Fossil Still A Sell After 'Noisy' Quarter, Piper Says

In a report published Wednesday, Piper Jaffray analyst Erinn E. Murphy maintained an Underweight rating on

, while reducing the price target from $60 to $53, after the company reported poor 2Q results. Fossil Group's 2Q sales fell short of expectations, while the company also reduced its guidance for 3Q and FY15. The company's 2Q EPS of $1.12 was ahead of the Piper Jaffray estimate of $0.85, while the revenue of $740 million fell short of the estimates due to decelerating trends in watches and a European sales miss. Analyst Erinn E Murphy noted that, "While Americas growth bested our estimate in Q2, European sales were worse than anticipated with UK and Italy softening--a clear deviation from expectations. By brand, Fossil and Skagen saw CC growth of 6% and 21%, whereas Michael Kors was down slightly in the Americas driven by lower sell-in for watches offset by growth in Europe and Asia." "During Q2, what seemed most surprising was the deceleration within Europe, which went from +9% in Q1 to +2% in Q2 on a CC basis. Mgmt indicated they were up against a tougher sell-in comparison LY in Europe," Murphy added. "FY15 guidance implies Q4 sales could be down in the LSD range, which at this point seems optimistic, particularly given inventory growth is expected in Q3," the Piper Jaffray report added. The EPS estimate for FY16 has been reduced from $5.42 to $4.84.