Thread regarding Fossil Inc. layoffs

Fossil's financial position is markedly stronger compared with the same period a year ago. Its net debt position has come down by approximately $170 million. At the end of Q3 2017, the company's net debt position stood at roughly $318 million. So this, at least, is some welcome news.

However, interestingly, management has been stating since the beginning of 2017 that it wishes to diversify the company's capital structure.

Unsure what Fossil means by its efforts to diversify its capital structure. Is the company signalling that an equity raise could be in the cards? At this point in the game, I would not be too concerned. While I do not wish to get engaged in a theoretical WACC discussion, I suspect that Fossil's cost of equity at this stage is possibly less than its cost of raising additional debt. After all, the company has been consistently raising its debt load, while its revenues are consistently falling. If that is not a short candidate, I do not know what is. Furthermore, Fossil, to state the obvious, is a retailer, and while other retailers have managed to raise much-needed debt in the current retail slump, they have done so on onerous terms, and I’m unsure of how Fossil would cope in its current fragile state.

The company said that it has improved its cash position to $319.9 million from $231.8 million at the end of last quarter and thus its net debt, even though its debt load overall increased slightly to $646.3 million from $636.3 million at the end of 2016. The situation should allow the company to stay in compliance with the amended terms of its credit agreement which in March extend the maturity date until 2019 and altered the leverage ratio requirements.

The new requirements will mean that Fossil needs to finish the third quarter with debt in the range of $575 million to $650 million. However, the amended agreement does require Fossil to pay off its $185 million term loan in October or face a higher interest rate. The company may not have sufficient cash on hand to make that payment.

In that scenario, the margin increases to 2.75% a year for base rate loans and 3.75% a year for LIBOR rate loans. If the company doesn't repay the term loan by the following March another point will be added to each of those rates. And beginning in April 2018, interest payments will be due monthly.

Fossil's balance sheet is stable for now, even though its debt is on the high end of what it can sustain under its loan agreements. However, Fossil faces many of the troubles that other traditional retailers are struggling with, in addition to technological advancements that affect traditional watch sales.

Spot on Canadian! I did my research and I believe like you that early 2019 will be the end. Trust me when you leave your attitude and health will benefit greatly.

Share your analysis with us.

It’s quite easy, all workers at Fossil, and every other company for that matter, are “Temporary.” If you don’t believe that then you are naive. The days of companies actually caring about their employees is over, especially for a public company whose main goal is to please shareholders. Did you get that? Shareholders are the first priority, then customers, and lastly employees. Sign of the times. My advice is to be grateful for the opportunity to work and provide for your family. Moreover, start looking for another job immediately if not already. Based on the financial dynamics and market outlook for Fossil, it will not survive. Do the analysis, it’s not even remotely possible. My analysis points to sometime in early 2019 as the end date for Fossil. Find a job elsewhere and move on. You will be so happy that you did.