Fossil bullish on wearables with big rollouts soon

American watchmaker Fossil revealed its plan for the future, and it involves a lot of wearables. In the second quarter earnings call, the company said it would embark on an “unprecedented launch” of wearables.

In the next three months, Fossil CEO Kosta Kartsotis said it would launch eight wearables in three categories—hybrid, smartwatch, and activity tracker—that will become the primary growth leader for the company.

Fossil plans to sell wearables of all shapes and prices, from smartwatches costing over $400 to smaller fitness trackers costing less than $100.

“We are well on our way to launching connected accessories across more of the brands in our portfolio and are on track to deliver this product in the third quarter,” Kartsotis said. “Weaker performance in our wholesale channel, particularly in the US, where the business is most challenged, is likely to continue. However, we believe the innovative products launched later in the year can begin to re-energize the channel.”

Fossil has already announced two of the planned devices, the Q Wander and Q Marshal, which are available to pre-order with an August 29 release date. The two smartwatches run Android Wear and have minimal internal differences. Fossil wants customers to choose the watch based on the design, similar to how we choose fashion accessories.

To emphasize the design options, Fossil is importing some well known designer brands to the wearables market later this year. Michael Kors, Kate Spade, Armani, Diesel, Misfit, and Chaps by Ralph Lauren will all design smartwatches, fitness trackers, or hybrids, to be released in the September to November period.

Fossil investors have changed their tune

Investors blamed wearables for Fossil’s poor performance in Q1 this year, cutting the stock price by 30% after the announcement.

But those investors seem to be happy with the company’s wearables focus now, according to MarketWatch the stock climbed nine percent after the earnings call. That is despite revenue falling from $740 million last year to $685 million in the three month period this year.

Android Wear hasn’t been a great success for OEMs, none of the manufacturers are in the top five for sales volume. Even Samsung, which has launched a variety of wearables in the last year, came in sixth.

Wearables take Fossil earnings back to stone age

Though consumers are still opening their wallets for smartwatches, things are definitely not sunshine and lollipops for Fossil Group which saw its shares plunge more than 30% on poor wearables revenues.

As reported by Investing.com, shares of the Texas-based maker of designer jewelry and smartwatches plummeted in after-hours trading yesterday as it missed analysts’ forecasts for earnings and revenues in the first quarter, and lowered its future outlook.

Revenues were hit by an 11% drop in jewelry sales and an 8% decrease in watch sales. Sales fell by 7% in both Europe and the U.S. from the same quarter last year

In first quarter 2016, Fossil missed expectations of $0.15 per share earnings on $667 million in sales, by posting actual earnings of $0.12 per share on sales of $659.8 million.

Will an Apple leave no Fossil?

Increased competition from Apple’s iWatch significantly ate into sales from its subsidiary Misfit wearables, which had previously been hailed as a growth driver for Fossil. Misfit, which was acquired in fall 2015 for $260 million, propelled Fossil to stronger than expected earnings in Q4 2015.

However, Fossil revealed in its quarterly report that Misfit operations will now be dilutive to its 2016 results.

The poor showing by Misfit and its wearables products led Fossil to play down earlier plans to launch up to 100 new wearables this year.

“While our financial results were in line with our expectations, they were below last year given the persistent headwinds pressuring the traditional watch category and the challenging retail environment, particularly in our wholesale channel,” said Kosta Kartsotis Fossil CEO. “We are disappointed that those headwinds have intensified, which will impact this year’s expectations, despite our further expense management.”