Fossil Group’s comeback continues. The watch and accessory maker updated its full-year income outlook after strong profits during the quarter, driven by store closures and smarter watches.
Fossil Group is now expecting this year’s income to be between $5 million and $30 million, compared with the previous estimate of losses of between $16 million and earnings of $18 million.
Fossil reported net income of $5 million during the third quarter ending Sept. 29, compared with a loss of $5.4 million in the same quarter last year. The news sent shares of Fossil soaring more than 16 percent after closing down 12.72 percent at $20.66 on Wednesday.
Still, it wasn’t all good news. The Texas-based company reported sales for the quarter at $609 million, down from $689 million in the same quarter last year.
“While the business continues to face top-line headwinds stemming from declines in the traditional watch category combined with business exits and closings of underperforming stores, we are focused on narrowing the gap with gains in connected and digital sales,” Kosta Kartsotis, chairman and chief executive officer, said in a statement. “The third quarter marked progress toward our goals as we saw double-digit growth in both our connected watches and our own e-commerce business.”
During Wednesday night’s conference call, executives said the brand plans to focus on being “a slightly smaller, but profitable business” moving forward by reducing promotions and closing unprofitable stores. The company closed 75 stores, down to 485 units at the end of the quarter.
The company said it will also focus on innovation in its other growth engine: smartwatches. A new Fossil smartwatch is set to be unveiled Thursday.
Fossil, which went public in the early Nineties, had “an incredible rise and then a very scary plummet,” said Simeon Siegel, a retail analyst at Nomura Instinet. The brand suffered as consumers ditched wristwatches for phones.
“The question will be, can [Fossil] convince people that their version of the watch is the new, fashionable accessory?” Siegel said. “They will never have the same stronghold as in the past. But they’re stable and trying to figure out where their place will be in the ecosystem.”