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Fossil Dull on Weak Traditional Watch Sales: Can it Recover?

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Fossil Group, Inc. (FOSL - Free Report) has been witnessing drab sales trend, stemming from sluggishness in traditional watches, leather and jewelry businesses. Traditional watch sales have been bearing the brunt of intense competition and rising demand for connected watches. Also, adverse impacts from currency fluctuations, tariffs and business exits are hurting the top line.

Let’s take a closer look.

What’s Hurting Fossil’s Performance?

Fossil is witnessing soft sales in traditional watches for a while now. Increased competition and rising demand for tech-savvy watches has been the prime deterrent. Evidently, the company’s watch sales declined 8.6% in third-quarter 2019. Moreover, performance of mid-priced fashion watches continued to be dismal in the quarter under review.

This apart, sales of leathers and jewelry businesses have been weak since the past few quarters due to soft demand. Well, these factors coupled with business exists have taken a toll on the company’s top line that has been declining year over year for a long time. Notably, in the third quarter, worldwide net sales fell 11%, following a decline of 13% and 18% in the second and the first quarter, respectively.

Further, adverse currency movements impacted Fossil’s net sales during the third quarter. Moreover, the bottom line was hurt by 4 cents due to currency woes. Volatile currency movements are a threat to the company’s performance.

Owing to these downsides, shares of this Zacks Rank #3 (Hold) company have slumped 55.2% in the past year compared with the industry’s decline of 19.7%.

Any Scope for Revival?

Fossil is focusing on efforts to lift its performance. To this end, the company’s wearables business is gaining traction, courtesy of an expanding tech-savvy consumer base. Markedly, management expects connected watches to grow 20% annually over the next three to five years. Moreover, Fossil is making several investments to improve digital marketing and drive online sales. Further, it is on track with the New World Fossil plan that aims to transform the company, fuel efficiencies, improve margins, better manage revenues and enhance overall operating structure.

That being said, we cannot ignore the aforementioned hurdles.  

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