Release Date: May 14, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Fossil Group Inc (FOSL, Financial) 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.
- 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%.
- Fossil Group Inc (FOSL) is seeing strong demand trends and confidence in their turnaround plan, supported by a leading market position, favorable industry dynamics, and iconic brands.
- 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.
- Fossil Group Inc (FOSL) is actively pursuing initiatives to improve working capital and manage liquidity, including a sale leaseback agreement for their European distribution center.
Negative Points
- Despite improvements, Fossil Group Inc (FOSL) still experienced a core sales decline of 8% year-over-year.
- The company is facing challenges in the Chinese market, with the Armani brand remaining pressured by the difficult market environment.
- Fossil Group Inc (FOSL) is dealing with the impact of global tariffs, which could affect their financial outlook if rates increase significantly.
- The company plans to close approximately 50 stores in 2025 as part of its cost-saving measures, which may impact its retail presence.
- Fossil Group Inc (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%.
Q: What are the key financial highlights from the first quarter of 2025?
A: Randy Greben, CFO, reported that net sales totaled $239 million, with a core sales decline of 8% year-over-year. Gross margin expanded by 880 basis points to 61.1%, and SG&A expenses decreased by 11%. The company achieved a $10 million profit in adjusted operating income, marking a significant turnaround from a $20 million loss the previous year.
Q: Can you elaborate on the strategic decisions regarding store closures and the distributor model?
A: Franco Fogliato, CEO, mentioned that the company closed 28 stores in Q1 and plans to close approximately 50 more in 2025. They are transitioning smaller international markets to a distributor model, which simplifies operations and reduces costs. This strategy is expected to drive efficient growth and scale in those regions.
Q: What is the outlook for Fossil Group for the remainder of 2025?
A: Randy Greben, CFO, reiterated the full-year guidance, expecting worldwide net sales to decline in the mid- to high-teens. The company anticipates narrowing year-over-year sales declines in the remaining quarters and achieving approximately $100 million in SG&A savings. The focus remains on expanding gross margins and aggressive cost actions to drive long-term profitable growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
