Shares of Fossil Group closed up 3.39 percent to $12.82 on Wednesday, and surged more than 11 percent during after-hours trading.
The steep increase after the market closed followed the watch firm’s release of quarterly earnings, which showed mixed results.
“We began fiscal 2019 reporting sales and earnings that exceeded our expectations,” Fossil Group’s chairman and chief executive officer Kosta Kartsotis said in a statement. “Given the ongoing disruptions in our category, we continue to plan our business conservatively, but are operating with a sense of urgency to transform our sales channels and to increase product innovation across our categories.
“We remain confident that our operating platform, brand portfolio, strong innovation and powerful partnerships will enable us to deliver on our objective of long-term profitable growth,” he said.
The better-than-expected results included a net income loss of $12.2 million for the quarter ending March 30. That’s a noticeable improvement from a net loss of $48.3 million a year earlier. Sales for the three-month period were $465 million, down from $569 million during the same period last year.
Kartsotis pointed out, though, that while the U.S. remains the company’s biggest market, there was solid growth in Asia, including double-digit growth in China and India, as well as positive e-commerce sales and increased sales of Fossil watches in the Americas.
Still, Fossil has fallen on hard times as consumers continue to ditch wristwatches for phones. Shares of the watchmaker, which also makes accessories, leather goods and jewelry, are down 30.9 percent year-over-year.
Fossil, which can be found in roughly 150 countries, has continued to shutter stores and is now down to 461. Executives on Wednesday evening’s conference call said the company plans to close approximately 30 more stores in 2019, most of them in the second and third quarters.
But the growing popularity of smartwatches may be the company’s saving grace. Fossil sold its intellectual property related to its smartwatch technology to Google earlier this year for $40 million. But it is up against some stiff competition — namely Apple Inc.
“Within this category, Apple Watch is the best-selling and most loved smartwatch in the world and produced its best results ever for a non-holiday quarter,” Cook said. “It’s reaching many new customers with three-quarters of purchases going to customers who have never owned an Apple Watch before.”
Even so, Fossil executive vice president and chief commercial officer said the Fossil Sport, part of the company’s wearable smartwatch line, has been a major growth driver. “We haven’t been able to keep it in stock,” he said.
Moving forward, Kartsotis said other wearables, specifically ones with health and wellness features, “could be a game-changer.”
“We definitely think, in our experience, what changes the direction in this business is innovation and differentiation,” he told analysts on the conference call. “This year, over the last six to eight months, we’ve kind of taken the gloves off. Our idea is to distort differentiation in the market.”