Shares of Fossil Group, Inc. FOSL have gained 20.3% since the company reported its earnings for the quarter ended Dec. 28, 2024. This compares to the S&P 500 index’s 1.2% growth over the same time frame. Over the past month, the stock has declined 12% compared with the S&P 500’s 8.3% decrease.
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Fossil incurred a fourth-quarter 2024 net loss of 14 cents per share, narrower than the prior-year quarter’s net loss of 54 cents per share. On an adjusted basis, net income came in at 39 cents per share against an adjusted loss of 30 cents per share in the year-ago quarter.
Net sales totaled $342.3 million, marking an 18.8% decline from $421.3 million in the prior-year period. In constant currency, sales decreased 18.1%. The decline was primarily attributed to soft consumer demand, reduced smartwatch sales following the company’s exit from the category and ongoing retail store closures, which collectively accounted for approximately 600 basis points of the decline.
Despite the drop in sales, gross margin expanded by 630 basis points year over year to 53.9%, aided by improved product margins in core categories and the discontinuation of smartwatches. However, restructuring costs related to the closure of Fossil’s Swiss manufacturing operations impacted the results.
The company incurred an operating loss of $16.3 million, narrower than a $24 million loss in the prior-year quarter. Adjusted operating income stood at $20.1 million, compared to an adjusted operating loss of $8.5 million in the fourth quarter of 2023. Fossil incurred a net loss of $7.6 million, narrower than a net loss of $28.2 million a year earlier. On an adjusted basis, net income came in at $21.2 million against an adjusted loss of $16 million in the previous year’s quarter.
Fossil Group, Inc. Price, Consensus and EPS Surprise
Fossil Group, Inc. Price, Consensus and EPS Surprise
Fossil Group, Inc. price-consensus-eps-surprise-chart | Fossil Group, Inc. Quote
Key Business Metrics
By region, sales declined 21% in Europe, 18% in the Americas and 13% in Asia on a constant currency basis. The wholesale segment declined 10%, while direct-to-consumer sales fell 27%, driven by a 20% drop in comparable retail sales.
Among product categories, traditional watch sales declined 10% in constant currency, leather goods sales dropped 37%, and jewelry sales were down 19%. Fossil-branded sales fell 20%, mainly due to weakness in smartwatches and leather goods, while traditional watch sales showed a slight decline.
Operating expenses decreased 10.5% year over year to $200.9 million, with SG&A expenses falling 17% to $172.1 million, reflecting efficiency gains from the Transform and Grow (TAG) initiative. Interest expense stood at $4.9 million, down from $5.7 million in the prior-year quarter.
The company ended the quarter with $177 million in total liquidity, including $124 million in cash and cash equivalents. Inventory was down 29.4% year over year to $178.6 million. Free cash flow generation stood at $30 million for the quarter.
Management Commentary and Turnaround Plan
CEO Franco Fogliato highlighted that Fossil exceeded internal expectations for the quarter, emphasizing improvements in operating margins and cost efficiencies. He outlined a three-pronged turnaround strategy focused on refocusing on core businesses, reducing costs, and strengthening the balance sheet.
The plan includes a renewed emphasis on traditional watches, a stronger Fossil brand platform, and a shift toward a distributor model in select international markets to lower costs. Additionally, Fossil aims to close approximately 50 retail stores in 2025 as part of its restructuring efforts.
Fossil also announced key leadership appointments, including the hiring of Randy Greben as CFO, effective March 17, 2025. The company emphasized its intent to return to profitable growth over the coming years through brand revitalization, enhanced wholesale relationships, and a disciplined approach to expense management.
Factors Influencing Performance
Fossil’s revenue decline in the fourth quarter was largely driven by weaker consumer demand across all regions, particularly in direct-to-consumer channels. The company’s exit from smartwatches and store rationalization initiatives contributed significantly to the decline.
On the positive side, cost-reduction measures, including a leaner retail footprint and lower compensation costs, helped mitigate the impact of lower sales. The company also benefited from reduced promotional activity in its e-commerce channel, improving its gross margin profile.
Full-Year Update
Net sales for 2024 totaled $1.1 billion, down 18.9% on a reported basis and 18.6% in constant currency from $1.4 billion in 2023. Despite the revenue decline, gross profit came in at $597.2 million compared to $679.6 million in the prior year. On a per-share basis, the company incurred a loss of $1.94, narrower than a loss of $3.00 in the previous year. Adjusted net loss came in at $47.7 million versus $116.9 million in 2023. Additionally, adjusted EBITDA came in at a negative figure of $11.6 million in 2024.
2025 Guidance
Fossil provided a cautious outlook for fiscal 2025, expecting net sales to decline in the mid-to-high teens. The company anticipates an approximately $45 million revenue impact from store closures. Management also expects a negative low single-digit adjusted operating income margin for the full year.
The company aims to achieve $100 million in SG&A savings through corporate workforce reductions, store closures and the transition of select international markets to a distributor model. Additionally, Fossil is exploring asset sales and other liquidity-enhancing initiatives.
Other Developments
As part of its turnaround efforts, Fossil is actively restructuring its business. In 2024, the company completed the closure of its Swiss manufacturing operations and transitioned five international markets — Denmark, Finland, Norway, Poland and Sweden — to a distributor model.
The company also announced an extension of its long-term licensing agreement with Michael Kors, a key brand in its portfolio. Furthermore, Fossil introduced a new marketing initiative, including an upcoming omnichannel campaign featuring celebrity ambassador Nick Jonas, aimed at strengthening brand positioning.
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