Fossil Group Q1 beats expectations, narrows losses as sales dip

By

Benjamin Fitzgerald

Published
May 9, 2019

Fossil Group said on Wednesday that its first-quarter results surpassed expectations for the three months ended March 31, as the U.S. company narrowed earnings losses, despite seeing a dip in total sales on last year.

The Richardson, Texas-based company reported a $12.2 million net loss for the first quarter in 2019, a vast improvement on the $48.3 million loss recorded for the first quarter in 2018. 

However, total sales for the three months declined to $103.9 million, down 18%, or $86.4 million in constant currency, down 15%, compared to the first quarter last year.

The U.S. company saw its watches category decline in the Americas and Europe, offset by increases in Asia. Geographically, sales declines in the U.S. drove the decrease in the Americas. In Europe, sales fell across the Eurozone and in distributor markets in Eastern Europe and the Middle East, with Germany, France and the UK recording the biggest declines.

In Asia, sales increases in China, India, Hong Kong and South Korea were partially offset by moderate sales declines in Australia, Japan and Taiwan, it said.

"While first quarter sales declined in total, we delivered a solid performance in Asia, with double-digit growth in China and India; our e-commerce sales were positive; and in connected, Fossil watch sales increased with particular strength in the Americas region," said Fossil Group's CEO, Kosta Kartsotis.

Meanwhile, global retail comps for the first quarter were down 9%, with declines across all product categories and regions. However, global direct e-commerce sales continued growth, and connected watch sales were up.

Looking ahead, the company said it will continue to transform its business model to address changes in consumer behaviour and their purchases of traditional watches and connected devices, as well as jewellery and leathers. 

"Given the ongoing disruptions in our category, we continue to plan our business conservatively but are operating with a sense of urgency to transform our sales channels and to increase product innovation across our categories," added Kartsotis.

In a conference call on Wednesday evening, Fossil executives also touched on plans to shutter some 30 stores in 2019. It currently retails across more than 150 countries globally.

For the current second quarter, Fossil said it expects to report a sales decline ranging from 16% to 10%, and an income loss before income taxes in the range of $17 million to $3 million.