Fossil Group Reports Q1 Decline

Fossil Group Inc., parent company of Fossil Corporate Markets (asi/55145), says a stronger U.S. dollar and a decline in the company’s multi-brand watch portfolio were important factors in causing worldwide first-quarter sales to decrease 9% compared to the same period last year.

Globally, net sales in the company’s various channels, which include the promotional products marketplace, dropped $65.3 million to $659.8 million during the first three months of 2016. Similarly, net income plummeted from $38.1 million in Q1 2015 to $5.8 million during the same 13 weeks this year. Diluted earnings per share, meanwhile, came in at $0.12, down from $0.75.

“While our financial results were in line with our expectations, they were below last year given the persistent headwinds pressuring the traditional watch category and the challenging retail environment, particularly in our wholesale channel,” CEO Kosta Kartsotis said in a statement. “We are disappointed that those headwinds have intensified, which will impact this year’s expectations, despite our further expense management. We are working hard to drive future growth with our focus on wearables, our commitment to brand building and our strength in innovation.”

During the first quarter, Fossil’s global sales of leather products were flat, but the company’s jewelry and watch categories declined. In the Americas, first quarter net sales decreased 7%, or $26 million, compared to the same time in 2015. “Modest sales growth in Canada and Mexico was offset by a decline in the U.S.,” Fossil reported in an earnings statement.

Overall, Fossil’s gross margin decreased 250 basis points to 52.8%. Impacted by lower sales and diminished margins, Fossil’s operating income dropped from $56.2 million Q1 2015 to $14.4 in Q1 2016.