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Could GoPro’s Profit Margins Improve in Fiscal 2017?

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Jun. 29 2017, Updated 7:36 a.m. ET

Need to reduce costs

In 1Q17, US-based (SPY), consumer tech (QQQ) company GoPro (GPRO) reduced its channel inventory by 13% QoQ (quarter-over-quarter). GoPro expects this trend to continue, as it has reduced the price of the HERO Session by $50 to $149. GoPro has several initiatives to cut costs and improve efficiency. It has built a customer support and IT (information technology) office in Manila.

In the company’s 1Q17 earnings call, GoPro chief operating officer Charles Prober stated that “we have a number of initiatives in process to simplify and reduce costs in our supply chain, small changes in packaging, assembly and shipping of our products that will show significant savings over time.”

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Operating expenses fall in 1Q17

GoPro’s operating expenses fell to $131 million in 1Q17, a fall of 51 million, or 28% QoQ (quarter-over-quarter). Operating expenses fell due to restructuring activities. Its employee count fell 14% from 4Q16 and 23% from 3Q16. GoPro reduced its investments in research and development by 20% and sales and marketing expenses by 40% in 1Q17.

As seen earlier, GoPro reported EPS (earnings per share) of $0.44 in 1Q17, compared with $0.53 in 1Q16. While GoPro’s revenue rose 19% YoY (year-over-year), its EPS improved 17% YoY in 1Q17. GoPro wants to reduce operating expenses to below $495 million in fiscal 2017, a reduction of $200 million YoY.

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