On Thursday, shares of specialty retailer Fossil Group (FOSL) group were the beneficiary of a 23% boost, courtesy of a solid third quarter earnings report. Revenue jumped 13% for the quarter, while digital sales were up 28%. Earnings per share came in at 68 cents (adjusted). While I'd like to say that results were "above expectations" in the conventional sense of consensus estimates, there are no analysts currently covering the name, thus no consensus. The dearth of company coverage in certain areas is still surprising.
In terms of the balance sheet, while cash dropped from $213.5 million to $181.8 million during the quarter, debt did as well, from $171.8 million to $138.6 million. Last week, the company issued $140 million of 7% Senior Notes, maturing in 2026, the proceeds of which will be used to repay the current term credit agreement.
This was a solid quarter for FOSL, certainly more solid than I expected. I've been on my second go-around with the name, having re-established a position between mid-November and early December of 2019 when shares were trading in the $7 range. The first time I owned it in early 2018, the ride up was swift and fast, and I exited the position within about six months. This time around, it's been a slower climb, more of what I am used to as a value investor. In this case, and with all of the retailers I've owned since 2018, they were never meant to be long-term holds, but rather opportunistic buys of companies that I believed the market had punished too severely.
Given the flattish nature of FOSL during a good part of 2021, I've been writing short-dated out of the money calls, which has worked out okay up until now. I'm quite sure that my shares will be called away next week, when the Nov 19 $14 calls I wrote expire, assuming the stock holds up. That's okay, I am ready to move on from the name at this point. As a "dumpster diver", I never expect to capture all of the upside, but am happy with a 100%+ return in FOSL over the past two years. I am not inclined to close out my covered call position in order to resume the "ride", whatever it may look like, with FOSL.
It is possible that part of the recent jump is due to the 10% short interest, but be that as it may, I give the company a lot of credit for what it's done over the past several years; paying down debt, and surviving in a post brick and mortar retail world.
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