This company, primarily designs, manufactures/ sources, markets, sells, and distributes watches and other accessories, has been grouped into watches sector in personal items industry.
It seems that, based on the typical company data, the demand for watches in North America market in the past three years (declined 5-13% annually) has been very weak and declining quickly, primarily attributable to general decrease in demand and the declining store traffic from stores of their wholesale clients. However, performance in European and Asian market of watches products seems different with that in US market. For some of brands, their international sales, Europe and Asia, have grown quickly in 2017 so as to completely offset the decline of their sales in domestic market. This seems to be consistent with performance in other products categories and may reflect some common factors behind those US and international markets.
Companies, facing the unfavourable retail environment, have responded to the slowing down traffic by lowering price and shifting marketing focus on lower price products. However, while those methods seem to have worked better for some premium brands but their profitability seems to be damaged largely.
The typical companies’ gross margins are down from average 55% to about average 51% in 2017. The SG&A as percentage of sales (including store occupancy and staffing costs) went up by about 480 basis points to about 46% in 2017; the typical operating margin went down from 14% to 4% in 2017. Companies’ cash flow thus significantly decreased during the same period.
The typical average stock price/sales ratio is about 0.9.
It seems that the global demand for its core products of this company has been weak and declining in the past three years as indicated by its continuingly decreasing global sales in almost all regions including US and international market.
The fiscal 2017 compared with the 2016
Organic net sales (excluding currency) decreased 9.1%.
Its gross margin has decreased from around 57% in 2014 down to about 49% of 2017 due primarily to sales mix (to lower margin products/connected products) and promotions. In addition to large increase in the SG&A as percentage of sales (about 47% in 2017) as a result of increased spending in marketing and deleveraging of decreasing sales, its operating margin decreased to about 1% in 2017.
Stock performance
This stock currently has a stock price/sales ratio of 0.2. We think that its stock is being relatively overvalued compared with its peers.
