Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Fossil Group Stock Fell 14% in August

By Evan Niu, CFA - Sep 4, 2018 at 5:13PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors had mixed feelings about second-quarter earnings, and a competitive threat looms on the horizon.

What happened

Shares of watch and accessory maker Fossil Group ( FOSL -2.95% ) fell 14% last month, in part due to its second-quarter earnings results. Investors initially sent shares higher following the report, only for the stock to close lower the next day.

So what

Fossil continues to make progress navigating the transition to wearables, with its wearables business nearly doubling during the quarter. Watches revenue, the biggest business, declined 1% to $463 million during the quarter, but CEO Kosta Kartsotis noted on the earnings call that wearables continue to represent a growing proportion of sales. Wearables were 20% of total watch sales in Q2, up from 10% in the year-ago quarter.

Two Fossil smartwatches

Image source: Fossil.

The company was able to significantly narrow its net loss, though, losing just $7.8 million, or $0.16 per share, during the quarter. That was a massive improvement compared to the $344.7 million, or $7.11 per share, in red ink a year prior.

Now what

Fossil shares have soared overall this year as the company pivots to wearables like smartwatches and fitness trackers in order to accommodate shifting consumer preferences. Fossil says that it will have over 250 smartwatch styles available for the holiday shopping season. It's also worth noting that Apple, which dominates the wearables market with Apple Watch, is expected to release a redesigned Apple Watch Series 4 later this month, which represents the most prominent competitive threat on the horizon.

The company's guidance for 2018 calls for net sales to fall by 6% to 10%, including the impacts of business exits. Gross margin for the year should be 51% to 52%, and operating expenses including restructuring charges should be $1.25 billion to $1.3 billion.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Fossil Group, Inc. Stock Quote
Fossil Group, Inc.
FOSL
$10.54 (-2.95%) $0.32

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
624%
 
S&P 500 Returns
140%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/06/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.