US watchmaker Fossil Group’s shares are down more than 17 per cent in after-hours trading on Tuesday after it reported that net sales had fallen over the past quarter thanks in part to the impact from the surging buck.
The company said that worldwide net sales were down 12 per cent year-on-year during the quarter ending April 1, to $581.8m, compared to the $589m predicted by analysts surveyed by Bloomberg. Its net loss was steeper than expected at $48.2m for the quarter, versus expectations for a loss of $50.2m, shaking out to a loss of $1 per share, a few pennies better than the $1.03 that analysts predicted.
While its “connected” watch segment — meant to rival wearables like the Apple Watch and Fitbit — managed to grow, that was more than offset by declines in its more traditional watch unit, the company said. It also said that the strong US dollar had hurt its sales.
The results, according to chief executive Kosta Kartsotis, “continue to reflect a challenging retail environment and a watch category undergoing significant change.
“The strategies we are pursuing in the midst of these headwinds enable us to better compete in the environment and capitalize on the growing importance of technology to the watch category. The newness and innovation we are infusing into our fashion accessories is gaining traction with our retail partners and consumers alike, demonstrating that technology can be the catalyst needed to drive growth in the watch category.”
Fossil also updated its full-year guidance, saying it now looks for a sales decline between 1.5 and 6 per cent, versus previous estimates for net sales staying flat or falling as far as 6.5 per cent. Per share, it is looking at a range between a 30 cent gain and a 40 cent loss, including 60 cents in restructuring charges. It has also predicted net sales to fall as much as 11.5 per cent in the current quarter.
It’s yet another earnings disappointment for Fossil, which is behind brands like Burberry and Skagen, as it tries to catch up to connected competitors. Over the past 12 months, its shares have fallen almost 54 per cent.