Fossil Group reported a disappointing quarter as sales through department stores continued to decline and shoppers didn’t buy lower-priced older-generation connected devices during the holiday season.

Those pressures more than offset any gains it made from its newest Hybrid HR smartwatches, strength in its e-commerce business and growth in its Asia markets, said CEO Kosta Kartsotis.

The Richardson-based watchmaker has been growing its Asia markets, which now are threatened by the coronavirus, as U.S. and European wholesale business has declined.

Fossil’s sales fell 10% in the holiday quarter to $712 million. Sales were up in Asia but down in Europe and the Americas, where there was ongoing softness in department stores, the company said.

Just four years ago, Fossil’s wholesale business in the U.S. and Europe represented more than half of its worldwide sales. Now that’s down to one-third and trending lower, Kartsotis said.

Fossil reported a loss of $6.9 million, or 14 cents a share, in the three months ended Dec. 28, compared with a profit of $47.6 million, or 94 cents a share, a year ago.

Assuming the coronavirus disruption to global business doesn’t extend much beyond the current quarter, Fossil forecast a first-quarter sales decline in the range of 3.5% to 10%.

The first-quarter sales decline anticipates disruption to its China, Hong Kong, Macau, South Korea and travel retail businesses, which represent about 10% of its global sales.

With its current inventory and production starting up again in a few weeks, the company doesn’t anticipate material disruption due to the coronavirus to its supply chain.

“However, given the dynamic nature of the situation and uncertainty regarding the duration of any business disruption across the globe, the potential longer-term financial impact cannot be reasonably estimated at this time,” Fossil said.

Fossil’s shares were trading almost 20% lower Wednesday.

Fossil is cutting costs and had layoffs this week without disclosing how many. The company confirmed that the number represented a low-single-digit percentage of its global workforce of 10,800. The cuts were worldwide and not just at its Richardson headquarters.

Fossil is trying to find the right mix of merchandise and plans to beef up its direct selling while continuing to work with its wholesale customers to better respond to the consumer.

New products, which include its Hybrid HR smartwatches, sold well, Kartsotis said.

The company closed 45 stores in 2019 and ended the year with 451 Fossil stores.

Twitter: @MariaHalkias

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