Fitbit’s Partnership with Adidas is About Gaining a Foothold in China

Fitbit (FIT) announced a partnership with Adidas (ADDYY) in September, promising consumers a new device loaded with programs to complement the company’s personalized training software. While the new special edition Ionic watch (to be released in ’18) will offer coaching and guidance, that distinguishes it from low-end fitness trackers, the decision to partner with Adidas centered on ADDYY’s popularity within China (‘16 revenue +28% YOY to $3.5 billion) and FIT’s inability to crack a market dominated by Xiaomi and Apple (AAPL). In Q4 ’16, FIT CEO James Park acknowledged the company had “yet to gain much traction in large markets like China” before expounding on the company’s plan in Q1 ’17 saying, the company would “look at a partnership model versus trying to develop the market all on our own.” Adidas has a large retail presence in the country, with more 10,000 brick and mortar locations.

Howie Long-Short: FIT saw Q3 growth over Q2 figures, but both revenue and units sold remain depressed from 2016 totals. Q3 ’17 revenue was down 22% YOY (to $392.5 million) and the total number of units sold dropped 32% YOY (to 3.6 million). Q4 will be the first full quarter of sales for the Ionic smartwatch and the company expects that product to drive quarterly revenue to between $570-$600 million; a figure that would be in line with their Q4 ’16 total, signaling that the company is on the “path back to growth and profitability.”

Fan Marino: Speaking of Adidas, the company introduced a new smart soccer ball to be used in the 2018 World Cup. The Telstar ’18, modeled after the original Telstar ball used in the 1970 World Cup, is being marketed as the most “tech savvy” ball history. Fans will be able to tap their phone on the NFC microchipped ball to unlock a unique consumer experience.

Fitbit’s Real Reason to Partner With Adidas

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Author: John Wall Street

At the intersection of sports & finance.

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