Investing.com -- Shares in Fossil Group Inc (NASDAQ:FOSL) plummeted more than 30% in after-hours trading after the Texas-based designer of recreational goods failed to meet analysts' forecasts for its first quarter revenues and earnings and lowered its forward guidance on Tuesday evening.
During the first quarter of Fiscal Year 2016, Fossil reported earnings of 0.12 per share on revenue of $659.8 million, sharply below analysts' expectations of per share earnings of 0.15 on sales of $667 million for the first three months of the year. On a constant currency basis, sales fell by 7% from the same period in 2015, including 7% declines in both the U.S. and the euro area. For the quarter revenues were dragged down by an 11% decline in jewelry and an 8% reduction in watch sales.
Even worse, sales from Misfit wearables provided an unexpected drag, as the wearable industry took a hit from heightened competition by the Apple (NASDAQ:AAPL) iWatch. In February, Fossil said it saw itself as a "fashion getaway" to wearable technology after Misfit sales help drive stronger than expected earnings in the fourth quarter. After acquiring the wearables technology company in November for $260 million, Fossil announced plans at a consumer electronic show to launch up to 100 new wearable devices in 2016. Last quarter, however, Fossil backtracked, blaming a decline in its multi-brand watch portfolio for contributing to sharp losses in revenue overall.
Fossil also disclosed to investors on Tuesday that operations of Misfit will be dilutive to its 2016 results.
"During the quarter, we maintained our intense focus on our strategic priorities to leverage our leadership position in our core business and invest in innovation and technology. While our financial results were in line with our expectations, they were below last year given the persistent headwinds pressuring the traditional watch category and the challenging retail environment, particularly in our wholesale channel. We are disappointed that those headwinds have intensified, which will impact this year’s expectations, despite our further expense management," Fossil CEO Kosta Kartsotis said in a statement.
"We are working hard to drive future growth with our focus on wearables, our commitment to brand building and our strength in innovation. Our performance in Fossil and Skagen, particularly in our international markets, continues to give us confidence in our long-term strategy to grow our owned brands and leverage our competitive and strategic advantages to restore growth to our portfolio."
Moving forward, Fossil expects EPS of 0.00 to 0.15 in the second quarter, considerably below analysts' forecasts of 0.58.
Shares in Fossil plunged 12.28 or 30.62% to 27.82.