Should You Invest in Fossil Group (FOSL)?
Miller Value Partners, an investment management company, released its “Deep Value Select Strategy” third-quarter 2023 investor letter. A copy of the same can be downloaded here. In the third quarter, Strategy returned +15.50% net-of-fees ahead of the S&P 1500 Value Index -4.20% return. Year to date through September 30, 2023, the fund returned +8.56% (net of fees) compared to +6.98% return for the index. Most of the strategy’s investments participated in the stronger quarter. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Miller Value Deep Value Select Strategy highlighted stocks like Fossil Group, Inc. (NASDAQ:FOSL) in the third quarter 2023 investor letter. Headquartered in Richardson, Texas, Fossil Group, Inc. (NASDAQ:FOSL) designs, develops, markets, and distributes consumer fashion accessories. On October 17, 2023, Fossil Group, Inc. (NASDAQ:FOSL) stock closed at $1.81 per share. One-month return of Fossil Group, Inc. (NASDAQ:FOSL) was -12.56%, and its shares lost 50.82% of their value over the last 52 weeks. Fossil Group, Inc. (NASDAQ:FOSL) has a market capitalization of $94.961 million.
Miller Value Deep Value Select Strategy made the following comment about Fossil Group, Inc. (NASDAQ:FOSL) in its Q3 2023 investor letter:
"Fossil Group, Inc. (NASDAQ:FOSL) appears to be a significantly mispriced global luxury good company with extremely low market expectations. The company designs, develops, markets, and distributes fashion watches, jewelry and accessories for their owned brands (Fossil, Michele, Skagen, Watch Station and Zodiac) and licensed brands (Armani Exchange, Emporio Armani, Diesel, Kate Spade NY, DKNY, Michael Kors and Tony Burch). The company recently announced a significant transformation plan that management expects to generate $300M of operating income benefits by 2025, more than 20% of annual revenue! The plan will focus on improving sales productivity (digital first approach, redesigning pricing/promotions and closing non-profitable stores), reengineering operations, streamlining overhead, and improving capital efficiency. With ongoing headwinds to company sales in the near term the current share price is discounting limited future benefits from the transformation plan. Fossil current share price is below cash per share on the balance sheet, a deep discount to the $6+ tangible book value.
Their net asset reproduction value remains in excess of $1B. Success on the transformation plan would likely mean significant upside potential, possibly 5 to 10x the current share price as normalized free cash flow should be greater than the current market capitalization. For comparison, we would highlight Tapestry, Inc.’s (TPR) recent acquisition of Capri Holdings (CPRI) in the luxury marketplace at an Enterprise Value to Revenue multiple of 1.5x, significantly higher than Fossil’s current valuation at less than .1x, suggesting significant embedded value potential from a successful transformation."
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Fossil Group, Inc. (NASDAQ:FOSL) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 15 hedge fund portfolios held Fossil Group, Inc. (NASDAQ:FOSL) at the end of second quarter which was 16 in the previous quarter. In addition, please check out our hedge fund investor letters Q3 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
