Fossil Group, Inc. (FOSL) has reported a 69.74 percent plunge in profit for the quarter ended Oct. 01, 2016. The company has earned $17.40 million, or $0.36 a share in the quarter, compared with $57.50 million, or $1.19 a share for the same period last year.
Revenue during the quarter dropped 4.32 percent to $738 million from $771.30 million in the previous year period. Gross margin for the quarter contracted 197 basis points over the previous year period to 52.18 percent. Total expenses were 95.77 percent of quarterly revenues, up from 90.19 percent for the same period last year. That has resulted in a contraction of 559 basis points in operating margin to 4.23 percent.
Operating income for the quarter was $31.20 million, compared with $75.70 million in the previous year period.
Kosta Kartsotis, Chief Executive Officer, commented on the results. "With our third quarter behind us and our results in line with our expectations, we’ve entered the fourth quarter well positioned with our new wearables in the marketplace and by all measures, they’re off to a great start. From that perspective, we are very pleased with our team’s effort and ability to launch our new wearables across eight brands over the last couple of months. We achieved this through the great work of our entire organization, with everyone focused on delivering over 100 skus including display smartwatches, hybrids and activity trackers in 40 countries and 20 different languages.
For fiscal year 2016, Fossil Group, Inc. expects revenue to decline in the range of 5 percent to 3 percent and expects adjusted revenue to decline in the range of 5 percent to 3 percent. The company expects operating income to grow in the range of 4 percent to 5 percent and expects adjusted operating income to grow in the range of 5 percent to 6 percent. It projects diluted earnings per share to be in the range of $1.30 to $1.80 and projects diluted earnings per share to be in the range of $1.80 to $2.30 on adjusted basis.
For the fourth-quarter, Fossil Group, Inc. expects operating income to grow in the range of 5.80 percent to 8.50 percent. The company expects adjusted operating income to grow in the range of 8.50 percent to 11 percent and projects diluted earnings per share to be in the range of $0.69 to $1.19. On an adjusted basis, the company projects diluted earnings per share to be in the range of $1.07 to $1.57.
Working capital declines
Fossil Group, Inc. has witnessed a decline in the working capital over the last year. It stood at $965.50 million as at Oct. 01, 2016, down 14.67 percent or $166 million from $1,131.50 million on Oct. 03, 2015. Current ratio was at 3.28 as on Oct. 01, 2016, down from 3.61 on Oct. 03, 2015.
Days sales outstanding were almost stable at 36 days for the quarter, when compared with the last year period.
Days inventory outstanding has decreased to 90 days for the quarter compared with 182 days for the previous year period.
Debt comes down
Fossil Group, Inc. has recorded a decline in total debt over the last one year. It stood at $723.80 million as on Oct. 01, 2016, down 9.98 percent or $80.20 million from $804 million on Oct. 03, 2015. Total debt was 32.06 percent of total assets as on Oct. 01, 2016, compared with 35.66 percent on Oct. 03, 2015. Debt to equity ratio was at 0.73 as on Oct. 01, 2016, down from 0.91 as on Oct. 03, 2015. Interest coverage ratio deteriorated to 4.46 for the quarter from 14.84 for the same period last year.
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