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How Did Fossil Group’s 1Q16 Earnings Turn Out?

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Price movement

Fossil Group (FOSL) has a market cap of $1.4 billion. It fell by 29.1% to close at $28.44 per share on May 11, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -29.2%, -27.4%, and -22.2%, respectively, as of the same day. This means that FOSL is trading 30.7% below its 20-day moving average, 34.6% below its 50-day moving average, and 39.1% below its 200-day moving average.

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Related ETF and peers

The Schwab US Mid-Cap ETF (SCHM) invests 0.19% of its holdings in Fossil Group. The ETF tracks a market-cap-weighted index of mid-cap stocks in the D0w Jones US Total Stock Market Index. The YTD price movement of SCHM was 2.9% as of May 11, 2016.

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

  • Coach (COH) — $10.6 billion
  • Kate Spade (KATE) — $2.9 billion
  • Guess? (GES) — $1.3 billion

Performance of Fossil Group in fiscal 1Q16

Fossil Group reported fiscal 1Q16 net sales of $659.8 million, a fall of 9.0% compared to net sales of $725.1 million in fiscal 1Q15. Sales for the Americas, Europe, and Asia business segments fell by 8.4%, 10.4%, and 8.2%, respectively, in fiscal 1Q16 compared to fiscal 1Q15. The company’s cost of sales as a percentage of net sales rose by 5.6%, and its operating income fell by 74.4% in fiscal 1Q16 compared to fiscal 1Q15.

Its net income and EPS (earnings per share) fell to $5.8 million and $0.12, respectively, in fiscal 1Q16. That compares to $38.1 million and $0.75, respectively, in fiscal 1Q15.

Fossil’s cash and cash equivalents and inventories rose by 6.0% and 0.75%, respectively, in fiscal 1Q16 compared to fiscal 4Q15. Its current ratio rose to 3.6x in fiscal 1Q16 compared to 2.9x in fiscal 4Q15.

During fiscal 1Q16, the company repurchased 0.1 million shares worth $4.4 million at an average price of $47 per share.

Projection

Fossil Group has made the following projections for fiscal 2Q16:

  • net sales to fall 10.0%–8.0%
  • operating margin of 1.5%–3.0%
  • EPS of $0.00–$0.15

The company has made the following projections for fiscal 2016:

  • net sales to fall 5.0%–1.5%
  • operating margin of 5.0%–7.0%
  • EPS of $1.80–$2.80

Now let’s take a look at Coach.

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