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Mark Yu
Mark Yu
Articles (435)  | Author's Website |

Fossil Has Lost Half of Its Value This Year

Manageable debt but slowing sales does not make a good impression on Wall Street

November 19, 2019 | About:

Fashion accessories retailer Fossil Group (NASDAQ:FOSL) has reported an earnings miss in its recent quarter. The Richardson, Texas-based retailer’s stock has lost nearly half of its value just this year.

Fossil experienced quite a revenue drop for its third quarter operations. The company reported an 11% revenue decline and a disappointing $26 million net loss compared to $5 million in net income a year ago.

Fossil said it is continuing to reduce its overall costs to improve its profitability. Nonetheless, its $48 million decline in revenue is something that a $16 million cost reduction cannot match, therefore resulting in losses.

The company suffered declines in all of its line items categories, including Watch, Leathers, Jewelry and Other. Its major business money maker, the Watch category, suffered the least with a decline of 8% (or $42 million) year over year.

Fossil projects another slowdown in the following quarter with a 5-10% sales decline. For its quarter that just ended, Fossil had $404 million in net debt and $510 million in equity.

Having lost half of its value so far this year, Fossil initially appears like a good pick with its attractive price-book ratio of 0.8 . However, declining sales and possible losses in the foreseeable future should deter value seeking investors.

Meanwhile, no Wall Street analyst rates Fossil as a buy at this time. The stock has an average price target of $8.50, representing a 14% upside from yesterday’s closing price of $7.30 a share.

Disclosure: No shares in Fossil.

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About the author:

Mark Yu
I'm a doctor in physical therapy (DPT) with an interest in finance. Not a registered financial analyst. Value seeker. Long only. Global investing. Long-term investing.

I attempt to dissect one company filing every day. I dislike goodwill and intangible assets.

One company (review) a day keeps the speculation (hopefully) away.

"The only source of knowledge is experience."

"I have no special talent. I am only passionately curious." - Albert Einstein

"To strive, to seek, to find, and not to yield." - Alfred, Lord Tennyson

"We find one a year, that's terrific. You do not need a hundred or a thousand great investment ideas to do well. You need a couple. And, the discipline is the most important thing." - Warren Buffett

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