Fossil CEO says turnaround is ahead of plan as sales return to growth

Summary

• Fossil Group returned to profitability in the third quarter with operating income of $25.3 million, compared to an operating loss of $21.7 million the prior year.
• Net sales increased 0.4% to $271.2 million, marking the first year-over-year sales growth since the first fiscal quarter of 2022.
• The company reported net income of $11.7 million, or 19 cents per share, against a net loss of $39.9 million, or 76 cents per share, in the same period last year.
• Operating expenses decreased 11.1% to $137 million.
• Fossil raised its full-year net sales outlook to between $980 million and $985 million, a slight decline from the prior year, contrasting with previous expectations of a 3% to 5% drop.
• The company expects to achieve positive free cash flow by the end of the year.
• CEO Franco Fogliato, who joined in 2024, implemented a strategy involving store closures, a shift from promotions to full-price sales, improved marketing, and a broader product range.
• Direct-to-consumer sales decreased 5.9% due to aggressive downsizing efforts.
• Asia served as the key growth engine with net sales growing 15.1%, led by the India market.
• Traditional watch sales grew 6.4% to account for approximately 86% of total sales, while smartwatch sales remained under $1 million for the quarter.
• Fossil stock traded under $8 a share on Tuesday despite a recent surge.
• The company plans to enter 2027 with a smaller, more profitable retail base ready for growth.