Fossil Group(US:FOSL)2019-08-08 02:45Financial Data and Key Metrics Changes - In Q2 2019, the company reported a net loss of $7 million, an improvement from a net loss of $8 million in the same quarter last year, with a reported loss of $0.15 per diluted share [24][25] - Sales decreased 13% to $501 million, with a constant currency decrease of 11%, showing a sequential improvement of four percentage points from Q1 [25][26] - Gross profit decreased to $265 million, and gross margin decreased by 70 basis points to 52.9%, primarily due to unfavorable currency impacts [33] Business Line Data and Key Metrics Changes - The watch business declined 8% in constant currency, with traditional watch sales improving from a double-digit decline to a high-single-digit decline [29] - Connected watch sales represented 21% of total watch sales for the quarter, with sales of newer generation connected display products increasing over 20% [29][30] - Direct business continued to contract, improving to a moderate single-digit decline compared to a double-digit decline in Q1 [28] Market Data and Key Metrics Changes - In the Americas, Q2 sales decreased 20% to $223 million, improving from a 24% decrease in Q1 [30] - In Europe, reported sales decreased 16% to $147 million, with a constant dollar decline of 12%, showing improvement from a 19% decrease in Q1 [31] - Asia reported a sales increase of 4% on $126 million, with underlying core sales in Asia growing low double digits [32] Company Strategy and Development Direction - The company is focused on improving profitability, driving product innovation, maximizing top-line growth, and transforming its business model [12][19] - The New World Fossil program aims to deliver $200 million of run rate profitability improvements over three years, with a focus on digital marketing capabilities and product innovation [18][19] - The company is investing in direct-to-consumer (DTC) and digital capabilities while streamlining its model to react more quickly to trends [20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that while sales trends remain challenging, there are underlying positive signs in parts of the business [9] - The company expects sales trends to materially improve in the second half of the year, driven by positive sales trends in Asia and strong growth in display watches [46] - Management remains focused on transforming the company to unlock significant potential for future growth [21] Other Important Information - The company has closed 51 stores since the second quarter of last year, ending the quarter with 456 stores [28] - The estimated gross exposure from a potential 10% tariff is approximately $5 million to $10 million, primarily impacting smartwatches [43] Q&A Session Summary Question: Transition from old parts to new product in smartwatches - Management highlighted the focus on customer experience and innovation in the new Gen 5 smartwatch, with strong initial sales and positive consumer response [51][53] Question: Stabilization of the traditional watch business - Management noted improvements in Asia and ongoing efforts to innovate and introduce new products, with expectations for future growth despite current challenges in the U.S. market [55][56] Question: Outlook for the wearables business and Michael Kors performance - Management maintained a modest growth forecast for the wearables business, with challenges in the Michael Kors watch brand due to a cooling women's fashion market [60][62]