Fossil (NASDAQ:FOSL) stock slid 9.4% on Wednesday after the fashion accessory maker cut its FY outlook due to high inflation pushing shoppers to cut back on spending, likelihood of COVID-19 restrictions in China, and forex impact.
FOSL expects 2022 worldwide net sales to decline ~8-4% to $1.75B-$1.82B. Prior sales growth forecast was flat to 3%.
The new guidance includes estimated foreign currency negative impact of 450 bps vs. prior estimate of 350 bps.
FOSL now expects adj. operating margin of 2-4% vs. prior outlook of 5.5-6.5%.
The firm reported Q2 adj. EPS of -$0.33 vs. $0.08 in Q2 2021.
Revenue was $371.2M, down 10% on a reported basis and 5% in constant currency Y/Y. Net sales, in constant currency, fell 6% in Asia, 4% in the Americas and 3% in Europe.
Traditional watch sales fell 7% in constant currency, while smartwatch sales dropped 18%, driven by the Americas. Leathers and jewelry categories each grew 12% in constant currency.
Direct to consumer net sales grew 5% in constant currency, led by 26% growth in store sales, but largely offset by lower e-commerce sales.
Total digital sales declined 21% in constant currency, due to traffic shifts from owned e-commerce to brick and mortar distribution in Europe and the Americas, and lockdowns in China.
Gross margin decreased 240 bps to 51.6%, reflecting higher freight costs and unfavorable currency impact. Additionally, the year-ago period included tariff reductions.
Shares of FOSL, which ended 2.5% higher ahead of results, have fallen 38.5% YTD.