Fossil Group, Inc. — Third Quarter 2026 Earnings Summary

Financial Performance:

• Worldwide net sales totaled $271.2 million, an increase of 0.4% reported and 2.0% in constant currency compared to $270.2 million in the third quarter of 2025.
• Gross profit was $162.3 million, up from $132.4 million in the prior year period, with gross margin expanding 10.8 percentage points to 59.8% from 49.0%.
• Operating income was $25.3 million compared to a loss of $21.7 million in the prior year; operating margin was 9.3% versus (8.0)%.
• Constant currency adjusted operating income was $30.2 million with an adjusted operating margin of 11.0%, compared to an adjusted operating loss of $14.4 million and margin of (5.3)% in the prior year.
• Operating expenses totaled $137.0 million, a decrease of 11.1% from $154.1 million, representing 50.5% of net sales versus 57.0% in the prior year.
• SG&A expenses were $133.9 million, down 8.8% from the prior year, representing 49.4% of net sales versus 54.3%.
• Restructuring costs included in operating expenses were $2.9 million in the third quarter of 2026, compared to $6.8 million in the prior year.
• Interest expense was $8.9 million, up from $4.2 million in the prior year.
• Other income (expense) was $4.2 million of income, compared to $6.2 million of expense in the prior year.
• Income before income taxes was $20.6 million compared to a loss of $32.1 million in the prior year.
• Adjusted EBITDA was $36.7 million (13.5% of net sales), compared to a loss of $15.0 million (5.6% of net sales) in the prior year.
• Net income was $11.7 million ($0.19 per diluted share), compared to a net loss of $39.9 million ($0.76 per diluted share) in the prior year.
• Adjusted net income was $14.2 million ($0.23 per diluted share), compared to an adjusted net loss of $32.8 million ($0.63 per diluted share) in the prior year.
• Total liquidity was $111.7 million, consisting of $77.0 million in cash and cash equivalents and $34.7 million of availability under the asset-based revolving credit facility.
• Inventories totaled $189.2 million, an increase of 13.4% compared to the prior year.
• Total debt was $208.0 million.

Guidance and Future Outlook:

• The Company raised its full-year 2026 financial outlook.
• Worldwide net sales guidance is now in the range of $980 million to $990 million.
• Adjusted operating margin guidance is in the range of 5.5% to 6.5%.
• The Company expects positive free cash flow for the full year.
• Guidance excludes impacts from foreign currency.

Business Segments and Product Lines:

• In constant currency, Asia net sales increased 15.1%, Americas increased 0.1%, and Europe decreased 5.6%.
• Wholesale sales in constant currency increased 4.4%, while direct-to-consumer sales decreased 5.9%.
• Within direct-to-consumer channels, comparable retail sales increased 0.1%.
• Traditional watch sales increased 6.4% in constant currency.
• Leathers category sales decreased 20.5% in constant currency.
• Jewelry sales declined 10.8% in constant currency.
• The Fossil brand increased 13.6% in constant currency.
• Store rationalization initiatives unfavorably impacted sales by approximately 190 basis points.
• Store count decreased from 204 at the end of the prior year to 174 at the end of the third quarter of 2026 (Americas: 97 to 89; Europe: 49 to 35; Asia: 58 to 50).

Market and Competitive Landscape:

• Sales growth was driven by strong consumer response to product innovation and storytelling.
• Gross margin expansion was primarily driven by reduced licensed brand minimum royalties, accelerated timing of minimum royalty recognition, improved product margins in core categories, benefits from the full-price selling model, sourcing initiatives, and reduced tariffs.
• SG&A expense reductions were largely driven by cost reductions and efficiencies gained through restructuring programs.

Risks and Challenges:

• Store rationalization initiatives negatively impacted sales by approximately 190 basis points.
• Leathers and jewelry categories experienced significant declines in constant currency sales.
• Direct-to-consumer sales decreased 5.9% in constant currency.
• Interest expense increased due to higher debt balances, increased interest rates, and higher debt issuance cost amortization.
• The press release lists various forward-looking risks including political uncertainty, economic conditions, consumer spending patterns, supply chain interruptions, license agreement termination, data security breaches, foreign currency valuations, and debt covenant compliance.

Management Commentary and Tone:

• CEO Franco Fogliato stated that strong results reflect momentum across brands, channels, and geographies, demonstrating that product innovation and storytelling are connecting with consumers globally.
• Management noted that the three strategic pillars of their turnaround plan are translating to top-line growth and accelerating profitability.
• Year-to-date results are outpacing expectations, supporting the increase in full-year financial outlook.
• Management expressed confidence in their ability to drive lasting shareholder value and described the company as being at the beginning of its long-term growth journey.

Other Key Points:

• The Company raised its full-year 2026 financial outlook on both the top and bottom line.
• A conference call to discuss results was held on November 10, 2026, at 5:00 p.m. Eastern Time.
• The press release includes reconciliations of non-GAAP financial measures (Adjusted EBITDA, Adjusted Operating Income, Constant Currency Adjusted Operating Income, Adjusted Net Income) to GAAP measures.
• The Fossil Group operates a portfolio of owned brands (Fossil, Michele, Relic, Skagen, Zodiac) and licensed brands (Armani Exchange, Diesel, Emporio Armani, Michael Kors, Skechers, Tory Burch).