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Will Fossil’s 2Q16 Results Drag Its Stock Price Down More?

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Prices drop over concerns

Fossil (FOSL) is slated to announce its 2Q16 results on August 9, 2016. The company’s stock price has dipped by 12.4% on a YTD (or year-to-date) basis to $30.04 as of August 2, 2016. The company will likely see weaker 2Q16 results, and the consensus estimate for the quarter has fallen.

The stock prices of Michael Kors Holdings (KORS) and Coach (COH) have risen by 24.6% and 23.9%, respectively, on a YTD basis to $50.32 and $41.67, respectively. Ralph Lauren’s (RL) stock price has dipped by 16.3% YTD to $93.4 as of August 2.

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Earnings trajectory

The $1.4 billion company specializes in designing and selling luxury items under in-house brands like Fossil and Skagen and licensed brands like Adidas, Kate Spade, and Armani.

Fossil’s adjusted earnings per share have beaten the consensus estimates six times in the last nine quarters and were in line with the estimate for 3Q15. The company recorded adjusted EPS (earnings per share) of $0.12 in 1Q16 against a consensus estimate of $0.15.

Fossil’s 1Q16 results

Fossil’s adjusted EPS dipped by 87% year-over-year to $0.12 in 1Q16. The adjusted EPS in 1Q16 was impacted by lower sales, currency headwinds, higher operating costs, and rise in interest costs. Fossil’s stock price fell by 29.1% on May 11, 2016, in reaction to the company’s dismal results.

The Guggenheim S&P MidCap 400 Pure Value ETF (RFV) invests 0.71% of its portfolio in Fossil. The Wall Street consensus estimate for 2Q16 adjusted EPS is $0.09 after factoring in the effect of the rising operating and interest costs. Analysts expect Fossil’s sales for 2Q16 to decline by 0.2% to $670.8 million.

In the next part, we’ll discuss the company’s margins.

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