According to Wikipedia, fossils (from Classical Latin fossilis; literally, “obtained by digging”) are the preserved remains or traces of animals, plants, and other organisms from the remote past. The totality of fossils, both discovered and undiscovered, and their placement in fossil-containing rock formations and sedimentary layers is known as the fossil record.

That’s amazingly close to the definition I’d give the once-trendy watch and accessories purveyor turned dinosaur crap retailer, Fossil Group Inc. (NASDAQ:FOSL).

At least we can give them foresight credit for getting their name right.

Similarities include words like “digging” (as in digging their own grave) and “sedimentary layers” which are also known as piled-up crap, and draws close comparison to FOSL piling its debt higher, as well as excess inventory of its watches, leather goods, and jewelry.

Here’s the open digging for you on this Fossil, and how to play its extinction for profit…

Why Fossil Is About to Go the Way of the Dinosaurs

Let’s work backwards, as adept diggers do. Looking at Fossil’s stock reveals it’s been pounded down to their 2009 levels, when the world was close to facing an extinction level event of another dimension.

How did it get down here?

Easily, it crapped on itself.

Just brushing off the first layer of dust on this rock, we see that the first quarter’s revenues fell 12% to $581.8 million. That was $10 million less than analysts had expected.

On top of that disappointing news, the company’s CFO Dennis Secor guided down the second quarter’s sales expectations to somewhere between 8% and 11.5% lower. Ouch.

The whole quarter was crappy, but the brave CFO tried to put a positive spin on it. Frankly, it was sad.

Fossil’s big push into wearables is being highlighted as a hot growth area for the company. I’m talking wearables like watches that can tell you how many steps you’ve walked, or your temperature, or that you’re a loser if you look at one of their watches and expect it to propel the company’s stock higher.

Talking up wearables as a bright spot in the company’s future was, for me, like saying the sun exploding would give everyone a good tan for a second.

Supposedly, the good news was that sales of wearables in the first quarter were in line with the company’s 5%+ expectation for the segments contribution to revenues. And, wouldn’t you know it, the proud CFO pointed out that, indeed, wearables accounted for 7% (or, $40.7 million) of sales revenue in the first quarter.

Good stuff, right?

Nope. On a sequential basis (meaning from the fourth quarter to the first quarter), sales of wearables were down 60%. In the fourth quarter, the company sold about $105 million worth of wearables…and $40.7 million in the first quarter. That’s bad.

Wearables are part of the watches segment at Fossil. So, how did watches in total do in the quarter versus a year ago? Sales were DOWN 9%.

And the other big growth segment – which for a good while was right behind watches – leather goods, well, sales in that segment were DOWN 21%.

And what about jewelry, you ask? Sales of their third principal segment of hot merchandise at Fossil were, you guessed it, DOWN 12%.

Starting to see how Fossil is starting to look like a fossil?

But it’s worse.

On a sequential basis, watches were down more than 30%.

The company’s gross margins were down 300 basis points. Their profit margin is less than point eighty-five. That’s 0.84, if you like to look at numbers with zeroes in front of them. In fact, if their profit margin gets any smaller, we’re going to need a microscope to find it.

Fossil is a problem for analysts. They say the company doesn’t provide any “visibility” as far as where they’re going with their push into wearables, with their merchandise mix, with their falling sales, or what they’re doing about competition, about shrinking margins, about margin compression on themselves from bringing in more goods that they have to discount to compete against their already stretched line-up of crappy merchandise.

At least the company’s got some cash on hand (more than $300 million) for now.

Oh wait, too bad they have almost twice that much in debt.

The only thing Fossil’s stock has going for it is that the percentage of shares floating in the market is almost… Are you ready? 50%. That’s only a positive because a short squeeze could take the stock higher.

I’d feel bad for them if I didn’t think they deserved it.

How We’re Targeting Fossil’s Extinction

In the long run, Fossil’s going the same way as the dinosaurs.

I recommend buying FOSL’s July 21, 2017 $10 puts at $0.50 or less. Set a limit order to sell half of your position as soon as it hits a 100% gain, to lock in those profits. Leave the rest of the position open for unlimited upside. For safety, I recommend using a stop-loss to sell the remainder of your position 50% lower than where you take your profit, just in case there’s a short squeeze after you book your gains.

If the markets were to gather themselves here and keep going up, especially if they were to pop something like 200 or 300 points (in Dow terms) in a day, there will be a lot of short covering everywhere. It would be good news for FOSL, who could see a 10-15% jump in response. It would be temporary, but it could happen