The company announced Wednesday that it would shift certain product manufacturing from China to another market in order to evade the cost of Section 301 tariffs.
Beginning in January 2020, “effectively” none of Fitbit’s trackers and smartwatches will be made in China, according to the company.
"In 2018, in response to the ongoing threat of tariffs, we began exploring potential alternatives to China,” CFO Ron Kisling said in a statement. “As a result of these explorations, we have made changes to our supply chain and manufacturing operations and have additional changes underway.”
Why It’s Important
Fitbit joined Lovesac Co (NASDAQ: LOVE) and other companies moving supply chains to attenuate trade-related risks. At least one analyst appreciates the strategy.
“We are encouraged by the move given the: 1) prolonged U.S./China trade war and 2) it seems to position Fitbit to have greater control of its future pricing and, therefore, its margins,” D.A. Davidson analyst Tom Forte said in a note.
“We expect more of our covered companies to mirror Fitbit's efforts and, at the minimum, move some of their supply-chain efforts out of China and, at the maximum, move all of them.”
How Fitbit and peers strategize around trade policy may trigger a federal reaction.
“To the extent more companies exit China, we do expect government to respond, though it is not clear to us yet as to how,” Forte said.
Fitbit will comment on the financial implications of its move in its third-quarter earnings call. The company’s stock was trading down 0.68% at $3.66 at the time of publication.
Fitbit Launches New Smartwatch, Subscription Service
Analysts: If You Want To Get Fit, Don't Buy Fitbit Stock
Photo courtesy of Fitbit.
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