Fossil: Color on Qtr
* Mizuho Securities remains sidelined on shares of FOSL given a bleak outlook as headwinds from: (1) wearables and technology; (2) brand challenges (KORS 26% of sales); and (3) on-going macro and FX headwinds continue to plague the company. While firm was encouraged by solid results in Skagen and Fossil brands and positive initial reaction to the Q connected product launch, lowered FY15 outlook and tepid watch interest per it's Fall Handbag and Accessories Survey suggests near-term headwinds will prevail. Moreover, mixed investor reaction to the dilutive Misfit acquisition will likely keep shares pressured pending earnings visibility.
* Telsey Advisory Group notes demand for traditional watches continues to falter. FOSL is making a strong push into the growing wearable tech space with the acquisition of Misfit. However, the new platform is not expected to bring product to market until the holiday season next year, a timeframe that may leave the company behind the competition in terms of building a critical mass of market share. In the meantime, the acquisition is expected to be dilutive to FY16 margins and earnings, and the wearables category carries a lower product margin than traditional watches. Firm is cutting tgt to $48 from $66. Maintains Market Perform rating on trough valuation.
Shares of FOSL are down approx 22% in reaction to earnings.