Fitbit remains atop the wearables market but the company’s financial struggles continue. The leading maker of fitness bands will announce later on Monday that its fourth-quarter results missed Wall Street’s expectations and that it will lay off 5% to 10% of its workforce, the news site The Information reported.
The company’s board voted last Wednesday to make the cuts as part of an effort to reduce costs by $200 million, the website said, citing anonymous sources. The expected announcement comes after reports that sales of smart, connected devices from Fitbit to the Apple (AAPL) Watch failed to meet the hype for the holidays.
While Fitbit (FIT) has continued to lead the market–it had a 75% share in the fourth quarter–it has not been able to grow as quickly as analysts and investors had once hoped. The company’s stock, which went public in 2015 at $20 per share, was trading at $6.57 in pre-market action on Monday, down 9% from its close on Friday.
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Fitbit confirmed the report later on Monday, announcing 6% layoffs and expected fourth quarter revenue of $580 million or less, well below its previous forecast of $725 million to $750 million. The $200 million cost cutting goal will be achieved via cuts in sales, marketing and R&D investments.
After doubling its holiday season sales from 2014 to 2015, Fitbit ran into major problems at the height of the 2016 gift-buying period. The announcement that its results fell short of analyst expectations follows a warning the company already disclosed several months ago that it would barely grow at all in the fourth quarter.
CEO James Park blamed manufacturing problems with some products and a slowdown in Asian economies for the earlier warning. He has been snapping up failing competitors in an effort to add features to Fitbit’s nearly ubiquitous fitness tracking bands, but did not announce any new hardware at the CES show in Las Vegas earlier this month.
Fewer than 40 million U.S. adults used a wearable device at least once a month in 2016, down from a year-earlier forecast of 64 million monthly users, research firm eMarketer said in a revised projection last month. The longer-term outlook is also looking worse, with 52 million monthly users expected by 2019, slashed from the earlier forecast of 87 million.