On May 14, 2025, Fossil Group Inc (FOSL, Financial) released its 8-K filing detailing the financial results for the first quarter of 2025. The company, known for its design, innovation, and distribution of consumer fashion accessories, reported worldwide net sales of $233 million, a decrease from the previous year. Despite this, the company achieved a significant improvement in gross margin and narrowed its operating loss.
Company Overview
Fossil Group Inc is a global leader in the design and distribution of consumer fashion accessories, including traditional watches, smartwatches, jewelry, handbags, small leather goods, belts, and sunglasses. The company operates through three reportable segments: Americas, Europe, and Asia, each contributing to its wholesale, retail, and e-commerce sales.
Performance and Challenges
Fossil Group Inc reported a net sales decline of 8.5% on a reported basis and 6.2% in constant currency compared to the first quarter of 2024. The decline was attributed to softness in overall category, consumer, and channel performance, with smartwatch sales and store rationalization initiatives contributing significantly to the decrease. However, the company benefited from an additional week in the fiscal quarter, which favorably impacted sales by 700 basis points.
Financial Achievements
Despite the sales decline, Fossil Group Inc achieved a gross margin expansion of 890 basis points to 61.3%, driven by improved product margins, exiting the smartwatch category, favorable product mix, and reduced freight costs. The company also reported a constant currency adjusted operating income of $10 million, marking a positive shift from the previous year's adjusted operating loss.
Key Financial Metrics
Fossil Group Inc's operating expenses decreased by 8.0% to $149.7 million, with selling, general, and administrative expenses down 12.1% due to cost reductions and efficiencies from restructuring programs. The operating loss was reduced to $6.7 million from $29.2 million in the prior year, and the net loss improved to $17.6 million from $24.3 million. The company maintained total liquidity of $100 million, with inventories decreasing by 19% year-over-year.
Segment and Product Performance
| Segment | Net Sales (2025) | Net Sales (2024) |
|---|---|---|
| Americas | $97.7 million | $110.0 million |
| Europe | $77.3 million | $78.7 million |
| Asia | $57.4 million | $65.6 million |
Traditional watch sales increased by 2% in constant currency, while the leathers and jewelry categories saw declines of 37% and 13%, respectively. The MICHAEL KORS brand experienced a 12% increase, while the FOSSIL brand saw an 8% decrease, primarily due to declines in leathers and jewelry.
Analysis and Outlook
Fossil Group Inc's first quarter results reflect the company's ongoing efforts to execute its turnaround plan amidst a challenging macroeconomic environment. The improvement in gross margin and reduction in operating loss are positive indicators of progress. However, the decline in net sales and challenges in certain product categories highlight areas that require continued focus and strategic adjustments.
The company reiterated its full-year 2025 guidance, anticipating a mid to high teens decline in worldwide net sales and a negative low single-digit adjusted operating income margin. Fossil Group Inc remains committed to its turnaround strategies, aiming for long-term profitable growth.
Explore the complete 8-K earnings release (here) from Fossil Group Inc for further details.
