Fossil Inc. (
) is set to report second-quarter 2014 results after the market
closes on Aug 12. Last quarter, this global consumer fashion
accessories maker and distributor posted a positive surprise of
2.52%. Let's see how things are shaping up prior to the
Factors to Consider this Quarter
Fossil brand has been driving consistent sales growth in the
watch category which led to positive comparable store sales in the
international markets for the past 5 years. The Skagen brand has
also contributed meaningfully to the increase in watch sales since
its acquisition in Aug 2012. In fact, the company has delivered
positive earnings surprises in the last four quarters owing to
strong results. Even with the positive results in the last few
quarters, the company has provided a not-so-good outlook for the
The company has anticipated a decline in year-over-year figures
for the second quarter. Fossil expects sales to increase
approximately 8% to 9.5%, softer than the prior-year sales growth
of 11.4%. The company expects earnings in the range of 90 cents to
97 cents per share, lower than $1.15 per share reported last year.
The company expects operating margin in the range of 10.5% to 11%
for the second quarter, much lower than 15.1% margin in the second
quarter of 2013.
The company has been witnessing sluggish comparable store sales
in the U.S. since past few quarters due to weak traffic. Poor
footfall in the stores has been impacting the business, especially
at its full price stores owing to the tough retail environment. We
expect the macro-economic headwinds to continue to persist for some
more time. In addition, the company's leather business has not been
doing too well as the category is highly competitive and
promotional in the wholesale channel.
Though the company is resorting to promotional techniques to
drive traffic, we are not sure whether these would prove
beneficial, as increased competition leads to giving
more-than-planned discounts, which in turn results in margin
Our proven model does not conclusively show that Fossil is
likely to beat earnings this quarter. That is because a stock needs
to have both a positive
and a Zacks Rank of #1, 2 or 3 for this to happen. That is
not the case here as you will see below.
ESP for Fossil is 0.00% as both the Zacks Consensus Estimate and
Most Accurate Estimate stand at 96 cents per share.
Zacks Rank #3 (Hold):
Fossil's Zacks Rank #3 when combined with an ESP of 0.00% makes
surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and #5 (Sell rated
stocks) going into the earnings announcement, especially when the
company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Other stocks in the consumer staples sector that have both a
positive earnings ESP and a favorable Zacks Rank are:
Pinnacle Foods Inc (
), with an Earnings ESP of +3.03% and a Zacks Rank #2
Supervalu Inc (
), with an Earnings ESP of +9.09% and a Zacks Rank #3.
Inventure Foods Inc (
), with an Earnings ESP of +5.56% and a Zacks Rank #3
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
SUPERVALU INC (SVU): Free Stock Analysis Report
FOSSIL GRP INC (FOSL): Free Stock Analysis
INVENTURE FOODS (SNAK): Free Stock Analysis
PINNACLE FOODS (PF): Free Stock Analysis Report
To read this article on Zacks.com click here.