In This Article:
Release Date: May 14, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Fossil Group Inc (NASDAQ:FOSL) reported a significant improvement in sales performance, narrowing core sales decline to 8%, a sequential improvement of 400 basis points compared to the fourth quarter.
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The company achieved a gross margin of over 61%, up nearly 9 points from the prior year, and delivered positive adjusted operating margins of 4.3%.
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Fossil Group Inc (NASDAQ:FOSL) is seeing strong demand trends and confidence in their turnaround plan, supported by a leading market position, favorable industry dynamics, and iconic brands.
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The company is making progress on its turnaround plan, focusing on core brands, rightsizing cost structure, and strengthening the balance sheet, with expected $100 million SG&A savings in 2025.
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Fossil Group Inc (NASDAQ:FOSL) is actively pursuing initiatives to improve working capital and manage liquidity, including a sale leaseback agreement for their European distribution center.
Negative Points
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Despite improvements, Fossil Group Inc (NASDAQ:FOSL) still experienced a core sales decline of 8% year-over-year.
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The company is facing challenges in the Chinese market, with the Armani brand remaining pressured by the difficult market environment.
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Fossil Group Inc (NASDAQ:FOSL) is dealing with the impact of global tariffs, which could affect their financial outlook if rates increase significantly.
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The company plans to close approximately 50 stores in 2025 as part of its cost-saving measures, which may impact its retail presence.
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Fossil Group Inc (NASDAQ:FOSL) expects worldwide net sales to decline in the mid- to high-teens for the full year 2025, indicating ongoing challenges in achieving sales growth.
Q & A Highlights
Q: Can you provide more details on the turnaround initiatives and their impact on the company's performance? A: Franco Fogliato, CEO, explained that the turnaround plan is centered on three pillars: refocusing on the core business, rightsizing the cost structure, and strengthening the balance sheet. The company has seen significant improvements, including a sequential improvement in sales performance, gross margin expansion to over 61%, and a second consecutive quarter of profitability. The plan is generating strong business momentum, with a focus on traditional watches and go-to-market execution.
Q: How is Fossil Group addressing the global tariff environment and its potential impact on the business? A: Randy Greben, CFO, stated that the company is confident in mitigating the impact of tariffs due to its global footprint, strong vendor relationships, and supply chain redundancy. They are also planning strategic price increases and further geodiversifying production to lessen reliance on China. The company is prepared to handle tariffs even if rates reach 145%.