Fossil stocks tumble on weak earnings report

Fossil Group, Inc. on Tuesday reported its financial results for the first quarter of fiscal 2016 ended April 2, 2016. The company struggled in all markets and all categories in the quarter, but its performance fell in line with expectations.


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First quarter worldwide net sales decreased 7% or $48.9 million in constant currency, due to the weak performance of the company’s multi-brand licensed watch portfolio. Net sales in Europe performed the worst in constant currency decreasing by 8% to $18.1 million, the Americas market decreased 7% to $26 million and the Asia market decreased 4% to $4.8 million.
 
The watch category decreased 8%, jewelry decreased 11% and leathers decreased 2%.
 
Kosta Kartsotis, Chief Executive Officer, commented on the results, “During the quarter, we maintained our intense focus on our strategic priorities to leverage our leadership position in our core business and invest in innovation and technology. While our financial results were in line with our expectations, they were below last year given the persistent headwinds pressuring the traditional watch category and the challenging retail environment, particularly in our wholesale channel. We are disappointed that those headwinds have intensified, which will impact this year’s expectations, despite our further expense management.”
 
Net income in the quarter plummeted to $5.8 million from $38.1 million in the previous year, and diluted earnings per share dropped to $0.12 from $0.75.
 
Kartsotis added, “We are working hard to drive future growth with our focus on wearables, our commitment to brand building and our strength in innovation.”
 
Fossil fully embraced wearable technology and worked with Intel on a new Fossil Q line that launched last winter. In November 2015, Fossil acquired wearable technology innovator, Misfit, which increased the company’s capabilities for the production and development of the technology supporting its products. The company also announced in March that it will launch wearables for eight brands this year, including Michael Kors, Kate Spade, Emporio Armani and Diesel among others. The products will be available in 40 countries and more than 20 languages by Holiday 2016. 

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