tiny form factor."
The Flex 2 looks simple, but its manufacturing process is complex — and that's not good for Fitbit
"I think it’s the smallest device [of that form factor] on the market," Park continued, "and that made it incredibly difficult to swim-proof it and to find batteries for it. We had to move to a fully automated production process to make the product, so there were a lot of things we had to learn a long the way."
Park called it a "non-optimal production process."
In other words: blame the robots.
Interestingly, Park waved off any notion that the launch of the Apple Watch Series 2 this fall had any impact on Fitbit’s quarterly sales — which, at 5.3mm devices, were up 11 percent year over year. "We’re not seeing impact from the competitive situation," he said on the company’s earnings call.
Park also teased "new form factors" coming to Fitbit’s product lineup in the new year, but did not offer anything more specific than that.