It's quite likely that Fossil (Nasdaq: FOSL) disappointed many investors who have dug it up over the course of recent history. Today, the company, known for its watches and handbags, reported a disappointing second quarter and slashed its outlook for the second half of the year, causing a bit of a landslide at the excavation site (er, a precipitous drop in stock price).
Second-quarter profit at Fossil fell 39% to $9.7 million, or $0.13 per share. Revenue increased 10% to $226.2 million. The company blamed the results on low-margin product sales and higher operating expenses. Gross profit margin fell, and inventory was up 35% at $218 million. To make matters worse, Fossil reduced its forecast for the second half of the year.
Today's information may not come as much of a surprise to some Fools -- one contributor looked at Fossil back in May and was of the opinion that an investment in Fossil at that time wouldn't be any great find.
However, the Fool is home to many different opinions and strategies for investing, and Fossil has been on Motley Fool Inside Value guru Philip Durell's watch list for quite some time, despite the fact that it might not be considered a traditional "value stock" like those he usually follows. (Back in February, Philip said he had a close eye on whether the stock could reach the point where it could deliver "growth at a reasonable price," or GARP.)
And of course, Fossil may be beginning to look like even more of a contender because Philip looks for stocks that are unloved and beaten down for various reasons, and carefully assesses when the price is right -- and when troubles are alleviating.
Whether Fossil is becoming a sweeter concept to Philip is information that Inside Value subscribers are probably looking forward to. Despite the company's obvious missteps lately and concerns about margins, it still has a strong balance sheet, with $132.8 million in cash (although that's down 6% on a year-over-year basis) and no long-term debt.
There's little doubt that Fossil has a few holes to dig itself out of, and investors would do well to watch and see whether the company's brand is losing market share. But it could very well be that over the course of the rough months ahead, the stock may eventually present itself to be a value. Stay tuned.
Read recent Foolish commentary on Fossil:
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Alyce Lomax
does not own shares of any of the companies mentioned.
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