Fossil, a company that makes both analog timepieces and smartwatches, reported its earnings last night and the results weren’t great. Not only did the watchmaker miss analyst estimates for Q4 2016, its outlook for 2017 is fairly bleak. CNBC reports that the stock is down nearly 20 percent.
The good news for Fossil is that people actually did buy some of its smartwatches, particularly from its Fossil and Michael Kors brand. The bad news is that in order to get those sales, Fossil had to cut prices, which means lower profits. When Fossil relaunches its smartwatch and wearable line, currently aimed at third-quarter 2017, its executives said that low prices will be a big target.
Back in 2015, Fossil spent $260 million on the wearable maker Misfit as a way to compete against up and coming watch brands like Apple and Samsung. Since then, Fossil has released 100 different wearables across eight brands—including Fossil and Michael Kors—that use some of Misfit’s technology. It was the company’s hope that a shift into tech would help it compete against a world of smartwatches.
But as we’ve seen with the demise of Pebble, layoffs at Fitbit, and the delayed Android Wear 2.0, it’s rough going for anyone interested in wearables or smartwatches. Apple reportedly sold 6 million Apple Watches, but the hard truth for most companies is that no one is buying smartwatches and the value of the product category itself is tenuous.
While Fossil CEO Kosta Kartsotis remains optimistic about wearables and smartwatches in general, making money off of the category is proving to be difficult.
A cheap watch might be enough to get some customers to bite, but that isn’t necessarily good for Fossil’s bottom line. It also says a lot about the general wearable category if cheap prices are the only thing that can keep customers interested.