fossil smartwatch

Fossil Inc.’s smartwatch business might be growing quickly and offering up some hope for the future, but the category’s not big enough to save the company from its extremely challenging present.

Shares of Fossil fell as much as 25 percent in after-hours trading Tuesday when the firm turned in third-quarter losses and sales declines and reduced its outlook for the full year. The stock declines moderated quickly, leaving shares off 14.7 percent to $5.84.

Kosta Kartsotis, chief executive officer, noted alongside the third-quarter results: “While our business and the retail environment remain challenging, we are continuing to make progress against key strategic initiatives that tell us we’re on the right track. So far this year, we have tripled our wearables business and continue to see these amazing new products materially improve the trajectory of our watch business. We and our partners are investing heavily in these products, and we are prepared for the important holiday season….While there remains significant work ahead of us, we continue to make substantial progress against our three key operational objectives: to advance our wearable technology agenda, leverage our scale to drive costs down and transform our business through our New World Fossil initiative.”

Fossil’s net losses for the quarter tallied $5.4 million, or 11 cents a diluted share, and compared with earnings of $17.4 million, or 36 cents, a year earlier. Sales for the three months ended Sept. 30 fell 6.7 percent to $688.7 million.

The sales decline was milder than the company projected in August, but Fossil still cut its forecast.

For the full year, the firm is now looking for sales to drop by 8.5 percent to 10.5 percent, down from the 4.5 percent to 8.5 percent decline previously projected.

Annual losses are expected to range from $7.75 to $8.30 a share, marking a weakening from the $6.62 to $7.42  previously forecast. Both projections included $6.50 in non-cash impairment charges and 60 cents in restructuring charges.

On a conference call with analysts, Kartsotis added: “As we enter the all important holiday setting period, we are very good about the potential of our new product launches and their ability to positively impact the business. We remain confident that wearables can be one of the key catalysts that offsets the declines that we’ve seen in our traditional watch business for some time now and ultimately, turn those headwinds into tailwinds. Response from our customers continued to be strong, and we are very encouraged by the results, particularly from some of our key brands.”

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