• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing

Fossil Group Is Under the Radar No More

FOSL has been overly punished by the markets at times.
By JONATHAN HELLER
May 14, 2021 | 10:30 AM EDT
Stocks quotes in this article: FOSL

After the markets closed on Wednesday, we got another progress report on specialty retailer Fossil Group (FOSL) , which reported first quarter results. FOSL has been quite an interesting under-the-radar story in recent years. It tanked in 2017, rose from the ashes the following year, tanked yet again through 2020, but has been on the rise yet again. As the love/hate cycle has continued with investors, the company has made great progress in putting its financial house in order.

First quarter revenue of $363 million, while down 7% year/year was better than the company expected. Unfortunately, no analysts currently cover the company, so we are stuck with company expectations instead of a consensus. That revenue drop was due to a 12% decline in company-owned stores, as well as the fact that it compared a "COVID quarter", to a "partial COVID quarter".

FOSL's cost cutting efforts are bearing fruit, the company cut operating expenses by $75 million year/year, and reduced the operating loss from $134 million to $17 million. Gross margins rose from 35.9% to 50.3%. Digital sales, which represented 41% of total revenue, grew 40%.

Since re-discovering FOSL in late 2017, I've been impressed with how the company has improved its balance sheet. At that time, the company had $485 million in debt, and $167 million in cash, for net debt of $318 million. Even that represented progress - at year-end 2016, the company had total debt of $808 million, and cash of $289 million, for net debt of $519 million. Fast forward to Q1 of this year, and FOSL has debt down to $195 million, and cash at $247 million, for net cash $52 million. Last year at this time, debt was at $320 million, while cash stood at $245 million.

FOSL's current enterprise value or EV (market cap - cash + debt) is about $533 million. At year-end 2017, EV was around $577 million, with a stock price of $7.77, 32% below Thursday's closing price. Debt represented a larger piece of EV at that time, and the company was in considerably worse shape than it is now.

Back to expectation for the future: management expects FY2021 revenue growth of between 12% and 16%, and EBITDA margins of between 5% and 7%. Again, no analyst expectations here.

I've been keenly aware, both times I've taken positions in FOSL since early 2018, that it is not in a great sector. Retail has been experiencing major changes for years, and dinosaurs will continue to go extinct. But this was never a case of purchasing the name due to growth prospects. It was through the lens of deeper value, and despite the company's fleas, my presumption that it has been overly punished by the markets at times.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Jonathan Heller was Long FOSL.

TAGS: Earnings | Investing | Markets | Stocks | Trading | Retail | Coronavirus

More from Investing

Let's Update 3 Recent Trades on Meta, Gold and Bumble

Ed Ponsi
Aug 12, 2022 7:00 AM EDT

It's clean-up time.

A Win-Win for the Bulls and the Bears

Helene Meisler
Aug 12, 2022 6:00 AM EDT

Let's look at breadth on the S&P 500, the put/call ratio, the bonds, the overbought market, and more.

Making Sense of Irrational Market Moves

James "Rev Shark" DePorre
Aug 11, 2022 4:55 PM EDT

Has this recent very powerful rally created a supply of underinvested bulls who are anxious to buy pullbacks and dips?

I Smell a Play With Clarus Corp.

Mark Sebastian
Aug 11, 2022 2:42 PM EDT

Is there a possible buyout? A looming breakout? Let's see.

The Market Was Out of Whack in 2022, So Time to Reset Your Strategy

Carley Garner
Aug 11, 2022 2:32 PM EDT

Let's perform an intermarket correlation check, and see how commodities moved vs. themselves and the buck -- and what to expect next.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 08:44 AM EDT PETER TCHIR

    CPI Beats Expectations, But Maybe Not the 'Whisper'?

    Slightly better-than-expected inflation across the...
  • 01:44 PM EDT STEPHEN GUILFOYLE

    This Holding Lights Up With Strong Earnings

    Check out the latest from TheStreet's Stocks Under...
  • 09:24 AM EDT PETER TCHIR

    Jobs Report Reaction: Incredibly Strong, But Questions to Ask

    An incredibly strong July jobs report. Not only d...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login