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Fossil Group Reports Financials

Texas-based Fossil Group Inc., parent company of supplier Fossil Corporate Markets (asi/55145), announced its net sales for the quarter ended April 1, 2017, decreased 12% to $582 million. Explaining the decline, Fossil said growth in its connected watches category “was more than offset by declines in traditional watches,” while slipping sales in leathers and jewelry and changes in foreign currency also dragged figures lower.

“Our results for the first quarter, while largely in line with our expectations, continue to reflect a challenging retail environment and a watch category undergoing significant change,” said Kosta Kartsotis, Fossil’s CEO. “The strategies we are pursuing in the midst of these headwinds enable us to better compete in the environment and capitalize on the growing importance of technology to the watch category.”

Fossil said its net sales in the Americas decreased $58.3 million, or 17%, in Q1, while net sales in Europe fell $14.3 million or 7%. In Asia, Fossil’s sales dropped $5.4 million or 5% in the first quarter, as sales increases in India and China were offset by a decline in Japan and Australia. Additionally, Fossil reported a loss of 65 cents per share and said its gross margin decreased 300 basis points to 49.8% in Q1, while its operating expenses were $334.8 million.

The disappointing earnings report drew the ire of investors as shares of Fossil continued to tumble on Wall Street this week. Over the last year, Fossil shares have dropped more than 60%. While Fossil faces competition, particularly from Apple, in the smart watch space, Kartsotis still believes a turnaround is coming. “Our focus for the year continues to be on executing against our New World Fossil restructuring initiative, driving growth in our core watch business and advancing our wearable products with an expanded offering across additional brands,” he said.