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Fossil Group Reports Sales Decline in Q3

Fossil Group Inc., parent company of Fossil Corporate Markets (asi/55145), announced that worldwide net sales for its third quarter reached $738 million, down 4.32% or $33.3 million from the third quarter of 2015. Gross profit also decreased to $385.1 million, a drop of 7.8%, while gross margin fell to 52.2% from 54.2%. Diluted earnings per share fell to $.36 from $1.19.

The company reports that growth in its SKAGEN and FOSSIL product lines was offset by a decrease in sales among its licensed brands.

In the third quarter, sales in the Americas reached $361.2 million, a drop of 7.67% from the third quarter of 2015. Sales in Europe, meanwhile, fell 6.57% to $243.2 million, while sales in Asia rose by 11.52% to $133.6 million. Worldwide, sales fell across the Watches, Leathers and Jewelry product categories.

The company predicts net sales for the fourth quarter will range from a 2% decrease to a 4.09% increase in the fourth quarter, and a decrease of 3% to 5% for all of 2016.

As reported in August, Fossil Group cited smartwatch competition as a reason for its second quarter sales decline, and has since launched wearable devices across eight brands over the past two months.

“We achieved this through the great work of our entire organization, with everyone focused on delivering over 100 SKUs, including display smartwatches, hybrids and activity trackers in 40 countries and 20 different languages,” said CEO Kosta Kartsotis. “While these launches were a monumental accomplishment and a huge milestone for our company, we know this is truly just the beginning of our wearables journey and of the opportunity it represents for Fossil Group.”

At the last earnings announcement, the company also announced a multi-year strategic plan to “reinvent” the company. “While it is early in the process,” said Kartsotis, “we envision a comprehensive plan that will evolve our model and the way we work, the way we develop product and the way we bring our products to market. We expect the program will touch all aspects of our business as we enhance our operational capabilities, gain greater efficiencies and take optimal advantage of our considerable scale.”

The company predicts improvements in annualized operating profit of more than $200 million over current levels at the conclusion of the plan.

“We are confident in our strategies and believe that our global operating platform, powerful portfolio of brands and ability to lead in wearables, uniquely position us to expand our addressable market and drive growth,” said Kartsotis. “By combining our scale, competitive advantages and improved operating capabilities, we believe we can improve our financial performance, build a nimble and responsive operating platform and drive long-term shareholder value.”