Fossil (FOSL) Trimming Headcount: Cost-Cutting the Culprit?

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Fossil Group, Inc.FOSL is eliminating about 50 employees this week at its Richardson headquarters, as part of a cost-cutting move. The fashion watch and accessories maker employs about 1,100 people at its headquarters. However, Fossil has not confirmed the exact number of people who will lose their jobs.

Like Fossil Group, many retailers are cutting jobs amid financial struggles and store closures. Yesterday, the retail giant and the biggest private employer of the world, Wal-Mart Stores, Inc. WMT has decided to lay off about 1000 jobs this month, mostly in human resources department, as the company is struggling with rising expenses. Last week, another retailer Macy's Inc. M reported to cut about 6,200 jobs and close down roughly 100 stores, due to sluggish holiday sales.

Notably, this Zacks Rank #3 (Hold) company has been struggling since the past several quarters due to unfavorable currency, wholesale challenges and declining sales in the Americas, Europe and Asia. However, product innovation in the watch portfolio and expansion in wearable technology continue to drive momentum at the Fossil brand.

In fact, Fossil's shares have been underperforming the Zacks categorized Retail-Apparel/Shoe industry over the past one year. The stock declined 16.3% in comparison to the above mentioned industry's fall of 9.6%. Notably, the industry is part of the bottom 16% of the Zacks Classified industries (223 out of the 265). The broader Retail and Wholesale sector is also placed at bottom 38% of the Zacks Classified sectors (12 out of 16).

The traditional watchmakers like Swatch and LVMH's Tag Heuer are also developing smartwatches to cater to the rising demand. Thus, Fossil's connected wearables and smartwatches are likely to face tough competition.

Also, we note that this global consumer fashion accessories maker has been recording sluggish comps in the U.S. over the past few quarters due to weak traffic. The company is witnessing a massive change in consumer shopping behavior, and has therefore adopted a cautious stance in the U.S.

Fossil Group, Inc. Revenue (TTM)

Fossil Group, Inc. Revenue (TTM) | Fossil Group, Inc. Quote

Fossil is also battling economic challenges in many key markets, including China, Europe, Russia and Greece, and thus does not expect much international growth this year. The company's soft performance in Europe and Asia remain a concern.

Key Pick

A better-ranked stock in the same industry space is Tilly's, Inc. TLYS , which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here . Tilly's has an expected earnings growth rate of 13.0%.

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Fossil Group, Inc. (FOSL): Free Stock Analysis Report

Wal-Mart Stores, Inc. (WMT): Free Stock Analysis Report

Macy's Inc (M): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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