Release Date: March 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Fossil Group Inc (NASDAQ:FOSL) exceeded its top and bottom line guidance for the fourth quarter, indicating strong financial performance.
• The company successfully extended its gross margins and reduced costs, resulting in positive adjusted operating margins.
• Fossil Group Inc (NASDAQ:FOSL) launched a new Fossil brand platform and website, focusing on watches and innovation, which is expected to enhance brand visibility and consumer engagement.
• The company has transitioned smaller international markets to a distributor model, which is expected to lower operating expenses and drive long-term growth.
• Fossil Group Inc (NASDAQ:FOSL) has secured a high-profile celebrity ambassador, Nick Jonas, to boost brand recognition and consumer interest through an upcoming campaign.

Negative Points

• Fossil Group Inc (NASDAQ:FOSL) reported an 18% decline in net sales for the fourth quarter, primarily due to the exit from the smartwatch market and store closures.
• The company plans to close approximately 50 retail stores in 2025, which may impact short-term revenue.
• Fossil Group Inc (NASDAQ:FOSL) anticipates a mid to high teens decline in worldwide net sales for the full year 2025.
• The company is facing challenges in maintaining sales growth due to reduced promotional activities, particularly in its e-commerce channel.
• Fossil Group Inc (NASDAQ:FOSL) is undergoing a corporate workforce reduction and other cost-cutting measures, which may affect employee morale and operational efficiency.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with FOSL.

Q: Can you elaborate on the strategic decision to transition smaller international geographies to a distributor model? A: Franco Fogliato, CEO, explained that transitioning smaller international geographies to a distributor model allows Fossil to build a more competitive and profitable model in key markets. This strategy leverages local knowledge and regional expertise, lowers operating expenses, and positions the company for long-term scalable growth. Five countries have already transitioned, with more expected this year.

Q: What are the expected impacts of the store closures and reduced promotional activities on sales? A: Andrew Skobe, Interim CFO, stated that for 2025, worldwide net sales are expected to decline in the mid to high teens, with store closures impacting sales by approximately $45 million. Reduced promotional activities, particularly in the e-commerce channel, will also affect sales. However, these actions are anticipated to drive more profitable growth over the long term.

Q: How is Fossil planning to strengthen its balance sheet and increase liquidity? A: Franco Fogliato, CEO, mentioned that Fossil ended the year with $177 million in liquidity and is actively working to monetize non-core assets, improve working capital, and address upcoming debt maturities. The company is also pursuing non-core asset sales and opportunities for incremental expense savings.

Q: What are the key initiatives under the turnaround plan to refocus on Fossil's core business? A: Franco Fogliato, CEO, outlined three primary pillars: refocusing on the core business, right-sizing the cost structure, and strengthening the balance sheet. Key initiatives include launching a new Fossil brand platform, leveraging core licensed brands, optimizing the global wholesale footprint, and driving channel profitability.

Q: What are the expected SG&A savings for 2025, and what factors are driving these savings? A: Andrew Skobe, Interim CFO, indicated that Fossil expects to capture approximately $100 million in SG&A savings in 2025 compared to 2024. This will be achieved through corporate workforce reductions, reduced costs from transitioning to a distributor model in smaller markets, and the closure of approximately 50 retail stores.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.