Fossil Stock Slides On Q1 Results: Revenue Miss, Lowered FY22 Guidance

Fossil Group Inc FOSL reported first-quarter sales growth of 4% year-over-year to $375.9 million and +6% on a constant currency basis, missing the consensus of $435.50 million.

Adjusted EPS was $(0.37), down from $(0.29) in 1Q21.

Total digital sales were down 17% year-over-year and reflected 34% of the sales mix compared to 43% in the prior-year period.

The gross margin contracted by 127 bps to 49%. The operating loss for the quarter was $14.3 million, compared to $16.8 million a year ago.

Adjusted operating loss was $11 million compared to $5 million last year.

Adjusted EBITDA loss was $1.7 million compared to Adjusted EBITDA of $7.5 million in 1Q21.

During the quarter, the company invested $10 million in repurchasing 989,000 shares at an average price of $10.11 per share.

As of April 2, 2022, Fossil held cash and cash equivalents of $163 million. Inventories totaled $386 million, an increase of 20% year-over-year.

“As the quarter progressed, external headwinds intensified, marked by the onset of the Ukraine crisis, Covid lockdowns in China and global inflationary pressures. While our teams are continuing to execute well amidst the fluid macro environment, we are adopting a more conservative near-term outlook to reflect these transitory factors that are affecting our international business, as well as the impact of a strengthening U.S. dollar,” commented Fossil chairman and CEO Kosta Kartsotis.

FY22 Guidance: Fossil now expects worldwide net sales growth of flat to ~3% versus prior guidance of 2% to 6%. It expects an adjusted operating margin of 5.5% to 6.5% compared to prior guidance of 6% to 7%.

FOSL Price Action: Fossil shares are trading lower by 12.61% at $7 during the post-market session on Wednesday.