Fossil Group Inc. got a big boost on Wall Street with investors sending shares of the company up 35 percent on the back of the watchmaker’s third-quarter report on Wednesday.
The company bounced back into the black in the third quarter, reporting profits of $16 million, compared with losses of $25.9 million a year ago. Much of that comes from cost cuts as Fossil reduced operating expenses by 26 percent, or $75 million.
It’s a bottom-line improvement that stood out all the more against a 19.3 percent drop in sales to $435.5 million.
The results lead to a big turnaround for the stock, which rose $2.08 to $8.05 in after-hours trading, having closed down 5.1 percent to $5.97.
Kosta Kartsotis, chairman and chief executive officer, said: “We outperformed our topline expectations in the third quarter, reflecting ongoing momentum in our digital channels and strong growth in mainland China, as well as trend improvement in the wholesale channel globally.
“In addition, we are making good progress on our strategic priorities, with accelerated initiatives around our digital expansion programs and structural cost-reduction efforts,” he said. “Given the uncertain environment, we are remaining agile and continuing to closely manage liquidity, expenses and inventory as we position the business for future growth.”
Last year Fossil laid out a plan to cut operating expenses by $200 million over three years and upped that to $250 million given the pandemic.
And it seems like the lean times will continue for a while longer. Fossil projected fourth-quarter net sales would fall by 30 percent to 40 percent against a year ago.
But it has some cushioning, including $324 million in cash and cash equivalents — something investors are no doubt keeping a close eye on. That cash makes up the majority of the company’s market capitalization, which stood at $413 million with the after-hours stock boost.
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