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How Deeply Did Fossil Group Dig in during 4Q15 and 2015?

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Price movement of Fossil Group

Fossil Group (FOSL) has a market cap of $2.1 billion. FOSL rose by 28.6% to close at $44.30 per share on February 17, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were 31.6%, 45.0%, and 21.2%, respectively, as of that date.

At times, the stock has broken the support of all moving day averages. Currently, FOSL is trading 36.7% above its 20-day moving average, 29.4% above its 50-day moving average, and 20.0% below its 200-day moving average.

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The iShares Morningstar Small Value ETF (JKL) invests 0.33% of its holdings in Fossil Group. JKL tracks a market-cap-weighted index of US small-cap value stocks. The index stocks from the 90th–97th percentile of the market-cap spectrum, using fundamental factors. The YTD price movement of JKL was -9.8% as of February 16, 2016.

The market caps of Fossil Group’s competitors are as follows:

  • Coach (COH)—$10.0 billion
  • Kate Spade Company (KATE)—$2.2 billion
  • Guess’ (GES)—$1.6 billion

Fossil Group’s performance in 4Q15 and 2015

Fossil Group reported fiscal 4Q15 net sales of $0.99 billion, a fall of 6.8% compared to net sales of $1.06 billion in fiscal 4Q14. Sales from its Americas, Europe, and Asia segments fell by 4.6%, 6.5%, and 15.4%, respectively, in 4Q15 compared to 4Q14.

Fossil reported restructuring expenses and operating income of $2.7 million and $88.9 million, respectively, in 4Q15, compared to $0.0 million and $222.1 million, respectively, in 4Q14. Its net income and EPS (earnings per share) fell to $70.4 million and $1.46, respectively, in 4Q15, compared to $154.1 million and $3.00, respectively, in 4Q14.

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2015 results

In 2015, FOSL reported net sales of $3.2 billion, a fall of 8.0% YoY (year-over-year). It reported restructuring expenses of $24.4 million in 2015. It opened 30 stores in Europe and 11 stores in Asia. Its net income and EPS fell to $220.6 million and $4.51, respectively, in 2015, compared to $376.7 million and $7.10, respectively, in 2014.

Meanwhile, its cash and cash equivalents and inventories rose by 4.7% and 4.7%, respectively, in 2015. Its current ratio fell to 2.9 and debt-to-equity ratio rose to 1.0 in 2015, compared a current ratio and a debt-to-equity ratio of 3.3 and 0.76, respectively, in 2014.

During fiscal 2015, it invested $229.5 million to repurchase 2.7 million shares of its common stock at an average price of $84 per share. As of January 2, 2016, it had $829.3 million remaining on its existing share repurchase authorization. The price-to-earnings and price-to-book value ratios of Fossil Group were 7.3x and 2.5x, respectively, as of February 17, 2016.

Projection

The company has made the following projections for fiscal 1Q16:

  • net sales to decrease in the range of 7%–10%
  • operating margin in the range of 1.0%–2.5%
  • EPS in the range of $0.05–$0.20

The company has made the following projections for fiscal 2016:

  • net sales growth in the range of -3.5%–1%
  • operating margin in the range of 7.0%–8.5%
  • EPS in the range of $2.80–$3.60

Keep checking in with Market Realist’s Consumer Discretionary page for ongoing analysis.

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