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Fossil Group Nearly Doubles FY Wearable Sales, Q4 Profit Tops; Shares Jump 72%

Fossil Group, Inc. (FOSL) reported that in fiscal 2017 the company generated progress toward its strategic initiatives, which included driving growth in wearables across its portfolio of brands, aimed at accelerating the evolution of the business to position Fossil for long term profitable growth. The company announced, over the next several years, it will continue to transform business model to address changes in consumer behaviors and their purchases of traditional watches and connected devices, as well as jewelry and leathers.

Kosta Kartsotis, Fossil Group CEO, said: "Fiscal 2017 saw us nearly double wearables to over $300 million, representing 14% of total watch sales. By year end, wearable product costs were aligned with our margin goal, setting the stage to increase gross margin in 2018. On the digital front, we greatly increased our reach, helping to drive a 31% increase in e-commerce sales in the fourth quarter, and our New World Fossil initiative led to $95 million reduction in expenses for the year placing us right on track to achieve our $200 million profit improvement goal."

Fossil Group reported a fourth-quarter loss per share were $1.65, including tax charges of $2.20 per share due to the impacts from the Tax Act combined with a valuation allowance and a restructuring charge of $0.09 per share, as compared to profit of $1.03 per share for the fourth quarter of fiscal 2016. Excluding Tax Reform and restructuring charges, adjusted profit per share was $0.64 for the quarter. On average, six analysts polled by Thomson Reuters expected the company to report profit per share of $0.40 for the quarter. Analysts' estimates typically exclude special items.

Fourth-quarter worldwide net sales were $921 million, down 4% in constant currency (a 7% decline) compared to the fourth quarter of fiscal 2016. Analysts expected revenue of $889.56 million for the quarter. Watches declined across all geographies, with growth in connected watches more than offset by a decline in traditional watches on a constant currency basis. Leathers and jewelry also declined across all geographies on a constant currency basis as compared to last fiscal year. Global retail comps increased 2%, with positive comps in the watch category partially offset by negative comps in the leathers and jewelry categories.

"In the year ahead, we expect to be a smaller yet more profitable company that is on a solid path for the future. Our priorities are focused on delivering innovative wearable and traditional watch styles while improving performance in the handbag and jewelry categories and driving increases in digital sales. We expect to deliver more profit to the bottom line," Kartsotis said.

Shares of Fossil Group were up 72% after hours.

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