Moody’s cuts Fossil, facilities

Moody's Investors Service said it downgraded Fossil Group, Inc.'s corporate family rating to Ba3 from Ba2, probability of default rating to Ba3-PD from Ba2-PD, senior secured facilities to Ba2 from Ba1 and unsecured shelf rating to provisional B2 from provisional B1.

The speculative grade liquidity rating was affirmed at SGL-3.

The outlook remains negative.

Moody’s said the downgrade and negative outlook reflect continued weakening in Fossil's operating performance and credit metrics and the expectation that significant challenges will persist over the next 12 to 18 months, as well as the need to extend its debt maturity profile well before its debt becomes current in May 2018.

Fossil's second-quarter revenue decreased 12% year-over-year, with declines in all product categories and all regions. Traditional watch sales continued to decline, and while its Connected business grew three-fold, it is not large enough to offset the declines.

Given persistent challenges, the company once again revised its revenue and earnings guidance down, with revenue now expected to fall in the range of 4.5% to 8.5% in 2017, versus its previous range of down 1.5% to 6%, the agency explained.

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