Fossil Plunges After ‘Unprecedented Disruption’ Rocks the Watch Company

Updated on
  • Sales are projected to decline faster than expected this year
  • Watch company’s chief financial officer also is stepping down

A Fossil Misfit Vapor smartwatch at the 2017 Consumer Electronics Show in Las Vegas, Nevada, on Jan. 5, 2017.

Photographer: David Paul Morris/Bloomberg

Fossil Group Inc. sank the most in 15 months after the wristwatch company gave a bleaker outlook, a sign that a retail slump and Apple Inc.’s incursion into the industry are taking a grim toll.

Fossil now expects sales to decline as much as 8.5 percent this year, compared with a previous range that capped at 6 percent. The company also predicted a deeper loss than it had forecast earlier, hurt by a writedown of its assets.

The guidance provided little hope to investors that Fossil can pull out of its tailspin soon. It’s saddled with a deep reliance on the struggling department-store industry, and the broader watch industry is under attack by Apple and other technology companies.

“We operate in a market and retail environment experiencing unprecedented disruption,” Chief Executive Officer Kosta Kartsotis said in a statement.

Though Fossil has been expanding into smartwatches and wearable devices, the effort has been slow to pay off.

“Even though the company has been singularly focused on this initiative for the past three years, their inability to gain traction in the category is preventing Fossil from offsetting sustained weakness in the rest of the business,” Ike Boruchow, an analyst at Wells Fargo & Co., said in a note.

The stock fell as much as 29 percent to $8.37 in New York Wednesday, the biggest intraday slide since May 2016. Even before the plunge, Fossil had lost more than half its value in 2017. And the shares declined in the previous three years, underscoring investor pessimism that the company can stage a comeback.

As it tries to rebuild, Fossil is releasing a flurry of new devices, including fitness trackers and other tech-heavy timepieces. The company has said it will introduce 300 products this year to fight the downturn. It’s also been closing underperforming stores.

Fossil now expects a loss of as much as $7.42 a share this year. That includes a writedown of $6.50 and 60 cents in restructuring charges.

Adding to the upheaval, Chief Financial Officer Dennis Secor is leaving the Richardson, Texas-based company. The executive “has decided to relocate back to California for personal reasons,” Fossil said. Jeffrey Boyer, a board member who previously served as CFO at Pier 1 Imports Inc., will take over the role.

— With assistance by Janet Freund

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