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$FOSL has appointed Gail B Tifford to its BoD, effective July 26, 2017. Currently, Tifford serves Unilever as VP of Media North America and Global Digital Innovation. Previously, she served as VP for Strategic Partnerships at MTV Networks.
$FOSL expects FY17 net sales to decline in the range of 6.0-1.5% and diluted earnings/loss per share to be in the range of $0.40 loss-0.30 earnings. The company expects its 2Q17 net sales to decline in the range of 11.5-8%. Diluted loss per share is expected to be about $1.00-0.83.
$FOSL generated $210MM of operating cash flow in 2016. The top of 2017 guidance assumes roughly neutral adjusted operating results. The company anticipates being able to manage with tighter inventories largely driven by running with fewer SKUs. $FOSL could see some compression of operating cash flow but still expects it to be positive for 2017.
For 4Q16, in the Americas, $FOSL’s reported sales decreased 7% to $483MM. In Europe, reported sales decreased 4% to $333MM. In Asia, reported sales increased 13% to $144MM. Constant dollar growth in India, China and Australia was partially offset by a decline in Taiwan.
In 4Q16, $FOSL’s wearable launches offset most of the continued softness in traditional fashion watches. The company grew its FOSSIL and SKAGEN brands with notable strength in wearables through the expansion of the Fossil Q assortment and the launch of SKAGEN Connected styles. Michael Kors watch sales improved with the Michael Kors Access launch.
$FOSL's 4Q16 global retail comps declined 7% YonY, with declines in all product categories. Positive comps in Asia were more than offset by declines in Europe and the Americas. For FY16, global retail comps decreased 5% YonY, with growth in Asia offset by flat retail comps in Europe and a decline in the Americas.
$FOSL said that for FY17, the company expects net sales to be in the range of a 6.5% decline to flat; operating margin in a range of 0.0-1.5%; and diluted earnings/loss per share in the range of $0.50 loss to $0.20 earnings. For 1Q17, $FOSL expects net sales to decrease in the range of 13-9.5%; and diluted loss per share in a range of $1.06-0.92.
Watch and jewelry maker $FOSL posted lower 4Q16 results, hurt by restructuring and purchase accounting costs and negative impact from currency. Net income fell 29.4% to $49.7MM or $1.03 per diluted share from $70.4MM or $1.46 per share a year ago. Net sales fell 3.35% to $959.2MM, hurt by decline in $FOSL's multi-brand licensed watch portfolio.
Simeon Siegel with Nomura Securities asks about how much the wearables revenues are embedded in the high end and low end of the full year and 3Q16 guidance. $FOSL said the company didn't specifically quantify, but it represents the change in trajectory from the first half on sale.
Oliver Chen of Cowen & Co. asks about the status of inventory. $FOSL said the trends were fairly stable throughout the channel for 2Q16. So sell-in pretty much was consistent with sell-through. Inventories in the channel seem pretty healthy for the company right now.
Omar Saad with Evercore asks about Misfit and what's happening with that business. $FOSL said the company's investment thesis and its goals for the Misfit acquisition are playing out pretty much exactly as it had hoped. The company has beat its internal integration goals and is on track on its product delivery expectations.
$FOSL's effective income tax rate for 2Q16 was 30.2% compared to 28.7% last year. The company said it expects full year GM to decline and based on the current plan, expects overall OpEx to be roughly flat to slightly down in 2016. CapEx for the full year is expected in the range of $70-80MM.
$FOSL said it expects the challenging retail environment to persist & expects its portfolio of license brands to evolve over time. $FOSL watch business grew slightly, while jewelry declined in 2Q16. The company's wholesale channel continues to be the most challenged as the traditional watch category feels pressure from technology enabled products.
$FOSL said it is working on improving the profitability of its traditional watch business. The company's goal in 2016 is to drive more than a 20% rise in investments supporting $FOSL's strategic initiatives; Fossil & Skagen, omnichannel & wearables, while significantly cutting infrastructure & other spending to hold overall spending flat for 2016.
$FOSL said the company is on track to launching connected accessories across more of the brands in the company's portfolio & is well on its way to deliver the product in 3Q16. During the quarter, $FOSL drove growth in both Fossil and Skagen & with 7% constant currency growth in Skagen, led by solid performance in watches would drive future growth.