Fossil, Inc. (NASDAQ:FOSL)
Consumer Discretionary - Textiles, Apparel & Luxury Goods | Reports May 10, After Market Closes
Key Takeaways
- The Estimize consensus on Fossil is calling for earnings of 20 cents per share on $669.30 million in revenue, 2 cents higher than Wall Street on the bottom and $2 million on the top
- Fossil’s core brands have offset the declines the company continues to experience in its licensed brand portfolio
- Late last year, Fossil acquired wearables technology provider, Misfit, in order to make a Fossil fitness tracker
Fossil Group is scheduled to report first quarter earnings today, after the market closes. Fossil is best known for making watches not only under its own brand name but also for Michael Kors, Kate Spade and other high fashion brands. The company is coming off a better than expected fourth quarter which saw a 12 cent beat on the bottom line and $70 million on the top. Unfortunately, year-over-year growth comparisons remained negative as has been the trend for the past year.
Fossil is in the midst of a brand transformation as waning consumer demand has taking a toll on the company's finances. The stock has followed suit, losing over 50% of its value in the last 12 months. That said, strong Q4 earnings were an encouraging start to Fossil’s turnaround.
This quarter, the Estimize consensus is calling for earnings of 20 cents per share on $669.30 million in revenue, 2 cents higher than Wall Street on the bottom and $2 million on the top. Since Fossil’s last report, per share estimates have dropped 37% and now reflect a 75% decline from a year earlier. Revenue on the other hand is forecasted to increase 8% over the same time period. 
Lately, Fossil is seeing encouraging trends through its core brands, Fossil and Skagen, aided by strong e-commerce growth, rising direct to consumer sales, and modest comp store sales. Growth from these brands last quarter was largely offset by declines in the company’s multi-brand licensed watch portfolio and weak currency conditions.
Apart from watches, Fossil is seeing strength in its leather and jewelry products. On the other end, licensed brands continue to drag down Fossil’s financial performance. At the beginning of the year, Fossil announced it would let its watch license with Burberry expire in December 2017, a move that some analysts believe could cost the company between $100-200 million a year.
As consumption trends shift away from traditional timepieces, Fossil is taking steps to continually innovate its product offerings. Last December the company purchased wearables technology provider, Misfit, in what looks to be a move towards a Fossil fitness tracker. Meanwhile, Fossil already develops and sells smartwatches fit with android operating system. These initiatives could help provide a long term solution in the rapidly growing wearables space. 