Garmin known for its GPS navigation devices has looked toward fitness and outdoor activity products for financial growth Pictured here is the Vivofit Photo courtesy Garmin Ltd

Garmin, known for its GPS navigation devices, has looked toward fitness and outdoor activity products for financial growth. Pictured here is the Vivofit. (Photo courtesy Garmin Ltd.)

Price War May Hit Fitness Watch Market after Garmin Cuts Profit Forecast

Garmin's plan to adjust product pricing could benefit consumers in the form of a price war among manufacturers.

The consumer fitness wearable device market could soon become more competitive.

Garmin Ltd., Schaffhausen, Switzerland, on Wednesday issued disappointing second quarter guidance by cutting per-share earnings and cutting its profit forecast for the year. It cited currency pressures and a more promotional pricing environment in the fitness segment.

Garmin CEO Cliff Pemble's plan to adjust product pricing could benefit consumers in the form of a price war among manufacturers.

 “The current competitive environment in the fitness market necessitates more aggressive pricing with higher advertising expenses,” Pemble said in a statement. "We are revising our full year outlook to reflect the dynamics we face in the current operating environment."

The company forecasted per-share earnings of 70 cents to 72 cents and revenue of $770 million to $775 million for the second quarter, according to MarketWatch. But analysts polled by Thomson Reuters expected per share profits of 89 cents and revenue of $773 million. Garmin's expected revenue for the year remained unchanged at $2.9 billion.

"While fitness growth slowed in the second quarter, we expect that it will improve in the second half as sell-through trends continue to show growth, we launch new products and we recognize benefits from our advertising investments," Garmin said in a statement. "Thus, we still anticipate full-year fitness growth of approximately 25 percent."

Revenue in Garmin's fitness segment was $568.5 million in 2014. The fitness segment grew five percent to $131 million in the first quarter of 2015 compared to 2014, according to its first quarter financial report.  Garmin's total revenue was $585 million in the first quarter.

Garmin traded down over eight percent in the hours after the opening bell Thursday at $42.42 per share.

Garmin, known for its GPS navigation devices, has looked toward fitness and outdoor activity products for financial growth.

It introduced a number of products at January's Consumer Electronics Show. Designed for outdoor sports, the GPS-based Fenix 3 ($499.99) is a watch-style device that can track swimming metrics, ski/snowboard speed, run distance and run count. The Epix ($549.99), designed for wilderness enthusiasts, combines GPS navigation and on-screen maps on a watch-style device. The Vivofit 2 ($139.99) and VivoActive ($249.99) are wristband devices that track steps, distance, calories and heart rate (if equipped with Garmin's optimal heart sensor).

Those products compete with products offered by Fitbit ($59.95-$249.95), Basis ($199.99), Mio ($149.99), Jawbone ($49.99-$199.99) and Apple ($699.99).

Fitbit sold 10.9 million devices in 2014 and claimed it owned 85 percent of market share in the first quarter of 2015, according to its IPO filing. Fitbit's revenue was $336.8 million in the first quarter of 2015.

Fitbit debuted on the New York Stock Exchange on June 18. Shares opened at $20 per share in its initial public offering and that per-share price has increased above the $40 per share range this week. As Fitbit's per share price has grown, Fitbit is facing three legal actions from Jawbone relating to patent violations.

Although Fitbit may be an indicator of growth potential for manufacturers in the fitness wearable market, Jan Dawson at Jackdaw Research offered a dimmer long-term outlook in a May analysis.

Dawson looked at Fitbit's IPO data and expressed two concerns: few Fitbit buyers have yet to buy a second device and many no longer use the first purchased device.

"This, taken together with the threat of Chinese vendors invading the space with much cheaper devices, reinforces my perception that Fitbit is IPOing at the best possible time from the perspective of its existing owners and investors, but that its future looks much less rosy than its past," Dawson said.

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