Fossil Group shares surge by 87% as connected watch sales start to rise

Fossil Group share price on February 14, 2017.

Fossil Group shares surged by almost 90% yesterday after its fourth quarter financial results sparked optimism that its investment in connected watches and ecommerce is bearing fruit.

Fossil Group’s worldwide sales fell by 8.3% in 2017 to end the year on $2.8 billion. The company reported a net loss of $478 million compared to a $79 million profit in 2016.

Despite the difficult year, Fossil Group chairman and CEO Kosta Kartsotis, says that the group is progressing well with its strategic re-positioning.

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“In the year ahead, we expect to be a smaller yet more profitable company that is on a solid path for the future,” he said.

“In fiscal 2017, Fossil Group, embarked on a set of strategic initiatives aimed at accelerating the evolution of the business to position the company for long term profitable growth. While sales and earnings were challenged as expected, we generated progress toward our objectives that include: driving growth in wearables across our portfolio of powerful brands, leveraging our scale to lower supply chain costs, increasing our digital capabilities, and continuing the transformation of our business through New World Fossil,” Mr Kartsotis continues.

The group doubled the value of sales for its connected wearable watches in 2017 to over $300 million, 14% of all watch sales.

“There is a good business there. It is a small and growing area. I believe it will grow but there has been a disproportionate focus. For us, Fossil is Armani and Michael Kors, which are solid fashion brands for us,” said Beaverbrooks managing director Anna Blackburn.

In March of 2017, Fossil unveiled a slew of touchscreen and hybrid connected watches. Most notably, Michael Kors said that every new watch in 2017 would have some form of connectivity. Skagen, Emporio Armani, Fossil also introduced watches alongside last year’s Baselworld that fed into retail ahead of the pre-Christmas trading period.

The strategy, Mr Karsotis suggests, is working. “With wearable launches ahead of holiday, we significantly improved the trajectory for Michael Kors watches and drove a double digit increase in fourth quarter Armani watch sales. Overall, we introduced a number of new hybrid and display smartwatches across 14 brands and believe the continuation of this effort, combined with the innovation we are introducing across our traditional styles, has us poised for stabilisation and growth over time,” he concludes.

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