NEW DIRECTIONAL PUT PLAYS
Fossil Group, Inc. - FOSL - close: 68.56 change: -0.83
Stop Loss: 71.55
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.0 million
Entry on July -- at $---.--
Listed on July 09, 2015
Time Frame: Exit PRIOR to earnings on August 11th
New Positions: Yes, see below
Luxury-related stocks are not having a good year. COH, KORS, and MOV are all underperforming the broader market. TIF has outperformed some of these stocks in the last couple of months but it's still down for the year.
One stock that seems to be leading the industry lower is FOSL with shares down -38% year to date.
FOSL is in the consumer goods sector. According to the company,
"Fossil Group, Inc. is a global design, marketing and distribution company that specializes in consumer lifestyle and fashion accessories. The Company's principal offerings include an extensive line of men's and women's fashion watches and jewelry sold under a diverse portfolio of proprietary and licensed brands, handbags, small leather goods, accessories and apparel. The Company's products are sold to department stores, specialty retail stores and specialty watch and jewelry stores in the U.S. and in approximately 150 countries worldwide through approximately 25 Company-owned foreign sales subsidiaries and a network of over 60 independent distributors. The Company also distributes its products in over 590 Company-owned and operated retail stores, through its international e-commerce websites and through the Company's U.S. e-commerce website at www.fossil.com."
Trading shares of FOSL have been a dangerous game for investors over the last few years. The stock saw a couple of huge crashes back in 2011 and 2012. After slowly recovering from its 2012 lows the stock peaked again in late 2013. Shares appeared to breakout higher in late 2014 but ended up producing a bearish top and the selling continued in January this year.
Sales growth is a major concern for FOSL. The company reported their Q4 results on February 17th. They missed analysts expectations on both the top and bottom line. Revenues were up only +0.3% during the holiday shopping season. Management then guided lower. You can see the big gap down in the stock as the market reacted to this news.
FOSL was dead money for the next couple of months with the stock drifting sideways. Then the sell-off began again after FOSL's Q1 earnings report on May 5th. Earnings were $0.75 per share, which was 10 cents better than expected. Unfortunately revenues fell -6.7% to $725 million. This was below estimates and showed an sharp deceleration from the prior quarter. Their Q1 results saw net sales declines in the Americas, Asia, and Europe. Gross margins retreated as well. Traders sold the news even though FOSL management raised their Q2 guidance.
There has been some suggestion that the stock is a buy because it's so cheap. Shares currently trade with a P/E near 10. Thus far this fact doesn't seem to be helping. The bears appear to be right and the most recent data listed short interest at 21% of the 38.5 million share float.
FOSL has spent the last six weeks consolidating sideways in the $68.50-73.00 range. Today shares displayed relative weakness with a -1.2% decline and a new multi-year closing low.
If the $68.50 level breaks the next support area could be the $60-63 region. Tonight we're suggesting a trigger to buy puts at $68.40.
Trigger @ $68.40
- Suggested Positions -
Buy the AUG $65 PUT (FOSL150821P65) current ask $2.40
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike