Watch and accessories retailer Fossil is planning to close stores in light of falling traffic, also making moves to streamline its product offerings.
Fossil operates 610 stores worldwide, including 284 in the U.S. The company didn’t detail how many locations will close.
Fossil additionally said it will produce more than 20 hybrid smart watches that can track physical activity and alert users to incoming phone calls or text messages.
In a time of disappointing smartwatch and accessories sales, Fossil — which runs its own retail stores as well as working with brands like Michael Kors, Tory Burch and Kate Spade to produce a variety of branded watches — is under pressure to improve its profits.
Fossil last week reported third quarter earnings of 36 cents per share on total sales of $738 million, 4.2% below Q3 sales last year and below earnings last year of $1.19 per share. Earnings beat expectations from Thomson Reuters I/B/E/S analysts for 31 cents per share but missed expectations for sales, which analysts forecast at $739.1 million. For its fourth quarter, Fossil expects earnings in the range of 69 cents per share to $1.19 per share on revenue between $942 million and $962 million, below Thomson Reuters estimates.
Fossil's watch business declined “2% in constant dollars compared to last year, a sequential improvement from the 9% decline in the second quarter, a change in trajectory driven by our latest wearables launches, with even more launches to follow in the fourth quarter,” Executive Vice President and Chief Operating Officer Dennis Secor told analysts on a Thursday conference call. Secor said that the company’s leather goods saw disappointing sales, and that its wholesale channel experienced declines in the Americas and Europe, mitigated by growth in Asia.
“We are disappointed with our leathers performance, particularly considering our recent strength, and we're working hard to reverse this trend,” Secor said. “We believe that the introduction of the latest wearable product at the end of the quarter can prove to be a catalyst for the channel as the watch category evolves with the introduction of technology and new functionality.”
In addition to closing stores, Fossil will manufacture its top-performing products in larger numbers. “People want fewer and better products,” CEO Kosta Kartsotis said on the conference call. “Consumers don’t want to see a huge assortment of products like what’s in a department store. They want to see a few good, well-designed products.”