Entering text into the input field will update the search result below

Fossil Group Inc.: It's Ugly, But The Business Still Has Value

Jun. 05, 2020 10:04 PM ETFossil Group, Inc. (FOSL)2 Comments


  • Fossil reported Q1 earnings impacted by worldwide store closures amid the COVID-19 pandemic.
  • The company has responded to poor demand for its traditional watches in recent years by focusing on connected wearables as a growth opportunity.
  • Despite the ongoing challenges, we think the company can get through this difficult environment with a relatively stable liquidity position.
  • The stock is speculative but has upside as the outlook improves with its stores reopening, supported by its diverse brand portfolio and ongoing restructuring initiatives.
  • Looking for more stock ideas like this one? Get them exclusively at Core-Satellite Dossier. Get started today »

Fossil Group Inc. (NASDAQ:FOSL) has been challenged over the past decade, given the emergence of smartwatches at the expense of its core traditional watch market leadership position. The company responded by shifting its focus on designing "connected wearables" for its portfolio of brands which have seen some more favorable momentum in recent periods. The company just reported its latest quarterly result, which was significantly impacted by the COVID-19 pandemic with retailers shut down worldwide. Despite continued weakness expected in the coming quarter, we highlight some positives, including a relatively stable balance sheet position with limited debt and progress in its internal restructuring program known as "New World Fossil 2.0". We think the company can get past the current challenges, and the stock has value at the current level.

(Source: finviz.com)

FOSL Q1 Earnings Recap

Fossil reported its Q1 earnings on June 3rd with a non-GAAP EPS loss -$1.54, which missed estimates by $0.03. Revenue in the quarter at $390.7 million declined by 16% year over year but was favorable $9.4 million ahead of expectations. The weakness here was expected, given the impact of the COVID-19 pandemic with effects being seen in the Asian market since early February.

(Source: Company IR)

Temporary worldwide store closures at company-owned locations along with wholesale retail channels resulted in a sales decline in all regions, including a 20% drop in the Americas market. There was weakness across all product segments, including a 14% year-over-year decline in watches and a 24% drop in jewelry sales on a constant currency basis. The gross margin in the quarter at 35.9% was down from 53.3% in Q1 2019 in part pressured from the liquidation of the older generation connected wearables inventory.

The only silver lining here is that management noted that, before the store closing, sales were trending positive up 1% on

Are you interested to learn how this idea can fit within a diversified portfolio? With the Core-Satellite Dossier marketplace service, we sort through +4,000 ETFs/CEFs along with +16,000 U.S. stocks/ADRs to find the best trade ideas. Click here for a two-week free trial and explore our content.

This article was written by

Dan Victor, CFA profile picture

Dan Victor, CFA is a market professional with more than 15 years of investment management experience across major financial institutions in research, strategy, and trading roles.

Dan leads the investing group Conviction Dossier, where his focus is on helping investors stay ahead of market trends and inflection points. Dan’s investing vehicles of choice are growth stocks, tactical exchange-traded funds, and option spreads. He shares model portfolios and research to help investors make better decisions, via his Investing Group’s active chat room.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (2)

Dan Victor, CFA profile picture
55%! .. slow down guys!
Damir Bobojanov profile picture
Yeah, I know... What has just happened?

I thought I was lucky to unload @ 4.75
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

About FOSL

SymbolLast Price% Chg
Market Cap
Yield (TTM)
Rev Growth (YoY)
Short Interest
Prev. Close
Compare to Peers

More on FOSL

Related Stocks

SymbolLast Price% Chg
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.