It stands to logic that a company focused on leather goods, accessories, and branded jewelry such as Fossil (FOSL) should have a hard time in this tough economic climate. Yet the retailer has boosted sales by a quarter or a third in most markets, defying the odds.
Nevertheless, its stock has taken a bashing. When the company went to report in early August for second quarter and first half sales, second quarter gross profit was up by nearly a third year-on-year to $312 million.
Key markets in Asia, the United States, and Europe all saw double-digit growth, while sales to third party distributors were up by half and leather sales were up by more than 64 percent.
Yet when it came to reporting time, FOSL’s stock took a serious beating, losing 26 percent of its value that morning as it fell to the high $60s after trading between $105 and $130 for the two months prior. In May, it had been trading at the highest level since its IPO in 1993. Investors showed their extreme disappointment with increased expenses due to higher salary and raw material costs.
All is not lost, though. In fact, far from it, as sales growth is expected to continue in its major markets through the rest of the year. Piper Jaffray analyst Neely Tamminga said in a note to clients that Fossil is well positioned to mitigate further pressure as its international penetration grows. Piper is keeping an overweight rating.
Geek at heart
Typically fashion accessories are for the stylish, but Fossil recently received FCC approval for the developer version of its geek-oriented Meta Watch. The watch, designed to sync with Android smartphones and tablet devices, is set to become available in late September after several delays from its original launch date in May.
The race will then be on to see if enough developers take on the challenge to begin creating apps for the $200 watch. If so, it’s expected that the current clunky design will be upgraded for the more fashion-conscious consumers and available for the masses. FOSL reports third quarter sales around Nov. 8.
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