[Financial Performance Overview](index=1&type=section&id=FOSSIL%20GROUP%2C%20INC.%20REPORTS%20SECOND%20QUARTER%202025%20FINANCIAL%20RESULTS) Fossil Group reported strong Q2 2025 results with positive operating income and raised full-year guidance, driven by its successful turnaround plan [Second Quarter 2025 Financial Highlights](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Highlights) Fossil Group reported positive operating income of $8 million for Q2 2025, a significant turnaround from the loss in the prior year. Despite a 15.2% decline in worldwide net sales to $220 million, gross margin expanded by 490 basis points to 57.5%. The company's strong performance led to an increase in its full-year 2025 guidance Q2 2025 Key Financial Metrics | Metric | Q2 2025 | Change (YoY) | | :--- | :--- | :--- | | Worldwide Net Sales | $220 million | -15.2% | | Gross Margin | 57.5% | +490 bps | | Operating Income | $8 million | N/A (vs. loss in Q2 2024) | | Operating Margin | 3.9% | N/A (vs. negative margin in Q2 2024) | - The company has raised its financial guidance for the **full year 2025**[1](index=1&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) CEO Franco Fogliato attributed the outperformance to the company's turnaround plan, which has delivered a third consecutive quarter of positive adjusted operating income. He highlighted a comprehensive refinancing plan to strengthen the financial position and expressed confidence in the second half of the year, driven by key brand-building initiatives. This momentum supports the decision to raise the full-year 2025 outlook - The company's turnaround plan is showing strength, resulting in a **third consecutive quarter of positive adjusted operating income**[3](index=3&type=chunk) - A comprehensive refinancing plan was announced to strengthen the balance sheet and support growth plans[2](index=2&type=chunk)[3](index=3&type=chunk) - Focus for the second half of the year includes brand-building initiatives, such as a global campaign featuring celebrity brand ambassador Nick Jonas[3](index=3&type=chunk) [Detailed Financial Analysis](index=1&type=section&id=Detailed%20Financial%20Analysis) This section provides an in-depth analysis of Q2 2025 operating results, including sales performance, profitability, and key balance sheet metrics [Second Quarter 2025 Operating Results](index=1&type=section&id=Second%20Quarter%202025%20Operating%20Results) In Q2 2025, net sales fell 15.2% to $220.4 million, impacted by market softness, the exit from the smartwatch category, and store closures. Despite the sales decline, gross margin improved significantly to 57.5% from 52.6% YoY, driven by better product margins and lower freight costs. Operating expenses decreased by 30.8%, leading to an operating income of $8.5 million, a substantial improvement from a $34.0 million loss in Q2 2024. Net loss narrowed to $2.3 million from $38.8 million in the prior-year quarter Q2 2025 Net Sales Performance (Constant Currency) | Category | Change (YoY) | | :--- | :--- | | **By Region** | | | Americas | -19% | | Europe | -14% | | Asia | -12% | | **By Channel** | | | Wholesale | -6% | | Direct to Consumer | -30% | | **By Product** | | | Traditional Watches | -8% | | Leathers | -39% | | Jewelry | -22% | - The exit from the smartwatch category and store rationalization initiatives accounted for approximately **6 percentage points of the total sales decline**[4](index=4&type=chunk) Q2 2025 Profitability vs. Q2 2024 | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Gross Profit | $126.7M | $136.9M | | Gross Margin | 57.5% | 52.6% | | Operating Expenses | $118.2M | $170.9M | | Operating Income (Loss) | $8.5M | $(34.0)M | | Net Loss | $(2.3)M | $(38.8)M | | Diluted Loss Per Share | $(0.04) | $(0.73) | [Balance Sheet Summary](index=3&type=section&id=Balance%20Sheet%20Summary) As of July 5, 2025, Fossil Group maintained total liquidity of $110.6 million, primarily composed of $109.9 million in cash and cash equivalents. The company successfully reduced inventories by 11.9% year-over-year to $178.1 million. Total debt stood at $179.0 million Balance Sheet Highlights (as of July 5, 2025) | Metric | Amount | YoY Change | | :--- | :--- | :--- | | Total Liquidity | $110.6M | N/A | | Cash and Cash Equivalents | $109.9M | +4.8% | | Inventories | $178.1M | -11.9% | | Total Debt | $179.0M | +12.6% | [Outlook and Strategy](index=3&type=section&id=Outlook%20and%20Strategy) Fossil Group has raised its full-year 2025 financial guidance, reflecting improved sales decline forecasts and a positive adjusted operating margin outlook [Full Year 2025 Outlook](index=3&type=section&id=Full%20Year%202025%20Outlook) Reflecting strong year-to-date performance and progress on its turnaround plan, Fossil Group has raised its financial guidance for the full year 2025. The company now anticipates a smaller decline in net sales and has improved its adjusted operating margin forecast Updated Full Year 2025 Guidance | Metric | New Guidance | Prior Guidance | | :--- | :--- | :--- | | Worldwide Net Sales Decline | Mid-teens | Mid to high teens | | Adjusted Operating Margin | Break even to slightly positive | Negative low single digits | - The net sales guidance includes an expected negative impact of approximately **$45 million related to retail store closures**[9](index=9&type=chunk) [Supplemental Financial Data](index=5&type=section&id=Supplemental%20Financial%20Data) This section provides detailed consolidated financial statements, segment performance data, and reconciliations of GAAP to non-GAAP financial measures [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) This section presents the detailed unaudited consolidated income statements and balance sheets for the periods ended July 5, 2025, and June 29, 2024, providing a comprehensive view of the company's financial position and performance [Consolidated Income Statement](index=5&type=section&id=Consolidated%20Income%20Statement) This statement details the company's revenues, expenses, and net loss for the 13-week periods ended July 5, 2025, and June 29, 2024 Income Statement Summary (13 Weeks Ended) | ($ in millions) | July 5, 2025 | June 29, 2024 | | :--- | :--- | :--- | | Net sales | $220.4 | $260.0 | | Gross profit | $126.7 | $136.9 | | Operating income (loss) | $8.5 | $(34.0) | | Net loss attributable to Fossil Group, Inc. | $(2.3) | $(38.8) | | Diluted loss per share | $(0.04) | $(0.73) | [Consolidated Balance Sheet](index=6&type=section&id=Consolidated%20Balance%20Sheet) This statement provides a snapshot of the company's assets, liabilities, and equity as of July 5, 2025, and June 29, 2024 Balance Sheet Summary | ($ in millions) | July 5, 2025 | June 29, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $109.9 | $104.9 | | Inventories | $178.1 | $202.1 | | Total assets | $704.5 | $785.7 | | Total debt (Short & Long-term) | $179.0 | $159.1 | | Stockholders' equity | $133.9 | $187.1 | | Total liabilities and stockholders' equity | $704.5 | $785.7 | [Segment and Product Performance (Constant Currency)](index=6&type=section&id=Segment%20and%20Product%20Performance%20(Constant%20Currency)) On a constant currency basis for Q2 2025, net sales declined across all geographic segments, with the Americas showing the largest decrease. By product, the exit from smartwatches is evident in its sharp decline, while the core traditional watch category saw a single-digit decrease. Leathers and jewelry categories experienced significant double-digit declines Q2 Net Sales by Segment (Constant Currency) | ($ in millions) | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Americas | $97.1 | $119.6 | -18.8% | | Europe | $64.2 | $74.8 | -14.2% | | Asia | $57.5 | $65.2 | -11.8% | | **Total** | **$218.9** | **$260.0** | **-15.8%** | Q2 Net Sales by Product (Constant Currency) | ($ in millions) | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Traditional watches | $177.9 | $194.1 | -8.3% | | Smartwatches | $1.4 | $8.4 | -83.3% | | Leathers | $16.7 | $27.2 | -38.6% | | Jewelry | $18.8 | $24.2 | -22.3% | [Reconciliation of GAAP to Non-GAAP Measures](index=7&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) The company provides reconciliations for non-GAAP measures to offer a clearer view of underlying business performance by excluding items like restructuring costs and asset impairments. For Q2 2025, Adjusted Operating Income was $3.8 million, and Adjusted EBITDA was $7.0 million, both marking significant improvements from losses of $17.0 million and $11.7 million, respectively, in the prior-year quarter Adjusted EBITDA Reconciliation Summary | ($ in millions) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Income (loss) before income taxes | $4.1 | $(36.6) | | Adjustments (Interest, D&A, Restructuring, etc.) | +$2.9 | +$24.9 | | **Adjusted EBITDA** | **$7.0** | **$(11.7)** | Adjusted Operating Income Reconciliation Summary | ($ in millions) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Operating income (loss) (GAAP) | $8.5 | $(34.0) | | Restructuring Expenses | $7.3 | $16.7 | | Gains on Asset Divestitures | $(11.5) | - | | Other Long-Lived Asset Impairment | - | $0.6 | | **As Adjusted Operating Income (Loss)** | **$4.3** | **$(16.7)** | [Store Count Information](index=12&type=section&id=Store%20Count%20Information) As part of its store rationalization strategy, Fossil Group continued to reduce its physical retail footprint. The company closed 47 stores and opened 3, resulting in a net reduction of 44 stores. The total store count decreased from 258 at the end of Q2 2024 to 214 at the end of Q2 2025 Store Count by Region | Region | June 29, 2024 | Opened | Closed | July 5, 2025 | | :--- | :--- | :--- | :--- | :--- | | Americas | 120 | 0 | 19 | 101 | | Europe | 69 | 0 | 17 | 52 | | Asia | 69 | 3 | 11 | 61 | | **Total stores** | **258** | **3** | **47** | **214** |

Core Insights - Fossil Group, Inc. reported a second quarter 2025 net sales of $220 million, a decrease of 15.2% compared to the same period in 2024, primarily due to category softness and a decline in smartwatch sales [5][11] - The company achieved a gross margin of 57.5%, an increase of 490 basis points year-over-year, attributed to improved product margins and reduced freight costs [5][11] - Operating income for the second quarter was $8 million, with an operating margin of 3.9%, marking a significant improvement from a loss of $34 million in the prior year [11][12] - Fossil Group announced a comprehensive refinancing plan aimed at strengthening its balance sheet and increasing liquidity [3][4] Financial Performance - Net sales for the second quarter totaled $220.4 million, down from $260 million in Q2 2024, with declines across all major regions: 19% in the Americas, 14% in Europe, and 12% in Asia [5][11] - Gross profit was $126.7 million, a decline of 7.4% from $136.9 million in the previous year, but gross margin improved to 57.5% from 52.6% [5][11] - Operating expenses decreased by 30.8% to $118.2 million, representing 53.7% of net sales compared to 65.7% in the prior year [5][6] Outlook and Guidance - The company raised its full-year 2025 financial guidance, reflecting strong year-to-date results and ongoing progress in its turnaround strategy [8][12] - Worldwide net sales are expected to decline in the mid-teens, an improvement from previous guidance of a decline in the mid to high teens [12] - Adjusted operating margin is anticipated to be break-even to slightly positive, compared to prior guidance of negative low single digits [12] Balance Sheet and Liquidity - As of July 5, 2025, Fossil Group had total liquidity of $110.6 million, including $109.9 million in cash and cash equivalents [7] - Total debt stood at $179 million, with inventories decreasing by 11.9% to $178.1 million compared to the previous year [7][11]

Core Viewpoint - Fossil Group, Inc. has announced the refinancing of its asset-based lending (ABL) and entered into a Transaction Support Agreement to exchange its outstanding notes, positioning the company for future growth with a stronger balance sheet [1][2]. Group 1: Transaction Details - The Transaction Support Agreement allows holders of Unsecured Notes to participate in a New Money Investment, which is backed by Consenting Noteholders who own approximately 59% of Fossil's 7.00% Senior Notes due 2026 [2][7]. - The company has established a new $150 million asset-based revolving credit facility with Ares Management Credit funds, maturing on August 13, 2030, priced at SOFR plus 500 basis points [7]. - Noteholders can exchange their Unsecured Notes for new First-Out Senior Secured Notes or Second-Out Senior Secured Notes, along with warrants for common stock [8]. Group 2: Restructuring Conditions - If less than 90% of the outstanding principal amount of Unsecured Notes is tendered, the company may proceed with restructuring through the Companies Act 2006 of England and Wales, potentially eliminating all Unsecured Notes [3].

Core Viewpoint - Fossil Group, Inc. is set to report its second quarter 2025 financial results on August 13, 2025, after market close, followed by a conference call to discuss the results [1] Company Overview - Fossil Group, Inc. is a global company focused on design, marketing, distribution, and innovation in lifestyle accessories, including watches, jewelry, handbags, small leather goods, belts, and sunglasses [2] - The company operates a diverse portfolio of both owned and licensed brands, such as Fossil, Michele, Relic, Skagen, Zodiac, Armani Exchange, Diesel, Emporio Armani, kate spade new york, Michael Kors, Skechers, and Tory Burch [2] - Fossil Group is dedicated to delivering high-quality design and innovation across its brands, supported by an extensive distribution network across various geographies, categories, and channels [2]

Core Insights - Fossil Group, Inc. has been upgraded to an "Outperform" rating from "Neutral," indicating optimism regarding its transformation efforts and potential for profitable growth [1] Turnaround Strategy - The company is implementing a structured turnaround plan focused on three strategic pillars: refocusing on core brand assets, realigning its cost structure, and reinforcing its financial position [2] - In Q1 of fiscal 2025, gross margin increased to over 60%, an 890-basis-point improvement year-over-year, driven by operational streamlining and reduced promotional intensity [2] Cost Management - Fossil achieved a 12% year-over-year reduction in SG&A expenses, attributed to tighter marketing spending and the closure of underperforming stores [3] - The company closed 28 stores in Q1 and plans to close a total of 50 stores in 2025 to enhance profitability [3] Brand Strength and Innovation - Fossil was ranked fourth in the global watch market by Time Magazine in 2024, highlighting its strong market presence [4] - The Raquel Watch Ring won "Fashion Jewelry of the Year" at Inhorgenta in Munich, showcasing the company's design capabilities [4] Brand Initiatives - A global campaign featuring celebrity ambassador Nick Jonas is set to launch in summer 2025 to modernize the Fossil brand [5] - The company has renewed key licensing deals and is focusing on core markets such as the United States, France, Germany, and India [5] Market Focus and Distribution - Fossil is transitioning smaller, less profitable markets in Europe and Asia to a distributor-based model, which may lead to short-term sales dips but is expected to improve long-term margins [6] - Investments are being prioritized in scalable regions, enhancing wholesale presence through upgraded merchandising and strategic retail partnerships [6] E-commerce Strategy - E-commerce operations are being revamped to improve margin performance, with reduced promotional activity enhancing average unit retail [7] - Integration of features like Amazon's Buy with Prime is being implemented to elevate the customer experience on Fossil.com [7] Revenue Challenges - Despite positive developments, Fossil faced an 8.5% year-over-year decline in net sales for Q1 2025, totaling $233.3 million, due to store closures and exiting the connected watch business [8] Future Outlook - The upgraded rating reflects confidence in Fossil's ability to execute its restructuring plan and achieve sustainable profitability [9] - With $99.5 million in liquidity and improved margins, the company is better positioned for the evolving retail landscape [10]

Core Insights - Fossil Group, Inc. has appointed Laks Lakshmanan as the Chief Supply Chain Officer, effective June 16, 2025, to enhance its supply chain operations [1][3]. Company Overview - Fossil Group, Inc. specializes in design, marketing, distribution, and innovation of lifestyle accessories, including watches, jewelry, handbags, and more, under a diverse portfolio of owned and licensed brands [6]. Leadership Appointment - Laks Lakshmanan brings over 20 years of supply chain leadership experience, having previously served as Managing Director at Alvarez & Marsal and interim Head of Supply Chain for Fossil [2][4]. - His role will encompass overseeing Fossil's global end-to-end supply chain, including manufacturing, sourcing, distribution, and logistics [2]. Strategic Goals - The CEO of Fossil Group emphasized the importance of building a high-performing leadership team, highlighting Lakshmanan's operational expertise and strategic mindset as crucial for the company's turnaround [3]. - Lakshmanan expressed his commitment to modernizing Fossil's supply chain and enhancing its operational efficiency [3][4]. Previous Experience - Prior to joining Fossil, Lakshmanan held senior roles at Kearney and Target, focusing on supply chain optimization and transformational initiatives [5].

Core Insights - Fossil Group, Inc. (FOSL) shares have increased by 27.9% since the first-quarter earnings report for fiscal 2025, outperforming the S&P 500's 1.4% gain during the same period, and have surged 81.3% over the past month compared to the S&P 500's 15.4% increase, indicating renewed investor optimism in the company's turnaround strategy and improving fundamentals [1] Financial Performance - The company reported a first-quarter net loss per share of $0.33, an improvement from a loss of $0.46 in the prior-year quarter, while the adjusted net loss per share narrowed to $0.10 from $0.30 a year earlier [2] - Net sales were $233.3 million, down 8.5% from $254.9 million in the prior-year period, with a constant currency decline of 6.2% [2] - Gross profit increased to $143 million from $133.5 million a year earlier, with gross margin expanding to 61.3%, up 890 basis points, due to a favorable product mix, exiting the smartwatch category, and lower freight costs [3] Operating Metrics - Operating loss narrowed significantly to $6.7 million from $29.2 million in the year-ago quarter, with adjusted operating income of $10.3 million compared to an adjusted operating loss of $18.9 million in the first quarter of 2024 [4] Business Segment Highlights - Sales in the Americas and Asia declined by 9% and 10% respectively on a constant currency basis, while Europe saw a modest 1% increase; traditional watches grew by 2%, partially offsetting declines in leather goods (37%) and jewelry (13%) [5] - Wholesale sales rose by 6% on a constant currency basis, while direct-to-consumer (DTC) sales dropped by 24%, influenced by a 22% decrease in comparable retail sales [6] Management Commentary - CEO Franco Fogliato noted strong progress in operational and financial metrics, attributing improvements to restructuring initiatives and reduced promotional activity [7] - CFO Randy Greben highlighted an 8% year-over-year decline in operating expenses, reflecting cost discipline and reduced digital marketing spend [7] Strategic Initiatives - Successful product innovation was noted, particularly in the core Fossil line and collaborative launches, which generated social media traction and consumer engagement [8] - Margin expansion was driven by exiting the smartwatch segment, focusing on full-price sales, improving cost structures, and optimizing product assortments [9] Cost Management - SG&A expenses decreased to $133.8 million from $152.2 million, aided by lower compensation costs and fewer stores, while inventory declined by 19% year-over-year to $182.1 million [10] Guidance - Fossil reiterated its full-year 2025 guidance, projecting a worldwide net sales decline in the mid-to-high teens and an adjusted operating margin in the negative low single digits, factoring in a $45 million revenue hit from planned retail store closures [11] Other Developments - The company signed an agreement to sell its distribution center in Eckstedt, Germany, in a sale-leaseback transaction expected to close in the second quarter, projected to add $20 million in balance sheet cash [12]

Group 1 - The Fossil Group held its First Quarter 2025 Earnings Call, with key participants including CEO Franco Fogliato and CFO Randy Greben [1][2] - The call included forward-looking statements, with a reminder that actual results may differ materially from those discussed [3] - The company referred to constant currency results and non-GAAP financial measures, with reconciliations available in the earnings release [4]

Financial Data and Key Metrics Changes - First quarter net sales totaled $239 million, down just 6% in constant currency, with core sales declining 8% year-over-year, showing a sequential improvement from a 12% decline in Q4 [27][28] - Gross margin expanded to 61.1%, an increase of 880 basis points compared to the previous year, primarily due to higher product margins and reduced promotional activity [28][29] - Adjusted operating income improved from a loss of $20 million last year to a profit of $10 million this year, resulting in an adjusted operating margin of 4.3% [30] Business Line Data and Key Metrics Changes - The Fossil traditional watch business posted growth of 7% globally, excluding the impact of the additional retail week and store closures, up from low single-digit growth in Q4 [28] - The Kors brand returned to growth with double-digit gains in Q1, while Armani Exchange also saw double-digit growth, although the Armani brand faced challenges in China [14] Market Data and Key Metrics Changes - The wholesale business for the core brand grew in double digits year-over-year in the U.S., with continued momentum in scalable markets like India [15] - Inventory levels totaled $182 million, down 19% compared to a year ago, indicating effective inventory management [31] Company Strategy and Development Direction - The turnaround plan focuses on three pillars: refocusing on core brands, rightsizing the cost structure, and strengthening the balance sheet [8][19] - The company is investing in brand marketing and enhancing storytelling around major product launches to drive engagement and demand [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to drive growth despite macroeconomic challenges, citing strong demand trends and effective turnaround initiatives [7][24] - The company reiterated its full-year guidance, expecting worldwide net sales to decline in the mid to high teens, while anticipating continued narrowing of year-over-year sales declines [37] Other Important Information - The company has taken steps to reduce SG&A expenses by $17 million, representing an 11% decrease versus the prior year [29] - A sale-leaseback agreement for the European distribution center is expected to close in Q2, bringing in excess of $20 million to the balance sheet [31] Q&A Session Summary Question: How is the company addressing the global tariff environment? - Management highlighted the company's diverse global footprint and established vendor relationships as key advantages in mitigating tariff impacts, with plans to increase prices strategically [33][36] Question: What are the expectations for the remainder of the year? - The company expects to continue narrowing year-over-year sales declines and remains confident in its ability to offset potential tariff impacts, even under challenging macroeconomic conditions [37]

Financial Data and Key Metrics Changes - First quarter net sales totaled $239 million, down 6% in constant currency, with core sales declining 8% year-over-year, showing a sequential improvement from a 12% decline in Q4 [28][29] - Gross margin expanded to 61.1%, an increase of 880 basis points compared to the previous year, primarily due to higher product margins and reduced promotional activity [29] - SG&A expenses decreased by $17 million to $136 million, representing an 11% reduction year-over-year [30] Business Line Data and Key Metrics Changes - The Fossil traditional watch business posted a 7% growth globally, excluding the impact of the additional retail week and store closures, improving from low single-digit growth in Q4 [29] - The Kors brand returned to growth with double-digit gains in Q1, while the Armani Exchange also saw double-digit growth [15] Market Data and Key Metrics Changes - The wholesale business for the core brand grew in double digits year-over-year in the U.S., with continued momentum in scalable markets like India [16] - Inventory levels totaled $182 million, down 19% compared to a year ago, indicating effective inventory management [32] Company Strategy and Development Direction - The turnaround plan focuses on three pillars: refocusing on core brands, rightsizing the cost structure, and strengthening the balance sheet [8][21] - The company is investing in brand marketing and enhancing storytelling to drive engagement and demand, including collaborations with popular brands and influencers [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the turnaround plan, citing strong execution and positive results from recent initiatives [6][26] - The company reiterated its full-year guidance, expecting worldwide net sales to decline in the mid to high teens, while also anticipating continued narrowing of year-over-year sales declines [37] Other Important Information - The company ended the quarter with total liquidity of $100 million, including $78 million in cash and cash equivalents [32] - A sale-leaseback agreement for the European distribution center is expected to close in Q2, bringing in excess of $20 million to the balance sheet [33] Q&A Session Summary Question: What is the outlook for the company's sales and profitability? - The company expects worldwide net sales to decline in the mid to high teens for 2025, with a focus on narrowing year-over-year sales declines in subsequent quarters [37] Question: How is the company addressing the global tariff situation? - The company is confident in mitigating tariff impacts through a diverse revenue stream, established vendor relationships, and strategic pricing adjustments [34][35]