Fossil Reports Q2 Earnings

A stronger U.S. dollar and competition from smartwatches were key factors in causing worldwide second-quarter sales, profits and earnings per share to decline at Fossil Group Inc., parent company of Fossil Corporate Markets (asi/55145).

In a release issued Tuesday August 9, the Texas-based company reported that net sales tallied $685.4 million, down 7.4% from the second quarter of 2015. Similarly, gross profit dropped 13% from last year’s Q2 to $355.8 million, with gross margin coming in at 51.9%, a fall from 55.3%. Diluted earnings per share, meanwhile, plummeted to 12 cents; they were $1.12 during the same period the prior year.

Despite the declines, Fossil’s second quarter earnings and revenue surpassed analysts’ predictions, a fact that resulted in the company’s stock rising 8.7% Tuesday to $33. Even so, by early Wednesday afternoon, the stock was down nearly 7% to $30.75.

In the second quarter, Fossil’s sales in the Americas dropped 11%, while sales in Europe declined 5% and Asia 1%. Worldwide, sales of jewelry and leather increased, but the gains were offset by a reported 10% decline in watch sales.

For the year, Fossil predicts that its net sales will be 1.5% to 5% lower than in 2015. Nonetheless, CEO Kosta Kartsotis is optimistic about the future. "Our team continues to work diligently on our key strategic growth priorities: Investing in Fossil and Skagen to continue to grow those brands, investing in digital and omni-channel capabilities to meet the customer wherever they shop, and driving future growth through wearable technology,” said Kartsotis. “As always, we continue to focus intently on managing our resources and investments tightly to improve the profitability of our core business.”