Shares of Fossil Group (FOSL 9.24, -2.60, -22.4%) are getting clobbered today in the wake of the company's disappointing second quarter report and outlook. Separately, the company also announced that its CFO, Dennis R. Sector, resigned for personal reasons and will be replaced effective October 16, 2017, by Jeffrey N. Boyer, who is the CFO for Pier 1 Imports (PIR 4.59, -0.01, -0.2%).
By and large, Fossil's second quarter report revealed many of the same disappointments that were present in the first quarter. Sales were down in all regions and across all product categories, global retail comps, including e-commerce sales, declined 11%, gross margins contracted, and the company reported a loss for the period on a GAAP and non-GAAP basis.
In the same vein, management maintained its optimism that it is on the right track to returning the company to solid growth, citing the traction it is gaining in the wearables category and the cost cuts it has made.
Many investors, though, appear to have run out of patience, especially since management's optimism was counteracted by reduced guidance for fiscal 2017.
The second quarter performance was ugly and it contributed to the reduced full-year outlook. Worldwide net sales declined 12.9% to $596.8 million, gross margins declined 140 basis points to 50.5% of sales, and the company reported a GAAP loss of ($7.11) per share, which included a non-cash intangible asset impairment charge of $6.50, a restructuring charge of $0.13 per diluted share, and a negative impact of $0.08 per diluted share for changes in foreign currency.
Fossil reported growth in connected watches across all regions, yet it also said that growth in all regions was more than offset by a decline in traditional watches. Overall sales for the watch category were down 9% while sales for the leathers and jewelry categories declined 25% and 22%, respectively, on a reported basis.
The company's outlook for the third quarter calls for net sales to decline in the range of 8% to 14% and its diluted earnings (loss) per share to be between ($0.44) and ($0.11), including $0.06 of restructuring charges.
For the full year, Fossil expects net sales to be down 4.5% to 8.5% and its diluted earnings (loss) per share to be between ($7.42) and ($6.42), including the aforementioned asset impairment charge and $0.60 of restructuring charges. Following its first quarter report in May, Fossil said it expected net sales to decline 1.5% to 6.0% and its GAAP earnings to range from a loss of ($0.40) to a profit of $0.30 per diluted share.
Including today's loss, shares of FOSL are down 64% year-to-date and down 70% over the last 52 weeks.