Fitbit’s Plans to Move Out of China

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Fitbit Inc. (NYSE: FIT) shares were initially positive on Wednesday but then slid despite a very positive strategic move for the company amid the Chinese trade war. It’s no secret that American companies have been eyeing China as a way to boost revenues, but with the complications and tariffs arising from the trade war, more and more companies are looking elsewhere. Fitbit is following suit.

The company will give more details regarding this move and the financial implications of these tariff mitigations in the upcoming third-quarter earnings report.

For now, Fitbit announced that it has undertaken a plan to shift its manufacturing operations outside of China for effectively all of its trackers and smartwatches. As a result, starting in January 2020, the company expects those products will no longer be of Chinese origin and therefore not subject to Section 301 tariffs.

Ron Kisling, chief financial officer of Fitbit, commented:

In 2018, in response to the ongoing threat of tariffs, we began exploring potential alternatives to China. As a result of these explorations, we have made changes to our supply chain and manufacturing operations and have additional changes underway. Based on these changes, we expect that effectively all trackers and smartwatches starting in January 2020 will not be of Chinese origin.

Excluding Wednesday’s move, Fitbit had underperformed the broad markets, with its stock down about 26% year to date. In the past 52 weeks, the stock was down closer to 27%.

Shares of Fitbit traded down over 1% at $3.63, in a 52-week range of $2.81 to $6.96. The consensus price target is $4.99.


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