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Fossil shares fell sharply in extended trading as the watchmaker behind brands like Burberry and Skagen that is playing catch-up in the wearables space issued a downbeat outlook and disappointing fourth-quarter results.

The Texas-based company forecast fiscal 2017 earnings in the range of $1.00 -$1.70 a share, below estimates of $1.78. And for the current quarter the company expects to post a loss of between 10 and 25 cents a share.

Trading in the company’s shares was initially halted; after resuming, the stock plunged 16 per cent.

The disappointing guidance accompanied a steeper-than-expected drop in fourth-quarter sales. Like-for-like sales, a key industry metric, fell 7 per cent in the fourth quarter, compared with estimates for a 0.4 per cent drop. Meanwhile, net sales slid 3 per cent to $959.2m, below expectations of $977.2m.

Profits slid to $49.7m, or $1.03 a share, in the three months ended in December, compared with $70.4m, or $1.46 a share, in the year-ago period. Earnings were impacted by a restructuring charge and purchase accounting costs tied to Misfit, the wearable activity tracker it purchased in 2015.

Fossil and other traditional watchmakers have come under pressure from the rise of activity trackers and smartwatches like the FitBit and the Apple Watch. Fossil bought Misfit more than a year ago as it began to push into the wearables sphere.

The company previously said it plans to double its wearables production to 300 new products and add new brands this year as it tries to entice consumers looking for fashionable connectivity.

“The fourth quarter of 2016 was pivotal for Fossil Group with our wearable launches demonstrating they could be the catalyst to drive growth in the watch category,” said chief executive Kosta Kartsotis. “Delivering some stability in the watch category during the quarter reinforces our belief that with our technology capabilities, we can turn what was once a headwind into a tailwind.”

Fossil shares are down more than 11 per cent so far this year and have declined nearly 80 per cent over the past three years.

Copyright The Financial Times Limited 2017. All rights reserved.
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