Specialty retailer Fossil Group's (FOSL) much anticipated - by me anyway, the company still has no analyst coverage - fourth quarter and full-year earnings release came on the heals of a big day for the stock on Wednesday. In fact, shares rose nearly 15% presumably in anticipation of the post market closing announcement.
The numbers looked pretty good. FOSL generated its first annual profit since 2016, bottom-lining $17 million or fully diluted earnings per share of 48 cents, and "adjusted" EPS of $1.12. Revenue rose 16% to $1.9 billion. For the fourth quarter, revenue rose 14% to $604 million, the operating margin increased from 3.5% to 7.8%, and FOSL earned 64 cents on an "adjusted" basis.
The balance sheet also improved. FOSL ended the year with $251 million in cash, and $109 million in net cash. While cash dropped $65 million over the past year, debt was down $85 million. Total debt now stands at $142 million, five years ago it was at $396 million.
However, the market did not like something in the earnings report - likely 2022 guidance, and the selloff began Wednesday in aftermarket trading. On Thursday, shares were hammered mercilessly, and FOSL closed down 37.5% to $9.08. That put the market cap at $473 million. Adding current debt and subtracting cash puts the enterprise value EV at just $363 million.
All in all, a very disappointing day and perhaps an overreaction (it was in my view), but investors evidently did not take too kindly to 2022 guidance. Sales growth of between 2% and 6%, and operating margins of between 6% and 7% simply did not resonate. The company does expect performance to be better in the second half of the year.
On occasion, I will trade on the "overreaction", and used yesterday's selloff to add some FOSL. Whether this is throwing "good money after bad" or ends up being an opportunistic win remains to be seen.