GoPro unveiled a major restructuring of its business on Monday after the embattled action camera maker unexpectedly issued a big sales warning for the all-important holiday quarter.
The company, which has been struggling with weak sales of its latest wearable camera, said it was cutting more than 254 jobs – or a fifth of its workforce – and exiting its drone business following a sharp drop in fourth quarter sales.
For the three months to end of December, GoPro said it now expects revenue to come in at $340m. That’s a 37 per cent drop from the $540.6m reported in the prior year period and much steeper decline than the fall to $472m the market had forecast.
GoPro attributed the sales warning to the $80m hit it is taking from its “price protection” policy on its Hero camera range, as well as the Karma drone.
Price protection is the money that GoPro has to refund to retailers who purchase cameras at a higher price whenever the company lowers the suggested retail price.
“As we noted in our November earnings call, at the start of the holiday quarter we saw soft demand for our Hero5 Black camera,” said Nicholas Woodman, GoPro founder and
chief executive. “Despite significant marketing support, we found consumers were reluctant to purchase Hero5 Black at the same price it launched at one year earlier. Our December 10 holiday price reduction provided a sharp increase in sell-through.”
As a result of the hefty discounting, GoPro now forecasts fourth quarter gross margin to be between 24-26 per cent, down from the 39.2 per cent recorded last year.
GoPro did not talk about how fourth quarter earnings would be affected. It noted however the restructuring plans announced today will result in a $23m-33m hit to its first quarter results.
The company also added that Mr Woodman will reduce his 2018 cash compensation to $1.
Shares in GoPro fell 4.3 per cent in pre-market trading before they were halted ahead of the news.
Get alerts on GoPro Inc when a new story is published