Fossil Group(FOSL) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Third quarter net sales totaled $288 million, down 16% in constant currency, with 600 basis points of the decline attributable to the smartwatch exit and store closures [25][24] - Gross margin expanded 240 basis points year-over-year to 49.4%, primarily due to the exit of connected products and benefits from retail pricing and promotional initiatives [27][24] - SG&A expenses decreased by$ 31 million to $161 million, representing a 16% reduction, driven by lower store operating costs and decreased marketing spend [28][24] - Adjusted operating loss narrowed to$ 19 million, reflecting a 39% improvement compared to the adjusted operating loss of $31 million last year [30][24] - Total liquidity at the end of the quarter was$ 130 million, including $106 million in cash and cash equivalents [32][24] Business Line Data and Key Metrics Changes - Traditional watches declined 4% globally on a comp basis in Q3, while India saw an increase of about 10%, excluding connected products [25][24] - Selected licensed brands such as Armani Exchange, SKECHERS, and Tory Burch showed strength, while larger licensed watch brands faced challenges [26][24] Market Data and Key Metrics Changes - The company closed seven stores, ending the quarter with 251 stores, a 17% reduction compared to a year ago, with expectations to close up to 58 by year-end [29][24] - Inventory levels decreased by 30% compared to a year ago, aligning with expectations [32][24] Company Strategy and Development Direction - The company is prioritizing three key areas: redefining and focusing on its core business, rightsizing the business, and strengthening the balance sheet [15][21][22] - A new brand platform is being developed to reignite consumer connection and cultural relevance, supported by a strong innovation pipeline and marketing [19][24] - The company plans to rebuild relationships with wholesale partners and strengthen its digital business for more profitable operations [20][24] Management's Comments on Operating Environment and Future Outlook - Management expressed a strong sense of urgency to execute the turnaround and create value for shareholders, with a commitment to moving swiftly [22][37] - The company expects to achieve at least$ 100 million of annualized P&L benefits in 2024 across margin and SG&A under the TAG Plan [36][24] - Guidance for worldwide net sales is revised to approximately $1.1 billion, with an adjusted operating margin loss expected to range from negative 6% to negative 8% [35][24] Other Important Information - The company completed the sale of its building in France, generating approximately$ 8 million in net proceeds, and is progressing towards a sale leaseback of its distribution center in Germany [33][24] - Restructuring costs related to the TAG plan are estimated to be approximately $40 million for the full year of 2024 [36][24] Q&A Session Summary - The Q&A session did not contain any specific questions or answers as the call concluded without further inquiries [38]