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Fossil Group posts decline in Q4 and FY16 revenue

By Prachi Singh

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Business

In the fourth quarter, Fossil Group said that the stronger US dollar negatively impacted net sales by 18.3 million dollars, resulting in a decrease of 3 percent or 2 percent on a constant currency basis. For fiscal year 2016, the company said, impact from the strong US dollar negatively impacted net sales by 45.4 million dollars, resulting in net sales decrease of 6 percent or 4 percent on a constant currency basis as compared to fiscal 2015.

Commenting on the company’s performance, Kosta Kartsotis, Chief Executive Officer, Fossil said in the media release, “The fourth quarter of 2016 was pivotal for Fossil Group with our wearable launches demonstrating they could be the catalyst to drive growth in the watch category. Our mission in 2017 is very clear, to build upon the early success of wearables and execute against our New World Fossil initiative. We continue to be confident in the strategies we are pursuing and their ability to enable us to improve our financial performance and drive long-term shareholder value.”

Financial review of Q4 and FY16 results

In the fourth quarter, the company reported worldwide net sales decrease of 3 percent or 33.3 million dollars as growth in the Skagen and Fossil brands was offset by a decline in the company’s multi-brand licensed watch portfolio with declines in traditional watches largely offset by growth in connected watches.

Declines in leathers and jewelry and changes in foreign currency also negatively impacted net sales. The company reported net income for the fourth quarter of of 49.7 million dollars compared to 70.4 million dollars for the fourth quarter of fiscal 2015. Diluted earnings per share were 1.03 dollars, compared to 1.46 dollars for the fourth quarter of fiscal 2015.

For fiscal year 2016, the company reported net income of 78.9 million dollars compared to 220.6 million dollars for fiscal 2015. Diluted earnings per share were 1.63 dollars, compared to 4.51 dollars for fiscal 2015.

Fossil reveals cautious outlook

On GAAP basis, the company expects net sales to be in the range of a 6.5 percent decline to flat for fiscal 2017 and operating margin in a range of 0.0 percent to 1.5 percent with diluted loss per share in a range of 0.50 dollar to 0.20 dollar. For the first quarter, the company expects net sales to decrease in the range of 13 percent to 9.5 percent, operating margin in a range of 8 percent to 6 percent and diluted loss per share in a range of 1.06 dollars to 0.92 dollar.

On a non-GAAP basis, the company expects constant currency net sales in the range between a 4.5 percent decline and a 2 percent increase, adjusted operating margin in a range of 3.5 percent to 5 percent and adjusted diluted earnings per share in a range of 1 dollar to 1.70 dollars, compared to adjusted diluted earnings per share of 1.80 dollars for fiscal 2016.

For the first quarter, the company expects constant currency net sales to decrease in the range of 11.5 percent to 8 percent, adjusted operating margin in a range of 2 percent to 0.0 percent and adjusted diluted loss per share in a range of 0.25 dollar to 0.10 dollar, compared to adjusted diluted earnings per share of 0.11 dollar for fiscal 2016.

Picture:Fossil

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