What happened

Shares of watch and fashion accessory maker Fossil Group (NASDAQ:FOSL) fell roughly 18% in the first hour of trading on March 11. The company reported earnings after the close on March 10. There's a connection between the two events.   

So what

First the "good" news. Fossil Group reported a fourth-quarter 2020 loss of $0.08 per share, an improvement over the loss of $0.14 per share in the final quarter of 2019. It also saw a material increase in digital sales, which were up 25% year over year in the quarter. That number, meanwhile, was driven by a 50% increase from Fossil's own e-commerce channels. And the company noted it was able to reduce costs and improve its gross margin. So far so good.  

a woman with a cell phone and credit card in her hands.

Image source: Getty Images.

The bad news is that while Fossil's loss was lower it still bled red ink in the incredibly important holiday sales period. Moreover, fourth-quarter 2020 revenue of $528 million was down from $712 million in the same quarter of 2019. Yes, these results were driven by the impact of the coronavirus pandemic, but Fossil's financial performance in the quarter is far from what could be called a good result. In fact, even the increase in online sales is a mixed blessing, given that consumers were limited in the ways they could shop and those online sales may not be sustainable. Even the company's outlook for 2021 wasn't all that inspiring, as it called for 10% to 15% top-line growth over 2020. At the high end that would still leave sales about 15% below the levels seen in 2019.   

Now what

Fossil entered 2020 working on a turnaround, which was made even more difficult by the onset of the coronavirus pandemic. The fourth-quarter results and sales expectations for 2021 show that this is still very much a work in progress. It's hardly surprising that investors were displeased with the update.

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