At the close of trading Tuesday, shares of Fossil Group (FOSL 5.76, -1.09, -15.9%) were trading at $6.85, which was 75% less than where they were trading 52 weeks ago. Shareholders might have been inclined to think things couldn't get any worse for the stock, yet that inclination has been proven wrong.
Shares of FOSL have fallen another 16% this morning in the wake of the company's third quarter earnings report and fourth quarter outlook, both of which exposed the struggles that this maker of watches and other lifestyle accessories continue to face.
Third quarter net sales decreased 6.7% to $688.7 million, as sales fell year-over-year in each product category and across all regions. Global retail comps, including e-commerce sales, decreased 6%.
Watch sales, which accounted for 80% of net sales, decreased 2.7% to $551.9 million. Fossil reported growth in connected watches, but said that growth was more than offset by a decline in traditional watches.
Strikingly, Fossil's gross margin decreased 580 basis points to 46.4%, which the company said was driven by lower connected margins, additional product valuation charges, and lower retail margins due to increased promotional activity in outlets and the e-commerce channel.
Fossil's non-GAAP earnings of $0.04 per diluted share were actually well ahead of analysts' average expectation, yet that has mattered little against the understanding that they were down 92% on a comparable basis from the same period a year ago.
Moreover, the positive third quarter earnings surprise was overshadowed by fourth quarter guidance that was weaker than expected. Net sales are expected to decline in the range of (11.0%) to (3.5%) while diluted earnings (loss) per share is expected to be in a range of ($0.08) to $0.47, including $0.04 of restructuring charges. On a non-GAAP basis, earnings are projected to be between $0.10 and $0.65 per diluted share.
For the full-year 2017, Fossil expects net sales to decline in the range of (10.5%) to (8.5%) and to report a GAAP loss per share in the range of ($8.30) to ($7.75). On a non-GAAP basis, earnings (loss) per diluted share are anticipated to be between ($0.45) and $0.10.
The guidance clearly isn't sitting well with investors, many of whom have run out of time and patience with the company and its stock.