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Fossil reported a 34 percent decline in second-quarter profit, which was better than Wall Street estimates. But the company also lowered its third-quarter forecast.
At the same time, it raised its projection of full-year results as it cuts costs and sees strengthening in its direct-to-consumer business.
The stock price fell $2.65, or 10 percent, to close at $25.07 a share Tuesday.
Fossil said it can respond quickly to signs of consumers bouncing back, but it is planning conservatively for its wholesale business. Trends at its own stores are better than the industry's, it said.
U.S. retailers seem to have big inventory reductions behind them but are ordering less because sales are still on a downward path from a year ago, chief financial officer Mike Kovar said during a call with analysts. Fossil's sales to U.S. retailers fell 3.2 percent in the second quarter.
International wholesale shipments, meanwhile, slid 15.3 percent. About 70 percent of Fossil's wholesale business is overseas.
The company's chain of 329 Fossil stores was the bright spot in the second quarter. Same-store sales rose 4.9 percent.
Fossil forecast third-quarter profit of 38 cents to 42 cents a share and said revenue is expected to drop 6 percent to 9 percent. Analysts surveyed by Thomson Reuters said they expect third-quarter net income of 46 cents and a 7.8 percent decline in revenue. Fossil raised its forecast for full-year earnings to a range of $1.63 to $1.73 per share; analysts predict full-year earnings of $1.61.
Stringent cost controls helped Fossil's second quarter, which ended July 4. The company posted income of $16.6 million, or 25 cents a share, down from $25.1 million, or 36 cents a share, a year earlier. Revenue fell 10.6 percent to $315.9 million.
Fossil, which also makes jewelry and sunglasses, is introducing shoes to its mix. The initial men's rollout still needs tweaking, the company said. But women's shoes, which will be in stores later this year, have had a strong response from retail buyers.
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