Let the wearables games begin.
In an encouraging sign for the nascent category, shares of Fitbit jumped 49.1 percent during its first day of trading on the New York Stock Exchange today. The stock is listed under FIT and closed at $29.81, having been priced at $20 for the initial public offering. That gave the company a market capitalization of $6.1 billion. Fitbit and early shareholders sold 36.6 million shares to the public.
The firm said last month that it would hit the Big Board and revealed that it sold almost 11 million devices last year and brought in a $132 million profit on revenues of $745.4 million. The company’s been an early leader in the space, along with Jawbone, commanding about half of the wearable market to date — but the recent entrance of the Apple Watch might threaten that head start.
“We’re still a reasonably priced product, but we caught on enough, so we got the scale as a business to be able to invest in R&D [research and development] and marketing and still turn a pretty good profit,” Fitbit chief revenue officer Woody Scal told WWD after Fitbit hosted an outdoor fitness event for consumers in front of the stock exchange.
The group workout, open to the public, was taught by celebrity trainer Harley Pasternak and actress Jordana Brewster. Scal said hundreds turned out to exercise, and the brand passed out 5,000 shirts over the course of the day.
He said the company wasn’t “starry-eyed” from the onset and has managed to develop hardware and software that delivers value to consumers at attainable price points. Products range from $59 for a Fitbit Zip to $249 for a Fitbit Surge, which in addition to serving as an activity tracker, monitors heart rate and doubles as a smartwatch where the wearer can receive texts and other notifications.
While Scal declined to project how many devices the company will sell this year, he said sales for the first quarter this year tripled year-over-year. More than half of the 21 million devices the company’s sold since its inception were sold last year.
Select Macy’s doors carry Fitbit product and it’s sold in every Kohl’s store.
But the category still has yet to gain traction with the masses. Scal acknowledged that although there has been mainstream adoption of the notion of wearables, there’s still a large segment of the consumer market that has yet to buy one.
“People think of wearables as just hardware, but the experience is based on more,” he said. “[Yes,] we’ve innovated a lot on hardware and will continue to, but it’s having a good app and social motivations like badges and challenges. Two-thirds of our engineers are software engineers.”
He was vague about the company’s future plans but said a big research and development team will help it bring new features, hardware and services to market. A more personalized product where a user can infuse their personal style is in the works, likely embracing the idea of wearables as jewelry. He said a partnership with Tory Burch last year was so successful that the product was sold out for months.
Also, the company plans to open freestanding Fitbit stores.
Patrick Moorhead, president and principal analyst at Moor Insights & Strategy said the company needs the money from the IPO to invest in enhancing product and increasing distribution. Fitbit has raised $66 million in funding since it was founded eight years ago by Eric Friedman and James Park.
“This is the first half of the first inning in fitness wearables,” Moorhead said, noting that in order to really grow, the company must “miniaturize and beautify” the existing devices, as well as extend the types of exercises it can track. “With Apple Health, the value of the aggregation [of hardware with apps] decreases, so they’ll need a whole lot more to keep their success going.”