What happened

Fossil Group Inc. (NASDAQ:FOSL) stock was looking worn today as the watchmaker offered a disappointing outlook for the key holiday quarter. Shares were down 12.8% as of 12:25 p.m EST.

The maker of fashion accessories including handbags, belts, and jewelry actually beat analyst estimates in its third-quarter report. The company said revenue fell 7% to $688.7 million, but that came in ahead of estimates at $649.9 million, while a bottom-line result of adjusted earnings per share at $0.04 was well below a $0.48-per-share profit a year ago, but still topped expectations at a $0.28 loss.

A lineup of Fossil's smartwatches

Image source: Fossil Group.

So what

Like other high-end consumer brands that have traditionally depended on retail partners like department stores, Fossil has struggled with the shift in the retail industry. The Americas was a particularly weak spot in the quarter with sales falling 15%, and sales were down across its three product segments: watches, leather, and jewelry. Declines were especially rough in leather and jewelry, falling 19% and 21%, respectively.

CEO Kosta Kartsotis said that results met the company's expectations, but acknowledged that the retail environment "remains challenging." He also said it was becoming more efficient, reducing operating expenses by nearly 10%.

Now what

For the holiday quarter, management projected a sales decline of 11% to 3.5% and for adjusted earnings per share ranging from a loss of minus $0.04 to $0.51. That forecast was well below the analyst consensus for revenue to fall just 0.6% and EPS at $1.31. 

Fossil shares have now plunged in every earnings report this year, giving up 77% year to date. With sales slipping and a muted profit forecast for the holidays, the sell-off is no surprise. Any potential turnaround in this retail environment for the company won't be easy.