Fossil Group Inc (FOSL) Stock Gets the Scythe After Q1 Loss

Fossil Group Inc (NASDAQ:FOSL) first-quarter results provided an unpleasant surprise, and investors have responded by pushing FOSL stock down more than 22% in pre-market trading this morning.

Fossil FOSL stock

FOSL reported a loss of $48.2 million for the quarter compared to a $5.8 million profit in the comparable year-earlier period, according to a company statement. On a per diluted share basis, the loss was $1 versus 12 cents last year. The results included a restructuring charge of 35 cents per diluted share along with a positive impact of 11 cents from foreign currency hedging gains.

Analysts had forecast sales to reach $596.5 million in the quarter, with a per share loss of 21 cents, according to Zacks Investment Research.

Compared to Q1 2016, a stronger dollar decreased Fossil’s fiscal 2017 reported net sales by $8.5 million and operating income by $3.8 million, the Richardson, Texas-based fashion watchmaker said.

“Our results for the first quarter, while largely in line with our expectations, continue to reflect a challenging retail environment and a watch category undergoing significant change,” said CEO Kosta Kartsotis.

Global retail comps, including e-commerce sales, for Q1 2017 decreased 11% compared to Q1 2016 with declines in all product categories and all regions, FOSL said. Gross margin slipped 300 basis points to 49.8% primarily driven by lower retail margins due to increased promotional activity in outlets and the e-commerce channel, as well as an increased mix toward lower margin connected product, the company reported.

Fossil updated its guidance for the year, now expecting net sales to decline in the range of 6.0% to 1.5%, with a diluted EPS in a range of a loss of 40 cents to a profit of 30 cents, including 60 cent per share in restructuring charges.

FOSL stock had lost almost 30% this year as of yesterday’s market close. Fellow watchmaker Movado Group, Inc (NYSE:MOV) declined nearly 18% in the same period.

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