We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Fossil (FOSL) Q1 Loss Wider than Expected, Revenues Miss
Read MoreHide Full Article
Fossil Group, Inc. (FOSL - Free Report) began 2017 on a dismal note, wherein it posted wider-than-expected losses, along with revenues which were way behind estimates. Weaker-than-expected results also pulled down shares of the company. Fossil shares plummeted 17% after hours trading yesterday.
Fossil Group, Inc. Price, Consensus and EPS Surprise
Adjusted loss of 35 cents that was wider than the Zacks Consensus Estimate of a loss of 21 cents. Also, the bottom line declined from earnings of 11 cents delivered in the year-ago quarter. In fact, the loss was also wider than the company’s guided range of a loss of 10–25 cents per share.
On a GAAP basis, it posted a loss of 1 cent versus earnings of 12 cents recorded in the year-ago quarter. This includes restructuring charges of 35 cents coupled with a favorable currency impact of 11 cents.
We note that shares of Fossil have plunged over 36% in the past one year compared with the Zacks categorized Retail – Apparel/Shoe industry’s loss of 5%. The industry is currently placed at bottom 4% of the Zacks Classified industries (245 out of 256). In fact, the broader Retail-Wholesale sector is placed at the bottom most of the Zacks Classified sectors (16 out of 16). Of late, Fossil has been witnessing general weakness in the watches category. The company also noticed that tech-enabled watches have been significantly affecting traditional watch sales.
Quarter in Detail
This global consumer fashion accessories maker’s net sales of $581.8 million in the first quarter fiscal 2017 lagged the Zacks Consensus Estimate of $596.5 million and also declined 12% from the prior-year quarter, primarily due to currency headwinds, a decline in the company's in traditional watches and tough retail landscape. On a constant-currency basis, the same fell 11%.
Notably, the sales decline on a constant-currency basis was in line with the company’s expectation of down 8–11.5%. Additionally, adverse currency movements had a negative impact of $8.5 million on sales.
Further, sales declined 17%, 7% and 5% in Americas, Europe and Asia, respectively. Category wise, sales fell 9%, 12% and 21% in the Watches, Leathers and Jewelry, respectively.
Global retail comps (includes eCommerce sales) dropped 11% year over year in the reported quarter with slump in all product categories and regions.
Gross margin declined 300 basis points (bps) to 49.8% in the quarter, mainly by reduced retail margins due to higher promotional activity and increased mix. In addition, adverse foreign currency impact and higher relative mix of off-price sales led to the decrease. These were somewhat compensated with margin improvement programs coupled with increased mix of international revenues.
Moreover, adjusted operating loss as a percentage of sales came in at 2.6% in the quarter, versus operating profit margin of 2.2% delivered in the prior-year quarter. This was primarily due to lower sales and gross margin, despite flat operating expenses on a year-over-year basis.
Other Financial Update
As of Apr 1, 2017, the company had cash and cash equivalents of roughly $320.7 million compared to $306.8 million in the year-ago period. Further, long-term debt was $589.7 million and total stockholders’ equity was $982.3 million at the end of the quarter.
Outlook
Moving ahead, Fossil continues to focus on the New World Fossil restructuring program along with growth in the company’s core watch business and product expansion. This restructuring initiative is likely to create a better operating platform that will cater to its customers efficiently in a tough retail landscape. Furthermore, it is on track to introduce more than 300 skus in 2017 with improved engineering as well as easier charging for display watches.
For 2017, Fossil expects net sales to be down in 1.5%–6.0% range and anticipates operating margin in the band of 0.5–2.2% on a GAAP basis. Further, it projects 2017 GAAP earnings (loss) in the range of a loss of 40 cents to 30 cents per share that includes 60 cents of restructuring charges. Moreover, its adjusted operating margin is projected to be in the range of 3–4.5% and adjusted earnings in the band of 80 cents–$1.50 for fiscal 2017. In fact, the company posted adjusted earnings of $1.80 in fiscal 2016. The Zacks Consensus Estimate for fiscal 2017 is currently pegged at $1.11 per share that is within the company’s guided range.
For the second quarter, management projects net sales to fall in the band of 88–11.5% and expects operating loss margin in the 3.5% to 5.5% range. Further, GAAP loss for the quarter is anticipated in the range of 83 cents to $1.00 per share that includes 15 cents of restructuring charges. The company projects its adjusted operating loss margin in the range of 1%–3% and adjusted loss in the band of 23–40 cents per share in the second quarter. Notably, the company delivered adjusted earnings of 9 cents in second-quarter 2016. The Zacks Consensus Estimate for the quarter is currently pegged at a loss of 6 cents per share.
Key Picks
Better-ranked stocks in the broader Retail-Wholesale sector include The Children's Place, Inc. (PLCE - Free Report) , The Home Depot, Inc. (HD - Free Report) and Builders FirstSource, Inc. (BLDR - Free Report) .
The Children's Place, with a long-term earnings growth rate of 8% has surged 73.2% in the past one year. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Home Depot has a Zacks Rank #2 (Buy) and a long-term earnings growth rate of 12.7%. Also, it has jumped 22.2% in the past six months.
Builders FirstSource, a Zacks Rank #2 stock posted an average earnings beat of 71.6% in the trailing four quarters. Further, it has increased 51.9% in the past six months.
Looking for Ideas with Even Greater Upside?
Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information >>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Fossil (FOSL) Q1 Loss Wider than Expected, Revenues Miss
Fossil Group, Inc. (FOSL - Free Report) began 2017 on a dismal note, wherein it posted wider-than-expected losses, along with revenues which were way behind estimates. Weaker-than-expected results also pulled down shares of the company. Fossil shares plummeted 17% after hours trading yesterday.
Fossil Group, Inc. Price, Consensus and EPS Surprise
Fossil Group, Inc. Price, Consensus and EPS Surprise | Fossil Group, Inc. Quote
Adjusted loss of 35 cents that was wider than the Zacks Consensus Estimate of a loss of 21 cents. Also, the bottom line declined from earnings of 11 cents delivered in the year-ago quarter. In fact, the loss was also wider than the company’s guided range of a loss of 10–25 cents per share.
On a GAAP basis, it posted a loss of 1 cent versus earnings of 12 cents recorded in the year-ago quarter. This includes restructuring charges of 35 cents coupled with a favorable currency impact of 11 cents.
We note that shares of Fossil have plunged over 36% in the past one year compared with the Zacks categorized Retail – Apparel/Shoe industry’s loss of 5%. The industry is currently placed at bottom 4% of the Zacks Classified industries (245 out of 256). In fact, the broader Retail-Wholesale sector is placed at the bottom most of the Zacks Classified sectors (16 out of 16). Of late, Fossil has been witnessing general weakness in the watches category. The company also noticed that tech-enabled watches have been significantly affecting traditional watch sales.
Quarter in Detail
This global consumer fashion accessories maker’s net sales of $581.8 million in the first quarter fiscal 2017 lagged the Zacks Consensus Estimate of $596.5 million and also declined 12% from the prior-year quarter, primarily due to currency headwinds, a decline in the company's in traditional watches and tough retail landscape. On a constant-currency basis, the same fell 11%.
Notably, the sales decline on a constant-currency basis was in line with the company’s expectation of down 8–11.5%. Additionally, adverse currency movements had a negative impact of $8.5 million on sales.
Further, sales declined 17%, 7% and 5% in Americas, Europe and Asia, respectively. Category wise, sales fell 9%, 12% and 21% in the Watches, Leathers and Jewelry, respectively.
Global retail comps (includes eCommerce sales) dropped 11% year over year in the reported quarter with slump in all product categories and regions.
Gross margin declined 300 basis points (bps) to 49.8% in the quarter, mainly by reduced retail margins due to higher promotional activity and increased mix. In addition, adverse foreign currency impact and higher relative mix of off-price sales led to the decrease. These were somewhat compensated with margin improvement programs coupled with increased mix of international revenues.
Moreover, adjusted operating loss as a percentage of sales came in at 2.6% in the quarter, versus operating profit margin of 2.2% delivered in the prior-year quarter. This was primarily due to lower sales and gross margin, despite flat operating expenses on a year-over-year basis.
Other Financial Update
As of Apr 1, 2017, the company had cash and cash equivalents of roughly $320.7 million compared to $306.8 million in the year-ago period. Further, long-term debt was $589.7 million and total stockholders’ equity was $982.3 million at the end of the quarter.
Outlook
Moving ahead, Fossil continues to focus on the New World Fossil restructuring program along with growth in the company’s core watch business and product expansion. This restructuring initiative is likely to create a better operating platform that will cater to its customers efficiently in a tough retail landscape. Furthermore, it is on track to introduce more than 300 skus in 2017 with improved engineering as well as easier charging for display watches.
For 2017, Fossil expects net sales to be down in 1.5%–6.0% range and anticipates operating margin in the band of 0.5–2.2% on a GAAP basis. Further, it projects 2017 GAAP earnings (loss) in the range of a loss of 40 cents to 30 cents per share that includes 60 cents of restructuring charges. Moreover, its adjusted operating margin is projected to be in the range of 3–4.5% and adjusted earnings in the band of 80 cents–$1.50 for fiscal 2017. In fact, the company posted adjusted earnings of $1.80 in fiscal 2016. The Zacks Consensus Estimate for fiscal 2017 is currently pegged at $1.11 per share that is within the company’s guided range.
For the second quarter, management projects net sales to fall in the band of 88–11.5% and expects operating loss margin in the 3.5% to 5.5% range. Further, GAAP loss for the quarter is anticipated in the range of 83 cents to $1.00 per share that includes 15 cents of restructuring charges. The company projects its adjusted operating loss margin in the range of 1%–3% and adjusted loss in the band of 23–40 cents per share in the second quarter. Notably, the company delivered adjusted earnings of 9 cents in second-quarter 2016. The Zacks Consensus Estimate for the quarter is currently pegged at a loss of 6 cents per share.
Key Picks
Better-ranked stocks in the broader Retail-Wholesale sector include The Children's Place, Inc. (PLCE - Free Report) , The Home Depot, Inc. (HD - Free Report) and Builders FirstSource, Inc. (BLDR - Free Report) .
The Children's Place, with a long-term earnings growth rate of 8% has surged 73.2% in the past one year. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Home Depot has a Zacks Rank #2 (Buy) and a long-term earnings growth rate of 12.7%. Also, it has jumped 22.2% in the past six months.
Builders FirstSource, a Zacks Rank #2 stock posted an average earnings beat of 71.6% in the trailing four quarters. Further, it has increased 51.9% in the past six months.
Looking for Ideas with Even Greater Upside?
Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information >>