Despite Challenging Europe Conditions, The Time May Be Right For Fossil

Time may be ticking toward an economic slump in Europe, judging by the mood at the continent’s big watch and jewelry show known as Baselworld. But the time may be just right for investors to look at fashionable watch maker Fossil Group Inc. FOSL anyway.

KeyBanc Capital Markets analyst Edward Yruma came away from Baselworld noticing a palpable gloom about sales conditions for luxury fashion accessories on the continent and in the UK.

“A number of brands and non-U.S. retailers remained highly circumspect about current business trends,” Yruma wrote in a note recapping the event. “Conditions in the U.K. remain very challenging and Brexit-related uncertainty is significantly impacting demand.”

'Valuation Compelling'

But Fossil may be able to buck the trend with a focus on a trend toward vintage accessories and strength in wearables.

“FOSL's valuation is compelling, in our view, given the growth opportunity in wearables and opportunity for further earnings improvement,” Yruma wrote in the note.

Fossil has seen strength with its Fossil Sport Smartwatch, and the company plans new wearables for the holiday season. Yruma says the company also will release a hybrid watch in the fall that combines characteristics of digital and analog timepieces that should extend the company’s momentum.

Fossil also has taken note of the signs of potential economic slowing and is “working to add entry-price-point product in select brands in an effort to combat global softness,” Yruma says.

Price Action

Fossil's stock was up 1.5 percent to $14.43 per share at publication time Thursday.

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