Fossil optimistic about wearables following sales slump

By

Obi Anyanwu

Published
Feb 15, 2017

Fossil on Tuesday reported its fourth quarter and full year 2016 results. Both periods were negatively impacted by the US dollar with fourth quarter net sales falling 3% to $959 million and full year net sales slipping 6% to $3.0 billion.

 
The Americas and Europe regions fell in both periods and were offset by a positive performance in Asia, which increased in net sales by 13% to $16.4 million in the fourth quarter and 4% to $18.3 million for the year. The Fossil and Skagen brands posted growth in the fourth quarter, but were offset by the decline in the company’s multi-brand licensed watch portfolio and declines in leathers and jewelry.
 
“The fourth quarter of 2016 was pivotal for Fossil Group with our wearable launches demonstrating they could be the catalyst to drive growth in the watch category,” said Kosta Kartsotis, Chief Executive Officer.

“Delivering some stability in the watch category during the quarter reinforces our belief that with our technology capabilities, we can turn what was once a headwind into a tailwind. During the quarter, we also began executing against our New World Fossil initiative by closing underperforming stores, adjusting our expense base and enhancing our supply chain, all actions that we believe will enable us to improve our financial performance in the future.”
 
Kartsotis added that the company plans to build on the success of its wearables business for 2017 and execute against the New World Fossil initiative.
 
He said, “Our success with wearables over the last year clearly shows that our pursuit of the category and expanding our addressable market is a significant long-term opportunity for the company. As we pursue building a more nimble and responsive operating platform through our New World Fossil initiative, we’ll be even better positioned to improve profitability in a very leverageable business model.”
 
Net income for the quarter was $49.7 million compared to $70.4 million in the fourth quarter of 2015 and diluted earnings per share were $1.03, compared to $1.46. Full year net income also fell to $78.9 million from $220.6 million, and diluted earnings per share were $1.63 compared to $4.51. The full year diluted earnings included a restructuring charge, purchase accounting costs associated with Misfit, Inc. and a negative impact from currency.
 
Fossil expects more currency headwinds due to the strength of the US dollar. The company expects its first quarter 2017 net sales to decrease in range of a 13% and 9.5% and for the diluted earnings loss per share to range from ($1.06) to ($0.92). Full year 2017 net sales are expected to be in range of a 6.5% decline to flat, and diluted earnings (loss) per share is expected to be in a range of ($0.50) to $0.20.