Why Is Fossil Trading below Moving Averages in 2015?

Fossil’s price movement

Fossil Group (FOSL) has a market cap of $2.5 billion. It’s YTD (year-to-date) price movement has been falling quarter-over-quarter in 2015. After the 3Q15 earnings report, FOSL fell by around 2.0% to close at $51.01 per share as of November 12, 2015. The price movement on a weekly, monthly, and YTD basis is -8.2%, -8.2%, and -53.9%, respectively.

Why Is Fossil Trading below Moving Averages in 2015?

The stock is trading below all the moving day averages. Currently, it’s trading at -5.7% below the 20-day moving average, -9.3% below the 50-day moving average, and -29.0% below the 200-day moving average.

The Guggenheim S&P Equal Weight Consumer Discretionary ETF (RCD) invests 1.1% of its portfolio in Fossil. The YTD price movement of the ETF is 3.3% as of November 11, 2015.

The competitors of Fossil Group (FOSL) and their market cap are:

  • Coach (COH) at $8.3 billion
  • Kate Spade (KATE) at $2.7 billion
  • Guess? (GES) at $1.8 billion

Performance of Fossil in 3Q15

The company reported revenue of $771.3 million in 3Q15, a fall of 13.8% when compared to revenue of $894.5 million in 3Q14. The cost of sales as a percentage of sales rose by 4.6% in 3Q15 as compared 3Q14. Revenue from the Americas, Europe, and Asia fell by 11.3%, 14.6%, and 19.3%, respectively, in 3Q15 as compared to the revenue in 3Q14.

The revenue of Watches, Leathers, and Jewelry fell by 16.6%, 3.0%, and 5.2%, respectively, in 3Q15, as compared to the revenue in 3Q14. The company’s new stores of Full price accessory and Outlets rose by 0.94%, and 13.4%, respectively, and its new stores of Full price multi-brand fell by 18.8% in 3Q15 as compared to 3Q14.

Operating income fell by 51.1% in 3Q15 as compared to 3Q14. Net income and EPS (earnings per share) fell to $57.5 million and $1.19 per share, respectively, in 3Q15 as compared to the net income of $103.7 million and EPS at $1.96 per share in 3Q14. Revenue and net income rose by 4.2% and 5.3%, respectively, in 3Q15, on a quarterly basis.

Meanwhile, cash and cash equivalents and inventories rose by 20.7% and 11.5%, respectively, on a quarterly basis. The current ratio and debt-to-equity ratio rose to 3.61 and 1.06, respectively, in 3Q15 as compared to a current ratio of 3.57 and a debt-to-equity ratio of 0.98 in 2Q15.

On November 12, 2015, the company entered into a definitive agreement to acquire Misfit, a company of wearable technology and connected devices. The price of the transaction is $260 million, inclusive of transaction cost. It will be paid through cash and bank debt. This acquisition could expand the market, with new distribution channels, new products, new brands, and new enterprise partnerships, including music, fitness, healthcare, and digital entities.

The company has projected its diluted EPS for 4Q15 and fiscal 2015 to be $1.05–$1.65 per share and $4.15–$4.75 per share, respectively.

About Fossil Group

Fossil designs, markets, and distributes consumer lifestyle and fashion accessories. It offers men’s and women’s fashion watches and jewelry sold under proprietary and licensed brands, handbags, small leather goods, and accessories.