Fossil Group, Inc.

Fossil Group, Inc. is a design, innovation and distribution company specializing in consumer fashion accessories, operating in the global fashion accessories market. The company designs, develops, markets and distributes products including watches, jewelry, handbags, small leather goods, belts and sunglasses under its owned brands FOSSIL, SKAGEN, MICHELE, RELIC and ZODIAC and licensed brands ARMANI EXCHANGE, DIESEL, EMPORIO ARMANI, MICHAEL KORS, SKECHERS and TORY BURCH. The filing does not disclose the overall market size or growth rate of the industry. Key structural forces shaping competition include intense competition from established manufacturers, importers and distributors such as Armitron, Citizen, Gucci, Guess?, Kenneth Cole, LVMH Group, Movado, Raymond Weil, Seiko, Swatch, Swiss Army, TAG Heuer and Timex, as well as technology companies like Apple, Garmin, Google and Samsung in the smartwatch category. The company exited the smartwatch category to focus resources on traditional watch offerings.

Fossil Group competes on the basis of style and technical features, price, value, quality, brand name, advertising, marketing, distribution and customer service. The company believes its design and branding are strong competitive advantages in the traditional watch market. Its distinctive business model of owning distribution in many key markets and offering a globally recognized portfolio of proprietary and licensed products allows for competitive advantages over smaller, regional or local competitors, enabling it to bypass a local distributor's cost structure in certain countries, resulting in more competitively priced products while generating higher product and operating margins. The filing does not provide a specific market share percentage.

Fossil Group generates revenue through the design, development, marketing and distribution of consumer fashion accessories. Revenue is transactional, derived from sales of finished products to customers through wholesale and retail channels, including e-commerce, company-owned retail stores, department and specialty retail stores, airlines, mass markets and concessions. Primary customer segments include style-conscious consumers across a wide age spectrum on a global basis. The company sells its products across approximately 132 countries worldwide through 21 company-owned sales subsidiaries and through a network of 74 independent distributors. The company does not maintain long-term contracts with its customers.

Fossil Group's product portfolio is divided into several major categories. Watches are the core global business, with sales of watches accounting for approximately 82.3% of consolidated net sales in fiscal 2025. Within watches, traditional watch sales were $814.6 million ¹ in fiscal 2025, representing 81.1% of net sales, while smartwatch sales were $11.8 million ², representing 1.2% of net sales. Leathers sales were $69.9 million ³, representing 7.0% of net sales. Jewelry sales were $91.1 million ⁴, representing 9.1% of net sales. Other product sales were $17.0 million ⁵, representing 1.6% of net sales. Sales of accessory lines accounted for 16.0% of consolidated net sales in fiscal 2025. From a brand perspective, licensed products accounted for 47.3% of consolidated net sales in fiscal 2025, including MICHAEL KORS product sales which accounted for 19.2% of consolidated net sales and EMPORIO ARMANI product sales which accounted for 10.1% of consolidated net sales.

In September 2024, the company appointed Franco Fogliato as Chief Executive Officer and created a plan to return the company to profitable growth (the Turnaround Plan). In fiscal 2025, the company achieved selling, general and administrative cost savings of approximately $100 million ⁶ as compared to fiscal 2024 through initiatives including a corporate workforce reduction, a reduction in costs from transitioning certain smaller international markets to a distributor model, and the closing of 49 ⁷ underperforming retail stores. During the second quarter of fiscal 2025, the company entered into a sale of its European distribution center for $23 million ⁸. On August 13, 2025, the company entered into a new revolving credit facility in an aggregate principal amount of $150 million ⁹. On November 13, 2025, the company consummated an exchange offer and concurrent rights offering, resulting in the cancellation of all $150 million ¹⁰ aggregate principal amount of the Prior Notes. In connection with the transactions, New Money Participants provided an aggregate of $32.5 million ¹¹ of incremental new money financing in exchange for $32.5 million ¹² aggregate principal amount of 9.50% First-Out Notes due 2029 and 954,070 ¹³ shares of common stock. Noteholders also received an aggregate total of approximately 3,000,000 ¹⁴ warrants. The number of warrants exercised as of January 3, 2026 was 2.6 million ¹⁵ with the remainder of the 3.0 million ¹⁶ warrants forfeited. The company also entered into a securities exchange agreement to exchange an aggregate of 2.5 million ¹⁷ shares of common stock for 2.5 million ¹⁸ pre-funded warrants.

For fiscal year 2025, total net sales were $1,004.4 million ¹⁹, a decrease of 12.3% compared to $1,145.0 million ²⁰ in fiscal 2024. Gross profit was $563.1 million ²¹ in fiscal 2025, a decrease of 5.7% compared to $597.2 million ²² in fiscal 2024. The gross profit margin rate increased to 56.1% ²³ in fiscal 2025 compared to 52.2% ²⁴ in fiscal 2024. Operating loss was $19.1 million ²⁵ in fiscal 2025, compared to a loss of $103.9 million ²⁶ in the prior fiscal year. Net loss attributable to Fossil Group, Inc. was $78.3 million ²⁷, or $1.45 ²⁸ per diluted share, compared to a net loss of $102.7 million ²⁹, or $1.94 ³⁰ per diluted share, in the prior fiscal year. Cash used in operating activities was $57.9 million ³¹ in fiscal 2025, compared to cash provided by operating activities of $46.7 million ³² in fiscal 2024.

The company's first growth vector is driving profitable growth, which includes plans to further leverage the FOSSIL brand platform to propel innovation, deepen consumer engagement through storytelling, and drive the traditional watch business with a focus on icons and collaborations, as well as develop premium products including those assembled in America. Driving profitable growth initiatives will also include modernizing point of sale expression, focusing on top customers in key markets, stabilizing the e-commerce business through investments in search and navigation, and reducing the pace of store closures. The filing does not provide a specific opportunity size or expected revenue contribution for this vector.

The second growth vector is optimizing the operating model, which is focused on sharpening go-to-market execution to elevate point of sale engagement, reduce complexity and improve business agility, strengthening digital and technology infrastructure, delivering best-in-class supply chain performance, and establishing an emerging brands organization to institutionalize entrepreneurship and build the next scalable growth brand in the portfolio. The filing does not provide a specific opportunity size or expected revenue contribution for this vector.

The company's margin and cost outlook is centered on the Turnaround Plan, which includes rightsizing the cost structure. In fiscal 2025, the company achieved SG&A cost savings of approximately $100 million ³³ as compared to fiscal 2024. Over the next three years, the evolution of the strategic pillars is expected to generate a return to top line growth and improved operating margins and free cash flows. The filing does not provide specific margin targets for future periods.

The company's operational outlook includes plans to strengthen digital and technology infrastructure and deliver best-in-class supply chain performance. The company plans to enhance its e-commerce capabilities in fiscal year 2026, with a focus on improving the end-to-end consumer experience, creating stronger CRM journeys via first party data and bringing more engaging and accessible experiences across channels. The company's CRM and marketing efforts will be increasingly robust throughout 2026 and into 2027. The filing does not provide specific headcount targets or workforce strategy details.

For the fiscal year ending January 2, 2027, the company expects total capital expenditures to be approximately $7 million ³⁴. The company's capital expenditure budget is an estimate and is subject to change. The filing does not provide specific R&D spending levels for the upcoming period. As of January 3, 2026, the company had $15.5 million ³⁵ of repurchase authorizations remaining under its repurchase program. The company has not declared or paid any dividends since its formation and currently does not intend to pay dividends for the foreseeable future.

A significant headwind is the impact of tariffs. Tariffs negatively impacted the company's gross margin by approximately 140 basis points ³⁶ during fiscal 2025. Future adverse effects on financial results will likely continue if tariff levels persist, continue to rise, or remain volatile, especially for goods imported from China. The company is developing and implementing mitigation strategies such as price increases and sourcing changes. The process for obtaining refunds from IEEPA duties is currently unclear.

The company faces constraints from the global economic environment, including slower consumer demand across discretionary goods, which has translated to excess inventory levels in key accounts and overall cautious buying patterns across wholesale customers. The company expects many customers to continue to manage to leaner inventory levels than historically. The company also faces risks from ongoing and emerging military conflicts, including the conflict between Russia and Ukraine and heightened tensions in the Middle East, which could result in higher fuel prices, a weakening of the global economy, negative consumer confidence, inflationary pressures, and supply chain constraints.

The company faces material risk from its substantial indebtedness, with $205.1 million ³⁷ of outstanding indebtedness as of January 3, 2026, which could adversely affect its competitiveness, liquidity, and ability to obtain additional financing. The company has a recent history of net losses, with a net loss attributable to Fossil Group, Inc. of $78.3 million ³⁸ in fiscal 2025 and $102.7 million ³⁹ in fiscal 2024, and may not achieve consistent profitability. A significant portion of cash and cash equivalents, $84.7 million ⁴⁰ or approximately 88% as of January 3, 2026, is held by foreign subsidiaries, which could negatively affect future liquidity needs. The loss of any of its license agreements for globally recognized fashion brand names could result in a significant decrease in sales, as licensed products accounted for 47.3% ⁴¹ of consolidated net sales in fiscal 2025, with MICHAEL KORS product sales accounting for 19.2% ⁴² and EMPORIO ARMANI product sales accounting for 10.1% ⁴³. Tariffs negatively impacted gross margin by approximately 140 basis points ⁴⁴ during fiscal 2025, and future adverse effects will likely continue if tariff levels persist or rise, especially for goods imported from China.

Management's tone is focused on executing a turnaround plan to return the company to profitable growth. The key themes emphasized are three new strategic pillars for 2026 and beyond: driving profitable growth, optimizing the operating model, and building shareholder value. Over the next three years, this evolution of the strategic pillars is expected to generate a return to top line growth and improved operating margins and free cash flows. Management states that the company plans to generate improved free cash flow from operations, strategically deploy capital toward investing for growth and reducing debt, and deliver strong returns on invested capital.