Fossil Group shares soared to its highest point in nearly three months after it posted earnings that beat analyst estimates straight out of the water.
Fossil (FOSL), which makes licensed watches and accessories for upscale brands such as Burberry, Adidas, Kate Spade, and Michael Kors, posted revenue of $992.5 million, handily beating the analyst consensus of $928.2 million by nearly $65 million. Adjusted earnings per share clocked in at $1.46 for the 13 weeks ending Jan. 2, trumping analysts’ projection of $1.30, according to Bloomberg.
Fossil was able to beat projections due to growth in its Fossil, Skagen, Michael Kors, and Kate Spade brands, which help offset losses in other parts of the company’s portfolio. The company’s e-commerce channels also helped drive double-digit growth.
Though the Richardson, Texas-based retailer’s revenues fell 6.8% year-over-year, investors were upbeat due to the company beat estimates. However, estimates were also low in part because of the company’s poor earnings reports in the first three quarters of 2014, which was partially due to its poor watch sales.
Looking forward, Fossil is pushing deeper into the wearable tech space—a space that is expected to ballon to $32.9 billion by 2020. Fossil Group bought smartwatch maker, Misfit, for $260 million back in November, and is now banking on the acquisition in coming years to help the retailer segue into that market.
Fossil’s CEO also acknowledged that the company’s mainstay, its traditional watch business, is losing its appeal, and need to be reinvigorated.
“The way we look at the watch business in the channel globally is that watch business is relatively soft; and from our perspective, because we have a fashion miss, we don’t have enough technology,” CEO Kosta Kartsotis said. “Our mission is to put technology across the platform, and all of our customers are very interested in this, and we think that as we continue to show products and bring out new brands and new devices on the program, not only in traditional watches, but also in wearable technology in both fashion trackers and also display watches.”
Fossil plans to launch wearable tech for Michael Kors in the later quarters. Other brands may add wearable tech products to their catalog in later years.
The company expects 2016 to bring between a 1% increase to 3.5% decrease in revenues. Growth is not expected to materialize until the second half of 2016, coinciding with the roll out of wearable tech products.