This company, primarily designs, sources, markets, sells, and distributes watches, 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 international demand for its core products of this company has been stronger than US domestic demand in the past three years. Sales from international market have jumped by about 18% in year 2017. However, sales from US market have been seen declining during the past two years.
The fiscal 2018 compared with the 2017
Organic net sales (excluding currency) increased 2.2% due to increase of about 19% in international wholesales and increase of 11% in retail offset by decrease about of 19% in US market.
The fiscal 2017 compared with 2016
Organic net sales (excluding currency) decreased 6% due to decrease of about 13% in wholesale of US market and decrease of about 2.5% in wholesale of international market. Sales of retail increased.
The fiscal 2015 compared with 2014
Organic net sales (excluding currency and others) increased about 2% due to increase of about 5% in wholesale of US market. Sales of retail increased.
Its gross margin has been at around 53% since 2017. Due to the increase in the SG&A as percentage of sales (about 45% in 2017), its operating margin decreased to about 8% in 2017.
Stock performance
This stock currently has a stock price/cash flow ratio of 33. We think that its stock is being relatively overvalued considering the uncertainty in growth of its sales.
