Are Better Days Ahead for This Watch Maker? — The Motley Fool

It has been a dismal year for owners of watchmaker Fossil Group (NASDAQ:FOSL). The stock is down over 60% as profitability for company is non-existent, and sales trends remain negative.

A brief rebound for the shares was helped, in part, by insider buying activity and talk in Washington D.C. about lower corporate tax rates. Investors, however, should curb their enthusiasm.

Data by YCharts.

2017 recap

During the second quarter, Fossil revenue fell 13% year over year. Comparable retail sales were down 11% — gains in online activity, new smartwatches, and other wearables were not enough to make up for declines in traditional watches and jewelry.

The most important segments for Fossil are North America and watches — its largest market and product type. The two areas fell year-over-year by 16% and 9%, respectively. Revenue to date is down 12% to $1.179 billion. As a result, the company has racked up a loss of $8.12 per share with $6.50 of that due to a one-time charge related to asset impairment and a restructuring charge of $0.13. However, adding those back, the company is still solidly in the red for the year.

Category Sales Increase (Decrease)

Q2 2017

Q1 2017

2016

2015

Watches

(9%)

(9%)

(6%)

(10%)

North America

(16%)

(17%)

(8%)

(5%)

Chart by author. Data source: Fossil Group quarterly earnings.

Mounting a resurgence

Those numbers don’t leave much room for optimism, but Fossil management thinks that business will start to improve during the back half of the year. The outlook is that sales will finish 2017 down 4.5% to 8.5%. Far from great, but the range implies a big improvement for the all-important holiday shopping season.

The company has been busy this year rolling out new “fashion-first” smart watches for companies like Diesel, DKNY, Armani, and Michael Kors, as well as the namesake Fossil brand. The watches use technology from Qualcomm and Android…

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