Please ensure Javascript is enabled for purposes of website accessibility

Why Fossil Group Shares Plunged 25% Thursday Morning

By Daniel Miller - Nov 7, 2019 at 1:19PM

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

Shares of Fossil are tanking Thursday after a large bottom-line loss.

What happened

Shares of Fossil Group (FOSL 4.99%), a global designer and distributor of accessory products that include watches and other wearables, plunged more than 25% lower Thursday morning after a surprisingly weak third-quarter report.

So what

Starting from the top, sales declined 11.4% to $539.5 million during the third quarter compared to the prior year, which missed analysts' estimates of $558 million. But it was the bottom line that concerned investors, as Fossil lost $26 million, or $0.51 per share, in the third quarter, compared to earnings of $5 million, or $0.10 per share, during the prior year. The result was wildly short of analysts' earnings estimates of $0.21 per share. Weak sales results were driven by a number of factors including store closures, currency effects, inventory liquidation levels, and reduced sales in the lower-margin off-price channel, among others.

A row of watches in a retail store.

Image source: Getty Images.

After noting sales performance improved sequentially from the second quarter, Kosta Kartsotis, chairman and CEO of Fossil, admitted some disappointment: "Our overall sales performance, however, was not up to our goals, and we are highly focused on bringing about a positive change in our top-line trajectory. In addition, we continue to reduce our overall cost structure in order to improve profitability and expand our capacity to invest in high growth areas."

Now what

It's been an incredibly difficult ride for Fossil and its investors lately; the company has shed roughly 90% of its value over the past five years as it failed to adapt to rapidly changing trends. Management has taken steps to strengthen the balance sheet by removing $500 million in net debt from the end of 2015 to the end of 2018, but it hasn't been able to innovate and develop enough compelling products to energize its business. Management believes in its strategy to bring new products to market and that its New World Fossil 2.0 Transform to Grow initiative will continue to deliver savings, but these moves will take time to bear fruit.

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
$7.99 (4.99%) $0.38

*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
345%
 
S&P 500 Returns
119%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/16/2022.

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

Premium Investing Services

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