Fossil Group(US:FOSL)2020-02-26 19:39Financial Data and Key Metrics Changes - Q4 sales were $712 million, down 10% year-over-year and 9% in constant currency, primarily due to challenges in U.S. wholesale and older generation connected product performance [29][30] - Gross margin for Q4 was 43.3%, reflecting a decline of 970 basis points from the previous year, with a significant portion attributed to a $38 million inventory write-down [32][34] - The company reported a net loss of $0.14 per diluted share for Q4, compared to an EPS of $0.94 in the prior year [34] Business Line Data and Key Metrics Changes - Watches category sales declined 8% in constant currency, with traditional watch sales down low single digits and connected watch sales decreasing double digits [32] - The direct-to-consumer business saw retail comp sales decrease by 3%, with full-price comps down high single digits [31] Market Data and Key Metrics Changes - Asia delivered double-digit growth, with mainland China growing 61% and India growing 10%, while the Americas experienced a 16% sales decline [30][11] - E-commerce marketplaces in the U.S. partially offset declines in traditional wholesale channels [30] Company Strategy and Development Direction - The company is focusing on four strategic priorities for 2020: exceptional storytelling and innovation, driving commercial transformation, expanding opportunities in China and India, and implementing New World Fossil 2.0 [20][23][24] - The company plans to pivot its model by deploying resources to direct channels, accelerating connected product offerings, and strengthening operations to build scale [17][19] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing challenges in the traditional wholesale channel and emphasized the need to optimize the cost structure while focusing on growth areas [25][36] - The company expects full-year sales to decline between 11.5% and 4.5%, with continued double-digit growth anticipated in Asia and modest growth in the direct-to-consumer channel [36][37] Other Important Information - The company ended 2019 with $200 million in cash and cash equivalents and virtually no net debt, maintaining a low net leverage ratio of 0.8x [35] - The company is prioritizing production for key products and expects factories in China to be at full speed by the end of March [62] Q&A Session Summary Question: What is the outlook for Asia in Q1 given the virus headwinds? - Management expects the APAC region to be down low double digits overall due to the impact of the virus [44] Question: What is the outlook for wearables in Q1 and throughout the year? - The company anticipates a decline in wearables for the full year, with a focus on key brands and distribution rationalization [45] Question: Can you provide details on the wholesale channel and product assortment changes? - Management expects trends in the wholesale channel to continue, with significant challenges in the Americas and modest contractions in AMEA [58] Question: What is the status of factories and component parts in light of the coronavirus? - Factories are coming back online, with an estimated capacity of about 50%, expected to reach full speed by the end of March [62]