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Category: Stock Market and Fossil Group
Date: 12 February 2020 Stock Price: $6.31 We take a look at the 3rd quarter earnings report of their 2019 fiscal year of Fossil Group, an American fashion designer and watchmaker which has been struggling for years, and its stock price decline shows it having lost almost 85% of its value in the last 5 years.
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About Fossil Group
Fossil Group, Inc. is a global design, marketing, distribution and innovation company specializing in lifestyle accessories. Under a diverse portfolio of owned and licensed brands, our offerings include fashion watches, jewelry, handbags, small leather goods and wearables. We bring each brand story to life with our 30,000 points of distribution across 150 countries, including 450 company-owned retail locations
A Fossil store entrance in Cape Town, South Africa
Overview of Fossil Group's 3rd quarter 2019 earnings report
The data below refers to the latest quarter's data (unless specified otherwise)
- Net sales: $539.5 million (down from $608.8 million for the same quarter of the previous year)
- Net sales decreased by -11.38% over the last 12 months
- Cost of sales: $261 million (down from $282.3 million for the same quarter of the previous year)
- Cost of sales decreased by -7.54% over the last 12 months
- Net loss: -$25.9 million (down from $4.281 million for the same quarter of the previous year)
- Diluted earnings per share: -$0.51 (down from $0.10 for the same quarter of the previous year)
- Number of shares in issue: 50.5 million (down from 50.7 million for the same quarter of the previous year)
- Cash and cash equivalents: $147.5 million
- Cash and cash equivalents per share: $2.92
- Cash and cash equivalents makes up 46.3% of Fossil Group's market capital
- Cash and cash equivalents makes up 8.9% of Fossil Group's total assets
- Accounts receivable: $247.6 million
- Accounts receivable makes up 15.1% of Fossil Group's total assets
- Inventories: $570.2 million
- Inventories makes up 34.7% of Fossil Group's total assets
- Stockholders equity in Fossil Group: $509.9 million
- Stockholders equity per share: $10.09
- So Fossil Group is trading at 0.63 times its stockholders equity per share which is well outside the expected range of between 2 and 4 times that most firms tend to trade at. And it is odd to see a firm trade at levels below 1 times its stockholders equity per share, as the stockholders equity per share shows what stockholders would receive if the group sold all its assets, paid off all liabilities and distribute what is left equally amongst stockholders.
Fossil Group (NASDAQ: FOSL) management commentary on 3rd quarter 2019 earnings
Richardson, TX. November 6, 2019 — Fossil Group, Inc. (NASDAQ: FOSL) (the “Company” or “Fossil Group”) today reported its financial results for the third quarter ended September 28, 2019.
Kosta Kartsotis, Chairman and CEO stated: “For the third quarter, sales performance was in line with our guidance range with sales improving sequentially from the second quarter across most geographies and all categories. The quarter also saw progress on key initiatives, including double-digit growth in Asia, strong global e-commerce expansion driven by double-digit online watch category growth, and robust performance from our Generation 5 connected watches. Our overall sales performance, however, was not up to our goals, and we are highly focused on bringing about a positive change in our top-line trajectory. In addition, we continue to reduce our overall cost structure in order to improve profitability and expand our capacity to invest in high growth areas.”
Kosta Kartsotis, Chairman and CEO stated: “For the third quarter, sales performance was in line with our guidance range with sales improving sequentially from the second quarter across most geographies and all categories. The quarter also saw progress on key initiatives, including double-digit growth in Asia, strong global e-commerce expansion driven by double-digit online watch category growth, and robust performance from our Generation 5 connected watches. Our overall sales performance, however, was not up to our goals, and we are highly focused on bringing about a positive change in our top-line trajectory. In addition, we continue to reduce our overall cost structure in order to improve profitability and expand our capacity to invest in high growth areas.”
“We continue to bring exciting new innovations to the market across traditional and connected watch categories, while also accelerating our investments in digital. We believe these actions will help our current sales trends. We also expect to realize increased efficiencies from our New World Fossil 2.0 Transform to Grow initiative,” continued Mr. Kartsotis. “That said, we recognize these programs will take time. We remain confident in our strategy and believe we have the right team, operating platform, and balance sheet strength to achieve sustained long term profitable growth and deliver increased value for our stakeholders.”
Guidance
Over the next several years, Fossil Group will continue to transform the Company’s business model to address changes in consumer behaviors and their purchases of traditional watches and connected devices, as well as jewelry and leathers. During the Company’s ongoing transformation project, it believes the following operating metrics are the most appropriate performance measures: net sales, gross margin, operating expenses, operating margin, other income (expense), interest expense, and income (loss) before income taxes. The Company is providing guidance on a GAAP basis. For comparison purposes, the Company has also provided additional information which quantifies the estimated impact on its operating expenses and operating income for non-operational items impacting operating results for fiscal 2019 and the fourth quarter of fiscal 2019. The Company expects the following during fiscal 2019:
GAAP Guidance For Fiscal 2019:
• Net sales in the range of (13.0)% to (11.0)%, including the estimated negative impact of business exits and currency of approximately (2.5)% and (2.0)%, respectively
• Gross margin in the range of 51.0% to 52.0%
• Operating expenses, ranging from $1,115 million to $1,135 million, including restructuring charges of $30 million
• Operating margin in the range of 1.0% to 1.7%
• Other income (expense) of approximately $26 million based on prevailing currency rates
• Interest expense of approximately $30 million
• Income (loss) before income taxes in the range of $18 million to $34 million
For the Fourth Quarter of Fiscal 2019:
• Net sales in the range of (10.0)% to (5.0)%, including the estimated negative impacts of business exits and currency of approximately (1.8)% and (1.6)%, respectively
• Gross margin in the range of 49.0% to 51.0%
• Operating expenses, ranging from $295 million to $315 million, including restructuring charges of $5 million
• Operating margin in the range of 7.5% to 9.0%
• Other income (expense) of approximately $1 million based on prevailing currency rates
• Interest expense of approximately $7 million
• Income (loss) before income taxes in the range of $45 million to $60 million
Guidance
Over the next several years, Fossil Group will continue to transform the Company’s business model to address changes in consumer behaviors and their purchases of traditional watches and connected devices, as well as jewelry and leathers. During the Company’s ongoing transformation project, it believes the following operating metrics are the most appropriate performance measures: net sales, gross margin, operating expenses, operating margin, other income (expense), interest expense, and income (loss) before income taxes. The Company is providing guidance on a GAAP basis. For comparison purposes, the Company has also provided additional information which quantifies the estimated impact on its operating expenses and operating income for non-operational items impacting operating results for fiscal 2019 and the fourth quarter of fiscal 2019. The Company expects the following during fiscal 2019:
GAAP Guidance For Fiscal 2019:
• Net sales in the range of (13.0)% to (11.0)%, including the estimated negative impact of business exits and currency of approximately (2.5)% and (2.0)%, respectively
• Gross margin in the range of 51.0% to 52.0%
• Operating expenses, ranging from $1,115 million to $1,135 million, including restructuring charges of $30 million
• Operating margin in the range of 1.0% to 1.7%
• Other income (expense) of approximately $26 million based on prevailing currency rates
• Interest expense of approximately $30 million
• Income (loss) before income taxes in the range of $18 million to $34 million
For the Fourth Quarter of Fiscal 2019:
• Net sales in the range of (10.0)% to (5.0)%, including the estimated negative impacts of business exits and currency of approximately (1.8)% and (1.6)%, respectively
• Gross margin in the range of 49.0% to 51.0%
• Operating expenses, ranging from $295 million to $315 million, including restructuring charges of $5 million
• Operating margin in the range of 7.5% to 9.0%
• Other income (expense) of approximately $1 million based on prevailing currency rates
• Interest expense of approximately $7 million
• Income (loss) before income taxes in the range of $45 million to $60 million
Fossil Group (NASDAQ: FOSL) stock price history
The image below obtained from Google, shows the stock price history of Fossil Group over the last 5 years. And its been a horrible time for Fossil Group stockholders. 5 years ago the stock of Fossil Group was trading at around $98 a stock and its currently trading at $6.31 a stock. That's a significant loss of -83.4% suffered by Fossil Group stockholders over the last 5 years.
The stock of Fossil Group is trading at a lot closer to its 52 week low of $5.91 than it is to its 52 week high of $16.68 a stock, which to us is a clear indication that the short term sentiment and momentum of Fossil stock is very negative at this point in time,
The stock of Fossil Group is trading at a lot closer to its 52 week low of $5.91 than it is to its 52 week high of $16.68 a stock, which to us is a clear indication that the short term sentiment and momentum of Fossil stock is very negative at this point in time,
Fossil Group stock price history over the last 5 years.
Recent coverage of Fossil Group
The extract below discusses the latest regarding Fossil Group as obtained from Zacks.com
Fossil Group, Inc. has been witnessing drab sales trend, stemming from sluggishness in traditional watches, leather and jewelry businesses. Traditional watch sales have been bearing the brunt of intense competition and rising demand for connected watches. Also, adverse impacts from currency fluctuations, tariffs and business exits are hurting the top line. Let’s take a closer look.
What’s Hurting Fossil’s Performance?
Fossil is witnessing soft sales in traditional watches for a while now. Increased competition and rising demand for tech-savvy watches has been the prime deterrent. Evidently, the company’s watch sales declined 8.6% in third-quarter 2019. Moreover, performance of mid-priced fashion watches continued to be dismal in the quarter under review. This apart, sales of leathers and jewelry businesses have been weak since the past few quarters due to soft demand. Well, these factors coupled with business exists have taken a toll on the company’s top line that has been declining year over year for a long time. Notably, in the third quarter, worldwide net sales fell 11%, following a decline of 13% and 18% in the second and the first quarter, respectively.
Further, adverse currency movements impacted Fossil’s net sales during the third quarter. Moreover, the bottom line was hurt by 4 cents due to currency woes. Volatile currency movements are a threat to the company’s performance.
Read the full article here
Fossil Group, Inc. has been witnessing drab sales trend, stemming from sluggishness in traditional watches, leather and jewelry businesses. Traditional watch sales have been bearing the brunt of intense competition and rising demand for connected watches. Also, adverse impacts from currency fluctuations, tariffs and business exits are hurting the top line. Let’s take a closer look.
What’s Hurting Fossil’s Performance?
Fossil is witnessing soft sales in traditional watches for a while now. Increased competition and rising demand for tech-savvy watches has been the prime deterrent. Evidently, the company’s watch sales declined 8.6% in third-quarter 2019. Moreover, performance of mid-priced fashion watches continued to be dismal in the quarter under review. This apart, sales of leathers and jewelry businesses have been weak since the past few quarters due to soft demand. Well, these factors coupled with business exists have taken a toll on the company’s top line that has been declining year over year for a long time. Notably, in the third quarter, worldwide net sales fell 11%, following a decline of 13% and 18% in the second and the first quarter, respectively.
Further, adverse currency movements impacted Fossil’s net sales during the third quarter. Moreover, the bottom line was hurt by 4 cents due to currency woes. Volatile currency movements are a threat to the company’s performance.
Read the full article here
Fossil sporty watch
Fossil Group (NASDAQ: FOSL) stock valuation
So what do we value Fossil Group stock at after the release of their 3rd quarter 2019 earnings report? Based on Fossil Group's 3rd quarter 2019 earnings report our valuation models provides a target price (full value price) for Fossil Group at $10.10 a stock. We therefore believe that the stock of Fossil Group is undervalued.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $10.10 therefore we believe a good entry point into Fossil Group's stock is at $9.09 or below. We expect the stock of Fossil Group to slowly make its way up to our target price (full value price) in coming weeks and months, as the group implements its turnaround plan to improve profitability.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $10.10 therefore we believe a good entry point into Fossil Group's stock is at $9.09 or below. We expect the stock of Fossil Group to slowly make its way up to our target price (full value price) in coming weeks and months, as the group implements its turnaround plan to improve profitability.
Next earnings release of Fossil Group
It is expected that Fossil Group will publish their 4th quarter 2019 earnings report in early February 2020