Watchmaker Fossil Group reported a 13% decline in sales during the second quarter and is pinning its future growth on increased sales of smartwatches and other wearables. To that end, the retailer plans to have many more wearables on the market by the end of this year, according to Wareable.
Wearables represented about 9% of Fossil’s overall revenue during the quarter, and Fossil Group CFO Dennis Secor, said on the quarterly earnings call this week that the company "now expect[s] wearables revenues to be in the mid-$300 million and the lower $400 million range" for 2017, according to a Seeking Alpha transcript.
The Wareable report also indicated that Fossil has many smartwatches lined up for the upcoming months, including the Fossil Q Venture and Q Explorist, the Diesel On, the Michael Kors Access Sofie & Grayson, the Misfit Vapor and the Emporio Armani Connected.
Things don’t appear to be getting better for Fossil as the quarters drift by. The company talked about falling sales, store closings and its intention to press hard on wearables last fall. The problem is that the wearables market isn’t paying off very well for anyone just yet and it certainly isn’t saving brands and retailers from persistent problems in their business. As a result, Fossil is struggling, and investors know it as well as anybody — the company's stock value dipped 25% amid its earnings report.
The fact is that traditional watches are not in demand the way they once were, but neither is the next big thing. That might be about to change in the wearables market, at least for makers of connected smartwatches. Research firm Canalys recently predicted a wave of growth for the smartwatch portion of the wearables market in the second half of 2017, suggesting that 12 million units could ship by the end of the year. Noted smartwatch maker Apple is moving in that direction as well, with strong relationships in the market posing potential problems for others trying to move into the space, Canalys reports.
Another disadvantage is that Fossil doesn't appear to be embracing mobile network connections quite yet. While the Fossil Q Venture and Q Explorist, mentioned above, are Android Wear 2.0 watches (just made available for pre-order) and do have Wi-Fi and Bluetooth connectivity, they don't have their own cellular network connectivity.
Fossil is addressing the wearables movement with volume — it has at least 95 smartwatches and hybrid analogue watches for sale, according to Wareable — and high style in mind, exemplified by the designer partners named above. The next step will be to keep pace with the likes of Apple by embracing mobile connectivity. It's a tall order for a watchmaker, but that's exactly the brand identity Fossil needs to shake.