) is set to report first-quarter 2014 results after the market
closes on May 13. Last quarter, this global consumer fashion
accessories maker and distributor posted a positive surprise of
9.84%. Let's see how things are shaping up prior to the
Factors to Consider This Quarter
Strong top-line growth driven by a double-digit increase in
global watch sales has been the company's strength over the years.
Product innovation and continued momentum of the Fossil brand also
added to growth. The company is also keen on improving its jewelry
and leather businesses. We expect the company's efforts to boost
sales in the first quarter.
We are encouraged by the fact that Fossil has a solid watch
portfolio and has witnessed strong sales growth owing to its strong
global distribution platform and successful innovations. The
acquisition of Skagen Designs, Ltd. and its certain subsidiaries in
Aug 2012 also contributed to the increase in watch sales.
The company's intention to develop exciting new watch and
jewelry designs, improve leather assortment and focus on increasing
brand awareness are expected to deliver strong comparable sales in
the first quarter.
While Fossil has been delivering positive comparable-store sales
for the past five years driven by continued strengthening of the
Fossil brand outside the U.S., the company is witnessing sluggish
comparable-store sales in the U.S. for the past few quarters due to
weak traffic amid a tough retail environment.
Though the company is resorting to promotional techniques to
drive traffic, we are not sure whether these would prove
beneficial, given the increased competition and a difficult
consumer spending environment.
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.
The Expected Surprise Prediction or ESP for Fossil is 0.00% as both
the Zacks Consensus Estimate and Most Accurate Estimate stand at
$1.18 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:
The Kroger Co.
), with an Earnings ESP of +0.95% and a Zacks Rank #2 (Buy).
General Mills, Inc.
), with an Earnings ESP of +2.86% and a Zacks Rank #3.
Estee Lauder Companies Inc.
), with an Earnings ESP of +1.82% and a Zacks Rank #3.
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