Financial analysts are pouring cold water on Fossil’s smart wearables bid, characterizing it as a hardware sector with shrinking margins and indeterminate growth.
The company wrapped its fourth fiscal quarter on December 31 and have just put out numbers for it: sales are down 3 percent for the season and 6 percent for the year, compared to 2015. Watches, leathers and jewelry all shrunk. Operating income shrunk. Net income shrunk. The only bright spot against the Americas and European geographies is a 13 percent revenue spike from Asia.
Traditional high-margin watches fell away from customer checkouts and corporate’s focus. And so, 2016 was the year that Fossil went all-in on smartwatches and wearable tech with the gearings of Skagen and Misfit and introduced a bevy of Q wearables.
“Delivering some stability in the watch category during the quarter reinforces our belief that with our technology capabilities, we can turn what was once a headwind into a tailwind,” said CEO Kosta Kartsotis.
Kartsotis promises that Fossil and its associated brands will be putting out 300 SKUs this year.
Alas, margin has indeed been on the decline, dropping 2 whole percentage points to 51 percent in Q4. And with forward guidance for a flat or down year in sales, margins and earnings, the headwinds are still more apparent right now than before with single-digit growth in global wearables sales and Apple Watch incumbency.