Fossil's Revenue Beats Estimate on Digital Sales and China Growth

Watchmaker Fossil reports third-quarter revenue that beat its own expectations.
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Fossil Group’s  (FOSL) - Get Report shares skyrocketed higher Thursday after the watchmaker reported revenue that beat its own expectations in the third quarter.

“We outperformed our top-line expectations in the third quarter, reflecting ongoing momentum in our digital channels and strong growth in mainland China, as well as trend improvement in the wholesale channel globally,” said Fossil CEO Kosta Kartsotis.

“In addition, we are making good progress on our strategic priorities, with accelerated initiatives around our digital expansion programs and structural cost reduction efforts.”

Fossil traded at $7.61, up 27.47% on Thursday. The stock has dipped 3% year to date.

The company's third-quarter revenue slid 19% to $436 million from $540 million in the year-ago quarter. Fossil had estimated a drop of 35% to 45%. Net income was $16 million, or 31 cents a share, swinging from a loss of $25.9 million, or 51 cents a share, a year earlier.

Gross margin rose 1.2 percentage points to 52.8%. Fossil said it expects to generate $100 million in costs savings for all of this year.

The company said in a press release that it reduced operating expenses by $75 million, or 26%, from a year earlier.

Fossil said it anticipates that impacts from Covid-19, the disease caused by the coronavirus, will "continue to pressure sales in the fourth quarter of 2020, with ongoing strength in e-commerce channels offset by contraction in Fossil retail stores and the wholesale channel."

The company said worldwide net sales are expected to decline in the range of 40% to 30%.