Fossil (FOSL - Get Report) stock was plunging about 16% to $19.13 on heavy trading volume Wednesday morning after the watchmaker reported fourth-quarter earnings and revenue sharply below analysts' estimates, fueling concerns about demand for traditional watches. 

After Tuesday's market close, the Richardson, TX-based company reported earnings of $1.03 a share on revenue of $959 million. Analysts surveyed by FactSet were looking for earnings of $1.12 a share on $977 million in revenue.

In the Americas, sales were down 7% to $483 million, driven by declines in leather accessories and traditional watches, CFO Dennis Secor said on the company's earnings call. 

Consumers' preferences are shifting toward lower-margin smartwatches and away from higher-margin traditional watches. 

Wearables accounted for more than 11% of sales in the most recent period, with sales of Fossil display watches up double-digits in constant currency and sales of Michael Kors (KORS) display watches flat.

Gross margin consequently fell 200 basis points to 51% during the quarter, reflecting steep discounts and the shift toward lower-margin smartwatches from higher-margin traditional watches, Secor said.

"It seems the company is stuck between a fossil and a hard place, as the one category that is growing is margin dilutive and its ultimate scalability remains unproven at the same time management is suggesting it will drop price to move units," Nomura analysts said in a note this morning. 

Fossil guided for continued declines on the top and bottom line for the current quarter and full year.

The company anticipates a fiscal 2017 first-quarter adjusted loss between 25 cents and 10 cents a share on a GAAP revenue decline between 13% and 9.5%. For the full year, Fossil expects adjusted earnings between $1 and $1.70 per share, and GAAP sales between a 6.5% decline to flat.

"Earnings will remain pressured in 2017 given a focus on driving volume in wearables (10 margin pt. investment), as well as higher interest expense," KeyBanc analysts said in a note this morning.

"Despite a soft 2017 earnings view, we see significant long-term upside as the company makes the transition to wearables," they added.

About 10.5 million shares of Fossil have been traded so far today, well above Fossil's average trading volume of roughly 1.45 million shares a day.