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Ouch! Why Fossil Group, Inc. Stock Plummeted Today

By Daniel Sparks - May 10, 2017 at 1:31PM

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Fossil isn't adapting fast enough to a rapidly changing watch market.

What happened

Shares of watch company Fossil (FOSL -2.46%) were slammed Wednesday, falling as much as 24.8% after the company reported worse-than-expected first-quarter results. At the time of this writing, shares are down about 22.7%.

So what

Fossil reported first-quarter net sales of $582 million and a loss per share of $0.65 after being adjusted to excluded a restructuring charge of $0.35. These results compare to net sales of about $660 million and earnings per share of $0.12 in the year-ago quarter.

A chalkboard sketch of a stock price falling.

Image source: Getty Images.

On average, analysts were expecting first-quarter revenue of $591 million and a loss per share of $0.31.

Fossil's challenges come as wearable technology continues to gain steam. Apple's (AAPL 0.17%) Apple Watch, in particular, has continued to gain traction. Apple noted in its first-quarter earnings release that Apple Watch revenue hit an all-time high during the important holiday quarter. And Apple said in its second-quarter earnings call that Apple Watch sales had doubled year over year.

Seeming to acknowledge the success of Apple Watch and the rise of smartwatches in general, Fossil CEO Kosta Kartsotis acknowledged the negative impact of a rapidly changing watch market on the company's results. "Our results for the first quarter, while largely in line with our expectations, continue to reflect a challenging retail environment and a watch category undergoing significant change," Kartsotis said.

Now what

While investors shouldn't count on it until they start seeing tangible evidence of a turnaround, Kartsotis believes the company's product pipeline will help the watchmaker better address this challenging environment.

The strategies we are pursuing in the midst of these headwinds enable us to better compete in the environment and capitalize on the growing importance of technology to the watch category. ... We are very excited about the next generation of products we are developing and launching throughout the year.

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Stocks Mentioned

Fossil Group, Inc. Stock Quote
Fossil Group, Inc.
$6.75 (-2.46%) $0.17
Apple Inc. Stock Quote
Apple Inc.
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