Fossil Tumbles as Company Slashes Forecast, Sales Lag Estimatesby
Technology-driven accessories, strong dollar hurt earnings
Shares of brand partners Michael Kors, Kate Spade also suffer
Fossil Group Inc. shares plummeted to the lowest price in more than six years after the company slashed its full-year earnings forecast, saying the increasing popularity of smartwatches and a challenging retail environment will continue to weigh on sales.
Earnings will be $1.80 to $2.80 a share in the current fiscal year, down from an earlier projection of $2.80 to $3.60, the Richardson, Texas-based company said in a statement Tuesday. Earnings fell to 12 cents per share in the first quarter, trailing analysts’ 15-cent average estimate.
The results show the company has yet to beat back competition from smartwatches like the Apple Watch and Samsung Gear. Fossil said it is working on new, innovative designs and plans to introduce technology-driven products in eight of its brands later this year. However, the company also expects gross margin to contract because of an expected increase in outlet promotions and a greater reliance on sales through off-price retailers, Chief Financial Officer Dennis Secor said in a conference call Tuesday.
“We see a business with almost no visibility and a huge amount of volatility, making this a very tough stock in our view,” Ike Boruchow, an analyst at Wells Fargo & Co., said in a note.
Fossil plunged as much as 34 percent to $26.51 in New York trading, the lowest price since November 2009. Michael Kors Holdings Ltd. and Kate Spade & Co. -- whose watch brands are made by Fossil -- dropped as much as 12 percent and 6.2 percent, respectively.
The stronger dollar also crimped Fossil’s first-quarter sales, reducing revenue by $16.4 million and trimming 8 cents off of earnings per share.