Traditional Watch Business To Hurt Fossil's (FOSL) Q1 Earnings

Fossil Group, Inc. (NASDAQ:FOSL) is slated to release first-quarter 2019 results on May 8, after market close. This renowned manufacturer of watches and other accessories has seen its bottom line outperform the Zacks Consensus Estimate in three of the trailing four quarters. Let’s see how the company is positioned ahead of the upcoming quarterly results.

Expansion in Wearables & E-commerce Bode Well

Fossil is gaining from rapid growth of its connected wearables category that includes smartwatches, hybrid watches and activity trackers. The segment is likely to maintain the upside in the first quarter. Moreover, the company’s partnerships, such as with Qualcomm (NASDAQ:QCOM), Google (NASDAQ:GOOGL) and Citizen, as well as the addition of brands to its smartwatch line-up, are likely to support performance.

We note that the e-commerce space is providing much impetus to Fossil’s wearables sales, alongside other products. It has been making several investments to improve digital marketing and drive online sales. Strength in the e-commerce channel combined with yielding licensing agreements are expected to favorably impact the upcoming quarterly release.

Fossil Group, Inc. Price, Consensus and EPS Surprise

Will Soft Traditional Watches Impede Growth?

Fossil’s traditional watch business has been sluggish for a while. Further, sale of leather and jewelry items have persistently been weak over the past few quarters on account of soft demand. Such headwinds are likely persist and be a drag on the top line in the first quarter.

Further, management expects unfavorable currency movements, business exits, store closures and supply-chain hurdles for connected products, to pose challenges in 2019. This in turn mars expectations for the quarter under review as well. In fact, for first-quarter, the company expects net sales to decline roughly 6-22%.

On the brighter side, the company is on track with its New World Fossil Plan, which is aimed at fueling efficiencies, improving margins and enhancing the overall operating structure of the business. This is likely to provide some cushion to the stock in the quarter under review.

How Are Estimates Faring?

The Zacks Consensus Estimate is currently pegged at a loss of 53 cents per share, which suggests an improvement of almost 46.5% from the loss of 99 cents in the year-ago quarter. The current estimate has been stable in the past 30 days.

However, the consensus mark for revenues is pegged at $454.3 million, calling for a declineof 20.2% from the year-ago quarter’s tally.

What Does the Zacks Model Predict?

Our proven model doesn’t show that Fossil can beat bottom-line estimates this quarter. For this to happen, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Although Fossil carries a Zacks Rank #3, its Earnings ESP of 0.00% makes us less confident about an earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks Poised to Beat Estimates

Here are a few companies you may want to consider as our model shows that they have the right combination of elements to beat earnings.

Ulta Beauty (NASDAQ:ULTA) has an Earnings ESP of +0.25% and a Zacks Rank #2.

Big Lots (NYSE:BIG) has an Earnings ESP of +0.71% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dollar General (NYSE:DG) has an Earnings ESP of +1.51% and a Zacks Rank #3.

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