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Headquartered in Richardson, TX, Fossil (FOSL - Free Report) is a designer and manufacturer of clothing and accessories. Under their portfolio of owned and licensed brands, their offerings include men's and women's fashion watches, jewelry, small leather goods, and wearables.

Their owned brands include Fossil, Michele, Misfit, Relic, Skagen and Zodiac, and licensed brands include adidas, Armani Exchange, Burberry, Chaps, Diesel, DKNY, Emporio Armani, Karl Lagerfeld, kate spade new york, Marc Jacobs, Michael Kors and Tory Burch.

Shares Plunge after Dismal Results

Fossil reported weak results with wider-than-expected losses for Q1. Net sales declined 12% from the same quarter a year ago.

Adjusted loss of 35 cents was much worse than the Zacks Consensus Estimate of a loss of 21 cents and earnings of 11 cents reported for Q1 2016. The loss was also wider than the management guidance of a loss of 10–25 cents per share.

“Our results for the first quarter, while largely in line with our expectations, continue to reflect a challenging retail environment and a watch category undergoing significant change,” said the CEO.

Falling Estimates

Analysts have slashed their estimates for the company after weak guidance. Zacks Consensus Estimates for the current and next fiscal year have fallen to $0.90 per share and $1.04 per share from $1.11 and $1.46 respectively, 30 days back.

Fossil Group, Inc. Price and Consensus

Fossil Group, Inc. Price and Consensus | Fossil Group, Inc. Quote

The Bottom Line

In addition to disappointing mall traffic, the retail space is going through a shift toward online shopping. It’s tougher for watchmakers due to ongoing shift from traditional watches to smart watches. It seems Fossil has been unable to adapt to this changing trend.

With tightening labor markets, wage pressure has also started hurting retailers. The industry “Retail - Apparel and Shoes” is currently ranked 234 out of 265 Zacks industries (bottom 12%), suggesting potential underperformance in the short-to-medium term.