Fossil Group Inc. ended 2016 on a somber note with net sales down and operating income down even farther, but the company said the launch of a new line of wearables at the end of the year has offered “some stability.”
With sales declines continuing across all product categories in America and flat sales in Europe, Fossil’s global net sales came in for the year at about $3 billion, down from roughly $3.2 billion in 2015, and operating income fell to $127.2 million from $291.2 million. Net income declined to $78.9 million, or $1.63 a diluted share, from $220.6 million, or $4.51, in 2015.
The company attributed at least a portion of the sales decline to the stronger U.S. dollar, but also pointed to more than $13 million in “restructuring costs” related to its multiyear turnaround plan and infrastructure costs related to its late 2015 acquisition of Misfit Inc., a maker of wearable technology such as smartwatches, as cause for part of the low operating income.
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Wearable technology served as a guiding light for the watchmaker, which said the fourth-quarter launch of a wearables line was “pivotal” for its future and the growth of its marquee watch category.
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“Delivering some stability in the watch category during the quarter reinforces our belief that, with our technology capabilities, we can turn what was once a headwind into a tailwind,” said Fossil chief executive officer Kosta Kartsotis, referring to the growing popularity of wearable tech.
He added that the company’s ongoing process of closing underperforming stores and “adjusting” expenses “will enable us to improve our financial performance in the future.”
Going forward, Kartsotis said the company plans to “double our efforts in wearables” by launching new brands and more than 300 new styles in the category, emphasizing innovation for current brands while working to “stabilize” licensed brands.
“We will also be relentless in pursuing the full potential of our [restructuring] initiative in 2017 and beyond,” Kartsotis added. “Driving efficiencies in everything we do from production to distribution and with our new operating structure in place, we’ll have a tremendous opportunity to leverage as we drive growth.”
Nevertheless, Fossil expects a rocky 2017, and said net sales could drop by as much as 6.5 percent over the year, leading to a bottom line ranging from losses of 50 cents share to earnings of 20 cents.