Can Fossil (FOSL) Turn Around with 2 New Smartwatches?

After the successful launch of its first Android Wear smartwatch, global consumer fashion accessories maker Fossil Group Inc. FOSL is now geared up to enrich its wearables portfolio with the addition of two new smartwatches.

Per media reports, the Q Wander and Q Marshal are the latest additions to the company's Q portfolio of Android Wear, which already includes the Q Founder smartwatch. The new additions will be available between early summer and fall of this year. Prices of both smartwatches will start from $275 and these will come in two sizes, 44mm and 46mm.

Both watches will also support wireless charging and come in multiple colors. Also, the watches are expected to have updated and the most recent Android Wear software, since both will be running on Android Wear, like Q Founder.

Fossil Q Founder was the first Android Wear smartwatch. It was launched in Nov 2015 along with a pair of connected smart bracelets called Fossil Q Dreamer and Reveler. Q Founder was also priced at $275. It was a success and helped the company to identify additional opportunity.

Going ahead, Fossil plans to launch more than 100 wearable products including activity trackers and smart watches in 40 countries in 2016. The company announced that eight brands including Chaps, Diesel, Emporio Armani, Fossil, kate spade new york, Michael Kors, Misfit and Skagen will each launch a product in the wearables space in 2016. These products will be available by the holiday season in 2016.

The launch of these wearables is part of the company's efforts to bring increased variety of products to the wearables industry amid sluggish industry trends. We note that the companyhas been witnessing sluggish results since the beginning of 2015. Estimates have also been moving south over the past 30- and 60-day periods. Softness in watch sales due to a decline in its multi-brand licensed watch portfolio, weak comps in the U.S., sluggish performance in key international markets and unfavorable currency have been weighing on the stock.

In such a scenario, the continued momentum of the Fossil brand, product innovation in the watch portfolio and expansion in wearable technology are encouraging. In fact, the launch of new wearables in 2016 might mark a turnaround for this Zacks Rank #5 (Strong Sell) company.

Fossil’s entry in the wearable space is surely going to benefit the company as there is huge opportunity in the wearable space owing to the rising demand for smartwatches.

Fossil operates in both the fashion and tech industries and produces a broad variety of connected products that appeal to both fashion and consumer electronics channels. Therefore, there’s a good chance that many designer watch brands will ask Fossil to make wearable tech under their names as well. Fossil also makes apparel and other wearables that might get smart technology later, including jewelry and handbags. Android-based value watches in the emerging markets will also be a boon for the company as about half of Fossil’s revenues come from overseas.

Moreover, with the acquisition of wearable technology brand Misfit in Nov 2015, Fossil Group increased its capabilities for the development and production of the technology supporting its wearables products, thereby advancing its connected accessories initiative further.

Better-ranked stocks in the same industry include Abercrombie & Fitch Co. ANF, American Eagle Outfitters, Inc. AEO and Express Inc. EXPR. While American Eagle Outfitters and Express, Inc. sport a Zacks Rank #1 (Strong Buy), Abercrombie & Fitch holds a Zacks Rank #2 (Buy).

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