Fossil is closing low-performing stores and cutting employees, but the company claims the transition is part of a plan to restructure around new priorities, including wearables.

The company — best known for its watches, handbags and jewelry — confirmed the series of layoffs and store closures to Women’s Wear Daily, noting that Fossil is focusing on “reinventing and repositioning.” Sales have continued to slump over the past year, with a reported drop of four percent in revenue earnings in the third quarter of 2016, as well as a 70 percent decline in profit compared to the same period a year before. The company has been vocal that wearable technology will be a major focus moving forward, and over the past few years, Fossil has made strategic acquisitions indicating its redirection, including purchasing Misfit Wearables in November 2015.

Despite the company asserting its loss as a period of regrowth, Melanie Shreffler, senior director of insights at Cassandra, said it points to larger issues impacting the retailer and its peers. Namely, she said brands like Fossil are failing to attract younger demographics of shoppers who are looking for innovative products.

“Fossil’s issues are reflective of many retail brands who are having difficulty adjusting to the expectations of young consumers,” she said. “They’re in the same boat as Macy’s, Forever 21 and others, who haven’t adapted their offerings. Teenage Gen Zs, in particular, are looking for unique items that can help them show off their personality and style, and the brands that are having the most success are the ones that have partnered with up-and-coming designers or have featured the creative directors behind their brands.”

Ramon Llamas, a research manager for wearables at market intelligence report IDC, said investing in wearables is a smart move for Fossil because it will address concerns of stale products and allow the company to leverage its design aesthetic.

“This is a lucrative opportunity for Fossil,” Llamas said. “If you take a look at the sea of wearables that is out there, particularly smartwatches, I think you’d find an overwhelming agreement among most people that they’re rather ugly. Fossil is turning the formula upside down and saying, ‘We’re going to lead with style and design.’”

He said what is particularly beneficial about brands like Fossil designing smartwatches — Michael Kors and Kate Spade have done the same in recent months — is they already know what it means to transform a timepiece into a multifaceted piece of jewelry.

“In the end, you still have a watch, but you’ve enhanced the utility and the value so it can, for example, also be a fitness tracker. This is not only good for Fossil, but good for the industry,” he said.

While delving into wearables may be an opportunity for Fossil to regain momentum, Schreffler warned that it won’t fully solve the company’s woes. She said she anticipates that Fossil may find difficulty in carving a niche in the robust wearable technology market.

“The wearables market is hot right now, but it is also incredibly crowded,” she said. “Putting more focus on this area doesn’t address larger issues that the brand is facing, and ignoring those issues will ultimately damage the brand. Brands need to differentiate themselves with good customer service and a good shopping experience both online and in store, as well as with creativity and innovation.”

Marija Butkovic, founder of Women of Wearables and Kisha Smart Umbrella, echoed Schreffler and said that while she anticipates an increasing number of traditional brands will experiment with wearables in 2017, it will be difficult to avoid panache and focus on function. However, she said if companies like Fossil can work to fashionably integrate technology into timepieces, it will help increase consumer sentiment toward wearables.

“Brands have realized it’s not so easy to penetrate into consumers’ minds and make them use wearables products,” she said. “A lot of wearables are gimmicks, let’s be honest. I believe the true value of wearables is yet to be shown, and the only way brands can make that happen and make their investment worthwhile is to start building and designing products that people really want to use, and that solve real problems.”