FOSL

Image source: The Motley Fool. Wednesday, Aug. 12, 2026 at 5:00 p.m. ET Investor Relations - Christine Greany Chief Executive Officer - Franco Fogliato Chief Financial Officer - Randy Greben Operator: Good afternoon, ladies and gentlemen, and welcome to the Fossil Group Second Quarter 2026 Earnings Call. [Operator Instructions] This conference call is being recorded and may not be reproduced in whole or in part without written permission from the company. Now I'll turn the call over to Christine Greany of The Blueshirt Group to begin. Christine Greany: Hello, everyone, and thank you for joining us. With me on the call today is Franco Fogliato, Chief Executive Officer, and Randy Greben, Chief Financial Officer. Before we begin, I would like to remind you that information made available during this conference call contains forward-looking information and actual results could differ materially from those that will be discussed during this call. Fossil Group's policy on forward-looking statements and additional information concerning a number of factors that could cause actual results to differ materially from such statements is readily available in the company's Form 8-K, 10-Q, and 10-K reports filed with the SEC. In addition, Fossil assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. During today's call, we will refer to constant currency results as well as certain non-GAAP financial measures. Please note that you can find reconciliation of actual results to constant currency results and other information regarding non-GAAP financial measures discussed on this call in Fossil's earnings release, which is available on the Fossil website, was filed today on Form 8-K, and is available in the Investors section on fossilgroup.com. With that, I'll now turn the call over to Franco to begin. Franco Fogliato: Good afternoon. Thank you, Christine, and welcome, everyone. We're pleased to deliver another quarter of strong financial performance, which reflects the compounding benefits of our turnaround plan and disciplined execution. Our Q2 net sales totaled $211 million, led by strength in key brands, channels, and geographies, which is setting the stage for our return to top-line growth in the fourth quarter of this year. Gross margins of 62.4% were above our expectation, largely attributable to our full-price selling model, and adjusted operating income doubled versus a year ago, coming in at $8.6 million. These standout results and continuing momentum enables us to confidently raise our full-year outlook, underscoring the strength of our turnaround pillars and our commitment to driving durable growth and value creation. During the quarter, we saw notable strength in two of our biggest and most scalable markets, the U.S. and India. From a regional perspective, the Americas region stabilized and was highlighted by mid-single-digit growth in the U.S. and the Asia region increased 4% with strong double-digit growth in India. Solid performance in these two regions is particularly gratifying given the headwinds we're seeing in the EMEA, which is being increasingly impacted by the geopolitical climate in the Middle East. Another standout this quarter was our Fossil brand traditional watch business, which delivered impressive growth of 12% globally in the wholesale channel. We're pleased that our solid top-line results, healthy gross margins, and effective cost management translated to strong bottom-line delivery in the quarter. We view this as a testament to the hard work and commitment of our teams around the world and would like to express our gratitude for their ongoing dedication to helping us consistently deliver on our plans. Now, I will turn to some updates on the initiatives under our three strategic turnaround pillars. First, returning to profitable growth. We're strengthening the Fossil brand platform to action to fuel innovation, deepen consumer engagement, grow the traditional watch business, and reinvigorate our jewelry and leather categories. Our product engine is key to growing our business. As a market share leader, we are benefiting from structural tailwinds that are driving traditional watch growth across markets and demographics. And we are uniquely positioned to capture this opportunity by continuing to deliver a steady pipeline of innovation. We're building a portfolio that allows Fossil to win at every level, from attainable everyday style to elevated watchmaking. We're thrilled to have recently been nominated for American Watch Brand of the Year, Volume Watch Brand of the Year, and Best Marketing Campaign for Big Tic Y2K for the upcoming WatchPro Awards in September, a premier watch industry event. This is a tremendous honor that speaks to the enduring strength of the Fossil brand and the talented teams driving our product engine and storytelling. Fossil has over 40 years of design heritage that we are drawing from to inspire innovation for the future. By bringing back iconic products from our archives, we're transforming nostalgia into a competitive advantage. And we're just getting started in 2026. In the first half of the year, we launched Big Tic, introduced a World Flags collection to coincide with the World Cup games, and continued to bring high-profile collaborations with Star Wars and Marvel to market. At the same time, Fossil icons like the Everett, Machine, Neutra, and Townsman collections for Men, and the Harlow, Racquel, and Scarlette collections for women continue to drive scale and market share. We're continually innovating our icons forward, which has enabled us to create best sellers like watch rings and minis, two categories that Fossil has defined within the industry. This fall, we are launching an exciting evolution of our Machine platform, the X-1, which is bolder, sportier, and marks another step forward in our premiumization strategy. We are focused on elevating our brand equity through innovation, material, craftsmanship, and now Swiss watchmaking. Among our biggest product stories in the second half of the year is the launch of Signature, a premium platform that introduces a new level of technical sophistication and Swiss-made craftsmanship. We're incredibly proud of this offering and believe it to represent an important new chapter for the Fossil brand. The Signature collection will premiere at New York Watch Week in October, supported by a dedicated campaign designed to celebrate craftsmanship and drive engagement with watch industry press and influencers. It will be quickly followed by a launch event in India, where consumers are increasingly seeking premium products. We will be amplifying the India launch by partnering with Padmanabh Singh, our global senior ambassador. Padmanabh is the Maharaja of Jaipur and one of India's leading polo players. He represents a unique blend of heritage, modern style, and global influence that we believe will help drive excitement and engagement. Storytelling is also critical to our brand-led, consumer-focused operating model, and in Q2, we accelerated our investment in demand creation. In the first half of 2026, the combination of robust product innovation and targeted marketing investment helped us drive brand heat in new customer acquisition. Our global marketing teams have been focusing on putting Fossil at the center of culture with a digital-first approach, social engagement, and immersive events. During Q2, we had a Fossil fun event featuring K-pop star L at our flagship store in the capital of Malaysia. The event drew an overwhelming response from hundreds of fans, far exceeding the capacity of our store. It also captured live media attention, drove exceptionally high engagement rates on social media, and generated 600,000 impressions in one day. We're continuing to invest behind marketing and events to drive cultural relevance and have more storytelling on deck for the second half, including our Signature launch and other key moments leading up to the holiday season. Looking further out, there is much more to come next year in terms of product innovation and creative marketing. We just held our Spring/Summer 2027 Global Sales Meeting at our headquarters in Dallas last month. The energy, collaboration, and enthusiasm from our teams from around the globe was tremendous and reflective of the exciting opportunities in front of us. Turning to our omnichannel initiatives, which are focused on modernizing our brand expression at wholesale, improving our e-commerce business, and optimizing our Fossil store portfolio. On the wholesale front, we're driving growth with our long-term partners and extending our footprint in specialty retail doors. This is primarily being driven by three major factors. Great product supported by a robust innovation pipeline, engaging storytelling, and our commitment to full-price selling. During Q2, we saw traditional watch growth in both the Americas and Asia regions, with strength across brands in key markets. This includes the important U.S. market, where wholesale channel performance was highlighted by traditional watch growth of 16%, led by even stronger performance from the Fossil brand. Looking now at DTC in the e-commerce channel, we're continuing to drive higher product margins and AUR as we prioritize full-price integrity and implement initiatives to provide a more engaging customer journey. In the retail channel, we're pleased to note that our store of the future strategy is continuing to gain traction, driving improved performance in our full-price stores during the quarter. Most notably, we're seeing accelerating trends across product margins and AUR. Building on the momentum we have seen across channels, we recently strengthened our leadership in the Americas region by bringing in seasoned industry veterans to lead our wholesale and retail businesses. We believe this leadership addition will accelerate our efforts to strengthen operational excellence, drive productivity, and increase market share. Moving now to our core licensed brands. In the Michael Kors brand, watches and jewelry delivered another quarter of improved performance in our most important channels and geographies. The brand is undergoing a successful turnaround, and we're following their lead on style and fashion authority. We're evolving our strong hero watch collections like Lexington that resonate globally with consumers, while also building new platforms beginning with the Chelsea collection this fall. We're also focused on rejuvenating jewelry through elevated design and a redefined pricing strategy, bringing new energy to demand across collections and price points. In Emporio Armani, the brand continues to generate strong sell-through, driven by innovation and a focus on premium offerings, while the Armani Exchange brand is benefiting from product newness and curated events featuring celebrity collaborations. This fall, Emporio Armani will introduce the next evolution of the Archetipo, a classic dress watch positioned in the $200 to $300 price segment in one of the brand's most iconic timepieces, which will serve as the foundation of the collection for the years to come. Looking now at India, one of our most important strategic markets, where we are seeing ongoing strength in all brands and channels. During Q2, we delivered double-digit growth in the Fossil, Armani, Diesel, and Kors brands, with strong performance in both the wholesale and direct-to-consumer channels. This was driven by product newness, disciplined full-price selling, and great storytelling, as our experienced team continues to deliver strong execution. We're executing a number of initiatives to continue the momentum in the Fossil brand. We're maintaining a robust pipeline of newness to drive consumer engagement and brand heat. At Michael Kors, we're leveraging the brand image and amplifying our bridge-to-luxury positioning as we cater to local consumers with a strong desire for upscale product. In the Armani brand, we're delivering newness and premiumization at Emporio Armani. We'll continue to focus on product innovation, premiumization, and customer engagement initiatives at Armani Exchange. To support the pace of growth we're seeing in this market, our operational and supply chain teams have been working fast and furious and delivering strong execution. Our India factory has been delivering increased throughput and recently achieved ISO certification, indicating outstanding commitment to quality procedures and protocols. We believe there is still a tremendous runway ahead to unlock additional growth in India as we double down on product marketing and channel expansion opportunities. Moving to our second turnaround pillar, optimizing our operating model. The major areas of focus include sharpening go-to-market execution, enhancing our digital and technology infrastructure, delivering best-in-class supply chain performance, and prioritizing high-impact projects and key performance indicators. Within the quarter, we made several important tactical advancements that are worth mentioning. First, the deployment of AI is supercharging automation and productivity improvements across our back office. Next, we completed a transition of our South Africa subsidiary to a distributor model, which is expected to lower our operating costs and drive greater flow-through of gross profit to the bottom line. We also transitioned our Malaysia and Singapore markets to a new hybrid operating model, capturing synergies in the region while yielding G&A reduction. Another key initiative is the recent execution of lease extensions on more than 25 of our best-performing stores in the Americas region. Lastly, during Q2, we also executed a lease for a new North American fulfillment and distribution center. The new facility located in Sunnyvale, Texas, will come online later this year, replacing our existing Retrodome. The upgraded space is not only fit for purpose based on our current business space, but also accommodates our future growth plans at a lower cost, further underscoring our commitment to optimizing our cost structure as we return to profitable growth. These are just a few examples that demonstrate the rigor with which our teams are executing across the business on a wide range of operational initiatives to capture efficiencies, unlock value, and strengthen performance. Now, turning to our third pillar, building shareholder value. We're pleased to be delivering a second year of traction under our turnaround plan. We're driving improved top-line trends, have established a healthy gross margin profile, demonstrated disciplined cost management, and returned the business to profitability. As we look at the balance of the year, based on our strong first half and positive business trends, we are pleased to be raising our full-year outlook on the top and bottom line. Most importantly, we continue to expect to return the business to sustainable top-line growth beginning in Q4 and now expect to generate positive free cash flow on a full-year basis in 2026. We believe our strategy, talented teams, and disciplined execution position us to deliver long-term profitable growth and remain committed to driving value creation for all of our stakeholders. Now I will turn the call to Randy to discuss the financials. Randy Greben: Thank you, Franco. Q2 was another strong proof point that our turnaround plan is delivering on all fronts. Sharp execution across our initiatives enabled us to exceed expectations on the top line, expand gross margins, capture operating efficiencies, and deliver 2x in adjusted operating income versus last year. Net sales in Q2 totaled $211 million. That represented a decline of 4% versus last year and includes approximately 220 basis points of impact related to our store closure program. This was better than our expectations and marks another quarter of improving sales trends with the rate of decline continuing to narrow. Gross margin performance in the second quarter was strong, expanding 490 basis points to 62.4%. The year-over-year improvement is first and foremost attributable to our commitment to full-price selling, which drove strong product margins, and is a continued testament to the strength of our supply chain initiatives. Lower tariffs compared to last year also served as a tailwind. We are pleased with our healthy gross margin profile and based on Q2's particularly strong performance, we now anticipate that full-year gross margins will be in the upper 50s. It's worth noting that this assumes we do not capture any additional tariff refunds in 2026. Turning now to operating expenses. SG&A came in at $123 million, essentially flat, excluding an $11 million gain recorded in Q2 of last year, resulting from the sale of our European distribution center. In aggregate, SG&A in Q2 2026 reflects fewer stores in operations, as well as lower compensation and administrative expenses, which more than offset a planned increase in marketing spend to support our storytelling engine. Disciplined cost management remains a core tenet of our turnaround strategy. That said, we have continued to balance demand-generating marketing with some of our savings reinvested back into the business, as seen this quarter, as we've worked to support key product launches in Q3 and the seasonally important Q4. In Q2, we ended the quarter with 17 fewer stores, including six closures and 11 stores that we transitioned to a distributor in South Africa, which we talked about last quarter. We have another two closures planned for this year and expect to end the year with approximately 178 locations globally. Stepping back, we believe the hard work of optimizing the store portfolio is largely behind us. Going forward, we will continue to deploy our successful store of the future strategy and evaluate longer-term opportunities to drive growth and productivity of the fleet. Physical retail remains a core pillar of our omnichannel business, and we are pleased to have extended our lease agreements on more than 25 of our best retail locations in the Americas, as Franco referenced earlier. Zooming out, we remain focused on optimizing our operating model by capturing efficiencies and rationalizing investments across key areas of the business, including go-to-market, IT, and back-office functions. Looking at the bottom line, driving flow-through remains a priority. Gross margin expansion and disciplined SG&A management converted our top-line performance into bottom-line delivery. Q2 adjusted operating income doubled compared to last year, coming in at $9 million. I believe it's worthwhile to pause here and reflect on our bottom-line performance for the first six months of 2026. Year-to-date adjusted operating income of $18.1 million is 35% greater than last year's $13.4 million even on reduced sales. And as we have continued to advance our turnaround, the cost of restructuring is far less impactful this year than last, which translates to a meaningful increase in GAAP operating income, up nearly $14 million versus a year ago, even before normalizing for the gain of the European distribution center sale in last year's Q2. Turning to the balance sheet. We ended the quarter in solid financial condition with $79 million of cash and cash equivalents and $18 million of availability under our ABL. Additionally, during the quarter, we collected $4.9 million of the $5.9 million tariff refund we recognized in Q1, and we had no utilization under our ATM program. Inventory at quarter end totaled $178 million. That's approximately flat compared to Q2 of last year and in line with our seasonal expectations, leaving the business well-positioned to support an anticipated return to growth in the fourth quarter, consistent with our emphasis on a full-price selling model. Importantly, higher year-over-year profitability and improved working capital management enabled us to narrow operating cash use versus a year ago. Moving now to guidance. Given our strong first half performance and business momentum, we are raising our full-year outlook on the top and bottom line. Worldwide net sales are now expected to decline in the range of 3% to 5%, which compares to our prior expectation for a decline in the range of 4% to 6%. As a reminder, about 360 basis points of the decline can be traced to the net impact of store closures and the extra week in 2025. Of note, our outlook assumes an expected return to top-line growth in Q4 as we continue to unlock the benefits of our turnaround plan. On the bottom line, we now expect adjusted operating margins in the range of 4% to 6%, up from our prior range of 3% to 5%. As a result of this improved profitability outlook, we now expect to generate positive free cash flow on a full-year basis. We are incredibly pleased with the way the business is performing, which is a testament to the work our teams are doing to reignite sales growth and strengthen our operating model, putting us firmly on a path to generate durable, profitable growth. Now I'll ask the operator to open the call to Q&A. Operator: [Operator Instructions] Our first question comes from the line of Henry Dare with Maxim Group LLC. Henry Dare: Henry Dare, I'm in for Tom Forte. First of all, congratulations on the quarter. I have two questions. The first is sales of traditional watches were up year-over-year in the previous quarter, and they were strong in this quarter. You've guided to a return to consolidated revenue growth in the fourth quarter. What would it take for traditional watches to consistently and sustainably grow revenue year-over-year in the future? Franco Fogliato: Henry, thank you very much for the question. I really appreciate it. We are extremely excited about our performances with our traditional watches. You've probably seen in the quarter our wholesale traditional watch growth was 12% globally, which is beyond our expectation and is really driven by the innovation that we started to develop and to enforce since I joined the company in September '24. To answer your question, it's really all about innovation. Innovation design, the creativity, the storytelling, the technology. I always repeat to the teams, I'm very excited about what we have achieved so far, but I'm even more excited about what is coming next, and particularly the second half of the year, and even further down into 2027 as we're building the alliance for 2027. I think that our teams are gaining confidence. We have world-class teams. The company is in a much better position than for many years. We're excited, and we're excited about doing what we like to do, which is really building great products. So, you know, really, the answer is we need to continue to build the best product in the world, continue to really create that emotional connection the brand has created over 40 years with our consumer, and continue to make our consumer dreaming about this brand. We're ahead of what we said, we're ahead of our original plan, and I can't say how thankful we are to our teams that are showing once more that once we put them in the best condition to operate, they can create the best product in the world, and we're excited about what's coming next. Henry Dare: Thank you. And my other question is, last year you had a big marketing effort with Nick Jonas in the back half of 2025. This year it seems like your marketing efforts are a little more spread out across the year. I know you touched on this a little bit during your comments, but could you compare and contrast your marketing efforts for 2026 with 2025? And also discuss high level, your future marketing spending plans as you continue to strengthen the company? Franco Fogliato: Yes, look, a great question. Thanks for asking. I think you've seen in Q2 our commitment to return the company to growth. We're here to build a sustainable long-term growth. We have downsized the structure, simplified the company, ultimately with the goal to invest more in demand creation, and we have done that in Q2. So I can't say how thankful I am with our teams that have been delivering on the strategy. Q2 has been exceptional. The first half have been exceptional and the second half will be even better. Our Big Tic Y2K campaign has been named as best watch campaign of the year, nominated as the best marketing campaign for the year. We're so honored of this. I'm so happy about the work that's been done. The campaign was so innovative and caught so much attention from our consumer. What's coming next, again, it will continue to improve. Nick Jonas is a great partner, will continue to unleash the opportunities to the brand. We're creating more stories focused into each media channel, and this will drive additional consumers into the funnel. I made clear when I joined the company we were moving investment for performance into upper funnel to drive the stronger brand and drive the brand heat, and that's what we are delivering on. Operator: Our next question comes from the line of Owen Rickert with Northland Capital Markets. Owen Rickert: First for me, the 490 bps of gross margin expansion was really impressive, but you called out some accelerated licensed brand minimum royalty recognition as a partial offset. How should we think about the cadence of that royalty headwind in the back half of the year? And is the 62% plus gross margin level sustainable, or is that more of a first-half weighted dynamic? Franco Fogliato: Owen, thank you very much for the congratulations for the question. Look, let me get started. And I'm asking Randy to chime in on this one. The gross margin is probably another statement on the way we're now running the company. We're disciplined, we're focusing into innovation, we're focusing into best presentation in the store, and the great news is consumers are responding, are buying. So I want to make sure this is the discipline we're now installing with the company, is coming in even better than what we thought, honestly. But I'm so proud of the work the teams did globally. We have changed and transformed this company into a full-price selling model. Randy Greben: Absolutely right, and just to answer the specific components of your question with respect to the timing of our royalty shortfalls, the impact on the quarter was approximately a point and a half, so not super meaningful. The real story continues to be, as Franco pointed out, the power of our full-price selling model. It's also worth noting its margin accretion for the Fossil Group, which also translates directly to our operating partners, our wholesale partners. It's truly a rising tide lifting all boats. It's a wonderful result for the business, and we're excited about it. Owen Rickert: Got it. Super helpful there. And then secondly for me, more of a general guidance question. What are the specific drivers that get you to that year-over-year growth in 4Q? Or is it mostly new product launches, wholesale door expansion, easier comps, or is it something else? And then just how much visibility do you have into that today? Franco Fogliato: Look, it's a great question. I think it's a combination of all of these. We're learning more about the business we're building. We're working close with our partners to build the visibility. We're presenting better our products in the stores. All of this gives us better confidence on anticipating our future. We obviously take always, I would say, a cautious look at the future. Not immune for what will happen in the market. I don't know what's going to happen with gas prices. There is another work, but we are very confident about the innovation, the product pipeline coming out, the marketing, the storytelling. I think I mentioned in my opening remarks, we had our global teams coming into Dallas to look even at next year range early and talk about the remaining five months of the year. And they were super excited and they never seen such a great momentum for many years. Our partners, which I get to them on the phone regularly every week, they're excited. They see the Fossil Group coming back. They see the Fossil Group they used to know, that great partner that was driving profit and sales, and they just love us, and we love them. And we will continue to build into this momentum, and all of that will be based on innovation in product marketing and discipline of running the company. Owen Rickert: And then lastly for me, it was great to see the Americas up, Asia up year-over-year in terms of net sales. Can you maybe just walk us through the primary drivers of some of that weakness in the European region? And what specific actions are you guys taking to stabilize that business? Franco Fogliato: Yes, it's a great question. Look, you can imagine Europe is pretty close to me. I was there actually maybe a couple of weeks ago. Look, we're not immune from any other brands. We benchmark with everybody else. There is a few things, obviously the war did have an impact, in particularly in the Middle East. Travel retail has been impacted. I have a lot of data showing how people are traveling less or they're traveling in the country. We also made significant changes to the business model through moving some direct territories into subsidiaries, which ultimately improved and simplified the company and took some risk out of the company and that drives a better profit, but has some pain in the short term. Now, we have a great management team there. We have a global team supporting Europe. I keep remembering everyone, Europe was actually relatively speaking the best-performing market last year for our company. So we think we're doing the right things there. We're not immune. We believe on the long run that the market is coming back and it's an important market obviously for the watch industry, and we're doing all what is necessary to have a long-term view without chasing short-term sales. Operator: Thank you. I'm currently showing no further questions at this time. I'd now like to hand the call back over to management for any closing remarks. Franco Fogliato: Thank you everyone for joining our call today. We're looking forward to talking to you next quarter. Operator: This concludes today's conference. Thank you for your participation. You may now disconnect. Before you buy stock in Fossil Group, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Fossil Group wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $419,408!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,348,694!* That performance is why people listen. With a track record of beating the S&P 500 by nearly 5x, Stock Advisor offers a distinct advantage. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul. See the 10 stocks » *Stock Advisor returns as of August 19, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Fossil (FOSL) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Interested in Fossil Group, Inc.? Here are five stocks we like better. Fossil’s Q2 sales fell 4% to $211 million, but exceeded expectations as its turnaround progressed. Gross margin rose 490 basis points to 62.4%, adjusted operating income doubled to $8.6 million, and the company raised its full-year outlook. Growth was led by a 12% increase in global traditional-watch wholesale sales, mid-single-digit U.S. growth, and a 4% sales increase in Asia driven by India. Europe, the Middle East and Africa remained pressured by geopolitical conditions and operating-model changes. Fossil now expects 2026 sales to decline 3%–5%, adjusted operating margin of 4%–6%, and positive free cash flow. Management continues targeting a return to companywide sales growth in the fourth quarter while optimizing its store portfolio and expanding premium product offerings. This Is What To Expect From The Q2 Reporting Cycle Fossil Group (NASDAQ:FOSL) reported second-quarter 2026 net sales of $211 million, down 4% from a year earlier but ahead of the company’s expectations as sales trends continued to improve. Chief Executive Officer Franco Fogliato said the results reflected progress in the company’s turnaround plan, with strength in key brands, channels and markets helping set the stage for an anticipated return to companywide sales growth in the fourth quarter. Gross margin expanded 490 basis points year over year to 62.4%, while adjusted operating income doubled to $8.6 million, which Chief Financial Officer Randy Greben rounded to $9 million during the call. Fossil raised its full-year outlook for sales, adjusted operating margin and free cash flow following the stronger-than-expected first half. → SoundHound AI Sends a Loud Signal After Its Q2 Earnings Beat Fossil Group: Should You Bet On Consumer Discretionary In 2023? The Americas region stabilized during the quarter, supported by mid-single-digit growth in the U.S., according to Fogliato. Asia sales increased 4%, led by double-digit growth in India. Fossil said India delivered double-digit growth during the period across its Fossil, Armani, Diesel and Michael Kors brands, with gains in both wholesale and direct-to-consumer channels. Fogliato said the company continued to face pressure in Europe, the Middle East and Africa, particularly from geopolitical conditions in the Middle East and their effect on travel retail. He also noted that changes to the company’s operating model in some European markets have created near-term sales pressure while improving profitability and reducing risk over the longer term. → AST SpaceMobile Earnings Just Reminded Investors How Risky Space Can Be Traditional watches were a major source of growth. Fossil’s traditional-watch wholesale business rose 12% globally, while U.S. wholesale traditional-watch sales increased 16%. Fogliato attributed the performance to product innovation, storytelling and the company’s full-price selling strategy. The company said its direct-to-consumer e-commerce business benefited from higher product margins and average unit retail prices as it emphasized price integrity. Its “store of the future” strategy also contributed to improved performance at full-price retail stores, including accelerating trends in product margin and average unit retail. → First Solar’s Profit Engine Faces a New Policy Test in Washington Fogliato said Fossil is pursuing traditional-watch growth through new product development, premiumization and marketing. Recent releases included the Big Tic World Flags collection, along with Star Wars and Marvel collaborations. The company plans to introduce the Machine X1 platform this fall and launch its Signature collection, a premium Swiss-made watch platform, at New York Watch Week in October. The Signature collection will subsequently launch in India, supported by a partnership with Padmanabh Singh, the Maharajah of Jaipur and a polo player, whom Fossil identified as its global Signature ambassador. Fossil also increased marketing investment during the first half of 2026, shifting more spending toward upper-funnel demand creation and brand building. During the second quarter, the company held an event in Malaysia featuring K-pop star L that generated 600,000 impressions in one day, Fogliato said. For licensed brands, management said Michael Kors watches and jewelry showed improved performance in important channels and geographies. Emporio Armani continued to see strong sell-through from premium offerings, while Armani Exchange benefited from product newness and celebrity-focused events. Second-quarter selling, general and administrative expense was $123 million. Greben said the figure was essentially flat excluding an $11 million gain recorded in the prior-year quarter from the sale of a European distribution center. Lower store-related, compensation and administrative costs offset a planned increase in marketing spending. Fossil ended the quarter with 17 fewer stores, including six closures and 11 South African locations transitioned to a distributor. The company expects two additional closures this year and anticipates ending 2026 with approximately 178 locations globally. Management said the major work to optimize the store portfolio is largely complete, while more than 25 lease agreements for top-performing Americas stores have been extended. The company also completed South Africa’s transition to a distributor model and moved Malaysia and Singapore to a hybrid operating model. In addition, Fossil signed a lease for a new North American fulfillment and distribution center in Sunnyvale, Texas, which is expected to begin operating later this year at a lower cost than the existing rental facility. Fossil ended the quarter with $79 million in cash and cash equivalents and $18 million of availability under its asset-based lending facility. Inventory totaled $178 million, roughly flat from the prior-year quarter. The company collected $4.9 million during the quarter from a $5.9 million tariff refund recognized in the first quarter and reported no use of its at-the-market equity program. Fossil now expects worldwide net sales to decline 3% to 5% in 2026, compared with its prior outlook for a 4% to 6% decline. Management said roughly 360 basis points of the expected decline reflects the net impact of store closures and an extra week in 2025. The company raised its forecast for adjusted operating margin to 4% to 6%, from a prior range of 3% to 5%, and now expects to generate positive free cash flow for the full year. Fossil also expects full-year gross margin in the upper 50% range, assuming it receives no additional tariff refunds in 2026. Greben said year-to-date adjusted operating income reached $18.1 million, up 35% from $13.4 million a year earlier despite lower sales. Management said it remains focused on returning to sustainable top-line growth in the fourth quarter through product launches, wholesale expansion, marketing, full-price selling and continued operating discipline. Fossil Group, Inc designs, develops, markets and distributes consumer fashion accessories, focusing on lifestyle and wearable technology. The company offers a wide range of products including analog and digital watches, smartwatches, jewelry, handbags, small leather goods and wearable devices. It sells merchandise under its own Fossil brand and via license agreements with international labels such as Michael Kors, Armani Exchange, Burberry, Diesel, DKNY, Kate Spade and Tory Burch. Through its proprietary e-commerce platforms and global retail network, Fossil Group serves markets across North America, Europe, Asia and the Middle East. The group's wearable technology segment combines traditional timepieces with features such as fitness tracking, heart-rate monitoring and NFC payments. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Fossil Group Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Performance was anchored by a shift to a full-price selling model, which drove gross margins to 62.4% and doubled adjusted operating income despite lower net sales. Traditional watch growth of 12% globally in wholesale reflects the successful execution of a product engine focused on innovation and nostalgia-driven archive revivals. Regional strength in the U.S. and India offset geopolitical headwinds in EMEA, particularly impacts from the Middle East conflict on travel retail. Strategic premiumization is being advanced through the launch of 'Signature,' a new platform introducing Swiss-made craftsmanship to elevate brand equity. Operational efficiency was bolstered by transitioning smaller markets like South Africa and Malaysia to distributor or hybrid models to reduce G&A and risk. The 'Store of the Future' strategy is driving improved productivity, higher Average Unit Retail (AUR), and better product margins across the physical retail fleet. Management expects a return to sustainable top-line growth in Q4 2026, supported by a robust innovation pipeline and seasonal product launches. Full-year 2026 guidance was raised for both revenue and operating margins, with the company now projecting positive free cash flow for the year. The new Sunnyvale, Texas fulfillment center is scheduled to come online later this year to lower logistics costs and support future growth capacity. Marketing strategy will continue shifting from performance-based spending to upper-funnel demand creation to drive long-term brand heat and customer acquisition. Gross margin outlook for the full year is set in the upper 50s, assuming no additional tariff refunds are captured in the second half of 2026. The store closure program impacted Q2 net sales by approximately 220 basis points as the company rationalizes its physical footprint. A $5.9 million tariff refund recognized in Q1 provided a liquidity tailwind, with $4.9 million collected during the second quarter. EMEA performance remains pressured by geopolitical instability and shifts in consumer travel patterns, though management views this as a macro-driven rather than structural issue. Deployment of AI across back-office functions is being utilized to automate processes and improve productivity within the operating model. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Growth is fundamentally tied to a continuous innovation cycle in design, storytelling, and technology rather than market cycles. Management expressed high confidence in the 2027 product pipeline, noting that the company is currently ahead of its original turnaround plan. The strategy has evolved from concentrated celebrity campaigns to a more distributed, digital-first approach focused on cultural relevance and social engagement. Investment is being intentionally redirected from lower-funnel performance marketing to upper-funnel brand building to increase long-term brand heat. The 62.4% margin was partially offset by a 1.5 percentage point headwind from accelerated licensed brand royalty recognition. Management emphasized that the margin expansion is structural, resulting from the new discipline of the full-price selling model which benefits both Fossil and its wholesale partners. Growth expectations are based on a combination of new product launches, wholesale door expansion, and improved store presentation. Management maintains a cautious outlook regarding macro factors like gas prices but cites strong enthusiasm from global wholesale partners as a leading indicator.

This article first appeared on GuruFocus. Release Date: August 12, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Fossil Group Inc (NASDAQ:FOSL) delivered strong Q2 2026 results with net sales of $211 million, beating expectations and showing improving sales trends with the decline narrowing. Gross margin expanded significantly by 490 basis points to 62.4%, driven by a full-price selling model and supply chain initiatives, leading to a raised full-year gross margin outlook in the upper 50s. Adjusted operating income doubled year-over-year to $9 million, and year-to-date adjusted operating income rose 35% to $18.1 million, demonstrating strong bottom-line flow-through. The company raised its full-year outlook, now expecting net sales to decline only 3% to 5% (improved from 4% to 6%) and adjusted operating margin of 4% to 6%, with a return to top-line growth in Q4 and positive free cash flow for 2026. Strong performance in key markets and categories: US wholesale traditional watch growth of 16%, global Fossil brand traditional watch growth of 12%, and double-digit growth in India across all brands and channels. Operational efficiency initiatives are progressing, including AI deployment, transitioning South Africa to a distributor model, and securing a new lower-cost North American fulfillment center, all aimed at reducing costs and supporting future growth. Net sales declined 4% year-over-year in Q2, with a 220 basis point impact from store closures, and the company still expects a full-year sales decline of 3% to 5%. EMEA region is being increasingly impacted by geopolitical climate in the Middle East, leading to headwinds in travel retail and overall regional performance. The company faces a headwind from accelerated licensed brand minimum royalty recognition, which partially offset gross margin gains in the quarter. SG&A expenses remained flat at $123 million, but this was only achieved by excluding an $11 million gain from last year's European distribution center sale, indicating ongoing cost pressures. The company continues to close stores, ending Q2 with 17 fewer locations and planning further closures, which will continue to pressure sales in the near term. The full-year gross margin outlook assumes no additional tariff refunds in 2026, leaving potential upside but also uncertainty in the tariff environment. Warning! GuruFocus has detected 6 Warning Signs with FOSL. Is FOSL fairly valued? Test your thesis with our free DCF calculator. Q: What would it take for traditional watches to consistently and sustainably grow revenue year over year in the future?A: Franco Fogliato, CEO, stated that the 12% global growth in traditional watches during Q2 was driven by innovation, design, creativity, storytelling, and technology. He emphasized that the company is ahead of its original plan and that continued success depends on building the best products in the world, creating emotional connections with consumers, and maintaining the brand's 40-year heritage. He expressed excitement about the product pipeline for the second half of 2026 and into 2027. Q: The 490 basis points of gross margin expansion was impressive, but you called out some accelerated license brand minimum royalty recognition as a partial offset. How should we think about the cadence of that royalty headwind in the back half of the year, and is the 62% plus gross margin level sustainable?A: Randy Grevivin, CFO, explained that the royalty shortfall impact on the quarter was approximately 1.5%, not super meaningful. The real story continues to be the power of the full-price selling model, which drives margin accretion for Fossil Group and translates directly to operating partners and wholesale partners. The company is pleased with the healthy gross margin profile and now anticipates full-year gross margins in the upper 50s, assuming no additional tariff refunds in 2026. Q: What are the specific drivers that get you to that year-over-year growth in 4Q, and how much visibility do you have into that today?A: Franco Fogliato, CEO, said the return to growth in Q4 is a combination of new product launches, wholesale door expansion, easier comps, and better visibility with partners. He noted that the company is working closely with partners to build visibility and presenting products better in stores. He expressed confidence in the innovation, product pipeline, marketing, and storytelling, citing the excitement from the global sales meeting in Dallas and positive feedback from partners who see the Fossil Group coming back. Q: It was great to see the Americas and Asia up year over year in terms of net sales. Can you walk us through the primary drivers of the weakness in the European region and what specific actions are you taking to stabilize that business?A: Franco Fogliato, CEO, attributed the European weakness to the geopolitical climate in the Middle East impacting travel retail and consumer behavior. He also mentioned significant changes to the business model, moving some direct territories into subsidiaries, which improved and simplified the company but caused short-term pain. He noted that Europe was the best-performing market last year and that the company is taking a long-term view without chasing short-term sales, believing the market will come back. Q: Last year you had a big marketing effort with Nick Jonas in the back half of 2025. This year, marketing efforts seem more spread out. Can you contrast your marketing efforts for 2026 versus 2025 and discuss future marketing and spending plans?A: Franco Fogliato, CEO, explained that the company has downsized and simplified its structure to invest more in demand creation, which was evident in Q2. He highlighted the success of the Big Tech Y2K campaign, nominated for best marketing campaign of the year. He stated that Nick Jonas remains a great partner and that the company is creating more stories focused on each media channel to drive additional consumers into the funnel, moving investment from performance to upper funnel to drive stronger brand awareness. Q: Can you provide more detail on the strength in the US and India markets and the drivers behind the double-digit growth in India?A: Franco Fogliato, CEO, noted that the Americas region stabilized with mid single-digit growth in the US, while Asia increased 4% with strong double-digit growth in India. In India, the company delivered double-digit growth across the Fossil, Armani, Diesel, and Kors brands, driven by product newness, disciplined full-price selling, and great storytelling. The India factory has been delivering increased throughput and recently achieved ISO certification, and the company believes there is still tremendous runway to unlock additional growth in India. Q: Can you elaborate on the operational initiatives and cost-saving measures implemented during the quarter?A: Randy Grevivin, CFO, highlighted several tactical advancements: the deployment of AI to supercharge automation and productivity in back-office functions, the transition of the South Africa subsidiary to a distributor model to lower operating costs, and the transition of Malaysia-Singapore markets to a new hybrid operating model for synergies and SG&A reduction. Additionally, the company executed lease extensions on more than 25 of its best-performing stores in the Americas and signed a lease for a new North American fulfillment and distribution center in Sunnyvale, Texas, which will come online later this year at a lower cost. Q: Can you provide more color on the store closure program and the expected store count at the end of the year?A: Randy Grevivin, CFO, stated that the company ended Q2 with 17 fewer stores, including 6 closures and 11 stores transitioned to a distributor in South Africa. There are another 2 closures planned for this year, and the company expects to end the year with approximately 178 locations globally. He noted that the hard work of optimizing the store portfolio is largely behind them, and going forward, the company will continue to deploy its successful store-of-the-future strategy and evaluate longer-term opportunities to drive growth and productivity. Q: Can you discuss the balance sheet position and the tariff refund collection?A: Randy Grevivin, CFO, reported that the company ended the quarter with $79 million in cash and cash equivalents and $18 million of availability under its ABL. During the quarter, the company collected $4.9 million of the $5.9 million tariff refund recognized in Q1, with no utilization under its ATM program. Inventory at quarter end totaled $178 million, approximately flat compared to Q2 of last year and in line with seasonal expectations, leaving the business well positioned to support the anticipated return to growth in Q4. Q: Can you provide more details on the raised full-year guidance and the expected return to top-line growth?A: Randy Grevivin, CFO, stated that given the strong first-half performance and business momentum, the company is raising its full-year outlook. Worldwide net sales are now expected to decline in the range of 3% to 5%, compared to the prior expectation of a 4% to 6% decline. About 360 basis points of the decline can be traced to the net For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Second quarter worldwide net sales totaled $210 million Gross margin expanded 490 basis points to 62.4% Second quarter operating income of $3 million and operating margin of 2%; constant currency adjusted operating income of $9 million and constant currency adjusted operating margin of 4% Raises full year 2026 financial outlook RICHARDSON, Texas, Aug. 12, 2026 (GLOBE NEWSWIRE) -- Fossil Group, Inc. (NASDAQ: FOSL) today announced financial results for the fiscal second quarter ended July 4, 2026. “We delivered another quarter ahead of our expectations, driven by broad-based strength across our core brands, channels and many of our key geographies,” said Franco Fogliato, CEO. “Top line performance, gross margin expansion and disciplined cost management fueled a doubling of constant currency adjusted operating income compared to the second quarter of last year, demonstrating continuing progress under our turnaround plan and the underlying strength of our operating model.” “Strong business performance in the first half of 2026 and ongoing business momentum are enabling us to confidently raise our full year financial outlook, which is highlighted by an expected return to top line growth in the fourth quarter, improved profitability and positive free cash flow generation. It is clear that our evolution to a brand-led, consumer-focused operating model - combined with healthy watch industry fundamentals - is positioning us to deliver long-term profitable growth and shareholder value.” Second Quarter 2026 Operating Results Amounts referred to as “adjusted” as well as “constant currency” are non-GAAP financial measures.   Reconciliations of these non-GAAP financial measures to their closest reported GAAP measures are included at the end of this press release. Net sales totaled $209.7 million, a decrease of 4.9% on a reported basis and 4.4% in constant currency, compared to $220.4 million in the second quarter of fiscal 2025. The sales decrease was driven by the direct to consumer channels, with our store rationalization initiatives comprising approximately 220 basis points of the sales decline in the second quarter. From a regional view in constant currency, Europe net sales decreased 18.2%, Asia increased 3.7% and the Americas increased 0.2%. Wholesale sales in constant currency increased 0.9%, while our direct to consumer sales decreased 14.6%. Within our direct to consumer channels, which include e-commerce and Fossil retail stores, comparable retail sales declined 8%. In our major product categories, traditional watch sales decreased 0.9% in constant currency in the second quarter compared to the prior year period. The leathers category decreased 31.4% and jewelry sales declined 11.3% in constant currency during the second quarter. Gross profit totaled $130.8 million compared to $126.7 million in the second quarter of 2025. Gross margin increased 490 basis points to 62.4% versus 57.5% in the second quarter of 2025. The year-over-year increase primarily reflects improved product margins in our core categories driven by benefits from our full price selling model, sourcing initiatives and reduced tariffs. This increase was partially offset by the accelerated timing of licensed brand minimum royalty recognition as compared to the prior year. Operating expenses totaled $127.6 million, an increase of 7.9% compared to $118.2 million a year ago. As a percentage of net sales, operating expenses were 60.8% in the second quarter of 2026 compared to 53.7% in the prior year second quarter. Operating expenses in the second quarter of 2026 included $3.4 million of restructuring costs, primarily related to professional services and employee costs, while operating expenses in the second quarter of 2025 included $7.3 million of restructuring costs. SG&A expenses were $123.5 million, an increase of 11.3% compared to the second quarter of 2025, primarily due to an $11 million gain on the sale of our European warehouse in the prior year second quarter. As a percentage of net sales, SG&A expenses were 58.9% in the second quarter of 2026 compared to 50.3% in the prior year second quarter. Operating income (loss) was $3.2 million compared to $8.5 million in the second quarter of 2025. Operating margin was 1.5% in the second quarter of 2026 compared to 3.9% in the prior year second quarter. Constant currency adjusted operating income totaled $8.6 million compared to adjusted operating income of $4.3 million in the second quarter of 2025. Constant currency adjusted operating margin was 4.1% in the second quarter of 2026 compared to adjusted operating margin of 2.0% in the prior year second quarter. Interest expense was $8.3 million compared to $4.3 million in the second quarter of 2025 due to increased debt issuance cost amortization, higher debt balances and increased interest rates. Other income (expense) was an expense of $1.8 million compared to an expense of $0.1 million in the second quarter of 2025, reflecting increased net currency losses in the second quarter of 2026 as compared to the prior year second quarter. Income (loss) before income taxes was $(6.9) million compared to $4.1 million in the second quarter of 2025. Adjusted EBITDA was $8.6 million, or 4.1% of net sales in the second quarter of 2026 and $7.0 million, or 3.2% of net sales in the prior year quarter. Provision (benefit) for income taxes was an expense of $3.7 million, resulting in an effective income tax rate of (54.2)% compared to an expense of $6.2 million and an effective tax rate of 150.9% in the prior year. The effective tax rate in the second quarter of 2026 differed from the prior year second quarter primarily due to a change in the Company’s global mix of earnings. Net loss totaled $10.6 million with net loss per diluted share of $0.18, which compares to net loss of $2.3 million and net loss per diluted share of $0.04 in the prior year second quarter. Adjusted net loss was $7.9 million for the second quarter with adjusted net loss per diluted share of $0.13 compared to adjusted net loss of $5.6 million with adjusted net loss per diluted share of $0.10 in the prior year second quarter. Balance Sheet Summary As of July 4, 2026, the Company had total liquidity of $96.6 million, including $79.0 million of cash and cash equivalents and $17.6 million of availability under its asset-based revolving credit facility ("ABL"). Inventories at the end of the second quarter of 2026 totaled $177.9 million, approximately flat compared to a year ago. Total debt was $203.0 million. Financial Outlook The Company is raising financial guidance for the full year 2026 to reflect the strength of year-to-date results and continuing progress under its turnaround plan. Worldwide net sales to decline 3% to 5%, with a return to growth in the fourth quarter Adjusted operating margin(1) in the range of 4% to 6% Positive free cash flow(2) Worldwide net sales and adjusted operating margin guidance exclude impacts from foreign currency. (1) A reconciliation of adjusted operating margin, a non-GAAP financial measure, to a corresponding GAAP measure is not available on a forward-looking basis without unreasonable efforts due to the high variability and low visibility of certain income and expense items that are excluded in calculating adjusted operating margin. (2) Free cash flow is a non-GAAP financial measure, defined as net cash from operating activities less net cash used in investing activities. A corresponding reconciliation of free cash flow to a corresponding GAAP measure is not available on a forward-looking basis without unreasonable effort. Conference Call Information Fossil Group will host a conference call to discuss these results at 5:00 p.m. Eastern Time today, August 12, 2026. A live webcast of the conference call will be available on the investor relations section of Fossil Group’s website at https://www.fossilgroup.com/investors and will also be archived for replay. Safe Harbor This press release and related statements by our management contain forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). These statements include, without limitation, statements regarding our current assumptions, projections and expectations about our business, financial outlook, turnaround plan and future events. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. Any such forward-looking statements involve risks and uncertainties and are subject to change based on various important factors, many of which may be beyond our control. The inclusion of such information should not be regarded as a representation by the company, or any other person, that the expectations of the company will be achieved. Words such as "estimate,” "project,” "plan,” "goal,” "believe,” "expect,” "anticipate,” "intend,” "should,” "are confident,” "will,” "could,” "outlook,” and similar expressions may identify forward-looking statements. Except as may be required by applicable law, we assume no obligation to publicly update or revise any forward-looking statements, including any financial targets, projections, estimates, or performance outlook, whether as a result of new information, future events, or otherwise. Factors that may cause actual results to differ from those expressed in our forward-looking statements include, but are not limited to, the factors disclosed in Part I, Item 1A. "Risk Factors” of the company’s most recent Annual Report on Form 10-K, and in our subsequent reports and filings with the Securities and Exchange Commission, as well as the following factors: increased political uncertainty; acts of war, military actions or acts of terrorism; the effect of worldwide economic conditions; lower levels of consumer spending resulting from inflation, a general economic downturn or generally reduced shopping activity caused by public safety or consumer confidence concerns; government regulation and tariffs; risks related to the success of our turnaround plan and goals; significant changes in consumer spending patterns or preferences; interruptions or delays in the supply of key components or products; the termination or non-renewal of significant license agreements; loss or shut down of key facilities; a data security or privacy breach or information systems disruptions; changes in foreign currency valuations in relation to the U.S. dollar; compliance with debt covenants and other contractual provisions and meeting debt service obligations; risks related to the success of our business strategy; impact of any minimum royalty commitments in excess of royalties payable on actual sales; risks related to foreign operations and manufacturing; the effect of any pandemic; changes in the costs of materials and labor; levels of traffic to and management of our retail stores; loss of key personnel or failure to attract and retain key employees and the outcome of current and possible future litigation. Readers of this press release should consider these factors in evaluating, and are cautioned not to place undue reliance on, the forward-looking statements contained herein. About Fossil Group, Inc. Fossil Group, Inc. is a global design, marketing, distribution and innovation company specializing in lifestyle accessories. Under a diverse portfolio of owned and licensed brands, our offerings include watches, jewelry, handbags, small leather goods, belts and sunglasses. We are committed to delivering the best in design and innovation across our owned brands, Fossil, Michele, Relic, Skagen and Zodiac, and licensed brands, Armani Exchange, Diesel, Emporio Armani, Michael Kors, Skechers and Tory Burch. We bring each brand story to life through an extensive distribution network across numerous geographies, categories and channels. Certain press release and SEC filing information concerning the Company is also available at www.fossilgroup.com. Constant Currency Financial Information The following table presents the Company’s business segment and product net sales on a constant currency basis which are non-GAAP financial measures. To calculate net sales on a constant currency basis, net sales for the current fiscal year period for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average rates during the comparable period of the prior fiscal year. The Company presents constant currency information to provide investors with a basis to evaluate how its underlying business performed excluding the effects of foreign currency exchange rate fluctuations. The constant currency financial information presented herein should not be considered a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP. Adjusted EBITDA, Adjusted Operating Income (Loss), Constant Currency Adjusted Operating Income (Loss), Adjusted Net Income (Loss) and Adjusted Earnings (Loss) per Share Adjusted EBITDA, Adjusted operating income (loss), Constant currency adjusted operating income (loss), Adjusted net income (loss) and Adjusted earnings (loss) per share are non-GAAP financial measures. We define Adjusted EBITDA as our net income (loss) before the impact of income tax expense (benefit), plus interest expense, amortization and depreciation, impairment expense, other non-cash charges, stock-based compensation expense, restructuring expense and unamortized debt issuance costs included in loss on extinguishment of debt, minus interest income, gain on sale of subsidiary, gains on asset divestitures and IEEPA refund claims for tariffs incurred in the prior year. We define Adjusted operating income (loss) as operating income (loss) before impairment expense, restructuring expense, gains on asset divestitures and IEEPA refund claims for tariffs incurred in the prior year. We define Constant currency adjusted operating income (loss) as operating income (loss) before impairment expense, restructuring expense, gains on asset divestitures and IEEPA refund claims for tariffs incurred in the prior year and excluding the effects of foreign currency exchange rate fluctuations. We define Adjusted net income (loss) and Adjusted earnings (loss) per share as net income (loss) attributable to Fossil Group, Inc. and diluted earnings (loss) per share, respectively, before impairment expense, restructuring expense, gain on sale of subsidiary, gains on asset divestitures, IEEPA refund claims for tariffs incurred in the prior year and unamortized debt issuance costs included in loss on extinguishment of debt. We have included Adjusted EBITDA, Adjusted operating income (loss), Adjusted net income (loss) and Adjusted earnings (loss) per share herein because they are widely used by investors for valuation and for comparing our financial performance with the performance of our competitors. We also use these non-GAAP financial measures to monitor and compare the financial performance of our operations. Our presentation of Adjusted EBITDA, Adjusted operating income (loss), Adjusted net income (loss) and Adjusted earnings (loss) per share may not be comparable to similarly titled measures other companies report. Adjusted EBITDA, Adjusted operating income (loss), Adjusted net income (loss) and Adjusted earnings (loss) per share are not intended to be used as alternatives to any measure of our performance in accordance with GAAP. The following tables reconcile Adjusted EBITDA to the most directly comparable GAAP financial measure, which is income (loss) before income taxes. Certain line items presented in the tables below, when aggregated, may not foot due to rounding. (1) Includes the gain on sale of our South Africa subsidiary (1) Includes the gains on sale of our European distribution center and equipment from a Swiss manufacturing facility The following tables reconcile Adjusted operating income (loss), Constant currency adjusted operating income (loss), Adjusted net income (loss) and Adjusted earnings (loss) per share to the most directly comparable GAAP financial measures, which are operating income (loss), net income (loss) attributable to Fossil Group, Inc. and diluted earnings (loss) per share, respectively. Certain line items presented in the tables below, when aggregated, may not foot due to rounding. (1) Includes the gain on sale of our South Africa subsidiary (1) Includes the gain on sale of our European distribution center and equipment from a Swiss manufacturing facility (1) Includes the gain on sale of our South Africa subsidiary (1) Includes the gain on sale of our European distribution center and equipment from a Swiss manufacturing facility Store Count Information

It has been about a month since the last earnings report for Urban Outfitters (URBN). Shares have added about 3.6% in that time frame, outperforming the S&P 500. Will the recent positive trend continue leading up to its next earnings release, or is Urban Outfitters due for a pullback? Well, first let's take a quick look at the latest earnings report in order to get a better handle on the recent catalysts for Urban Outfitters, Inc. before we dive into how investors and analysts have reacted as of late. Urban Outfitters reported strong first-quarter fiscal 2027 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. Also, both metrics improved from the prior-year quarter’s reported figures. The company delivered record first-quarter sales and profits, marking its seventh consecutive quarter of record performance.Management highlighted that broad-based momentum across the Retail, Subscription and Wholesale segments, along with disciplined execution and strong customer engagement, supported the quarter’s performance. This lifestyle specialty retailer delivered earnings per share of $1.30, rising 12.1% year over year and surpassing the Zacks Consensus Estimate of $1.20 by 8.3%. Net sales increased 11.4% year over year to $1,481.3 million, beating the consensus mark of $1,456 million by 1.7%. Strength spanned Retail, Wholesale and Subscription, supported by positive comparable sales at all retail brands and continued subscriber growth at Nuuly.Total Retail segment net sales rose 8% year over year to $1.22 billion, while comparable Retail segment sales increased 5.6%. Growth in comparable sales was driven by high-single-digit gains in digital channel sales and mid-single-digit growth in retail store sales. The Comparable Retail segment sales increased 9.8% at FP Group, 9.3% at Urban Outfitters and 1.9% at Anthropologie. Within the FP Group, total sales increased 16.6% year over year to $411.7 million due to continued momentum across both Wholesale and Retail segments. Free People brand sales increased 12%, while FP Movement brand sales jumped 32% during the quarter.The Wholesale segment posted net sales growth of 24.8% to $93.2 million, driven by a 26.2% increase in FP Group wholesale revenues due to higher sales to specialty customers.Nuuly, the company’s women’s apparel subscription rental service, continued to witness strong momentum. Subscription segment net sales increased 34.5% year over year to $167.3 million, driven by a 33.3% increase in average active subscribers from the prior-year quarter. Gross profit rose 10.9% year over year to $542.6 million in the fiscal first quarter, mainly driven by higher net sales during the period. However, the gross margin declined 16 basis points year over year to 36.6%. This decrease was largely due to a one-time gain of $4.8 million, or 36 basis points, recognized in the prior-year quarter that did not repeat this quarter. Excluding this item, the underlying gross margin expanded by 20 basis points, supported by lower markdowns at FP Group and Urban Outfitters, partly offset by deleveraging in initial merchandise costs related to tariffs.The Retail segment gross profit increased 7% year over year to $460.9 million, though the segment gross margin slipped 18 bps to 37.7%. The Wholesale segment’s gross profit rose 31% to $33.8 million, with the gross margin expanding 178 bps to 36.3%, driven by higher sales to regular-price customers. Subscription segment gross profit climbed 39% to $47.9 million, while the segment gross margin improved 85 bps to 28.7%.Selling, general and administrative (SG&A) expenses increased 11.7% year over year to $402.9 million. The increase was primarily driven by higher store payroll expenses to support the Retail segment sales growth, increased marketing investments to support customer acquisition and sales growth in the Retail and Subscription segments, and higher technology investments tied to AI initiatives. As a percentage of net sales, SG&A expenses deleveraged 5 bps to 27.2%. The quarter included a benefit of $6.9 million, or 47 bps, related to the reversal of a litigation accrual, partially offset by deleverage from higher marketing and technology spending.URBN reported operating income of $139.7 million, up 8.9% from $128.2 million in the prior-year quarter. However, the operating margin contracted 22 bps year over year to 9.4%, reflecting SG&A deleverage despite higher gross profit dollars. In the first quarter of fiscal 2027, the company opened 11 stores and closed three stores. Store openings included two Anthropologie, three Free People and six FP Movement stores, while closures included one Free People, one Urban Outfitters and one Menus & Venues location.The company plans to open 54 stores and close around 19 stores in fiscal 2027. Net new store growth will be primarily driven by the expansion of FP Movement, Free People and Anthropologie locations. Specifically, the company intends to open 21 FP Movement, 12 Free People, 13 Anthropologie and eight Urban Outfitters stores in fiscal 2027. As of April 30, 2026, Urban Outfitters had cash and cash equivalents of $301.4 million compared with $189.4 million in the prior-year period. Total shareholders’ equity stood at $2.61 billion as of the quarter-end. As of April 30, 2026, total inventory increased 9.5% from the prior-year period. The Retail segment’s inventory rose 10.6%, while comparable Retail segment inventory increased 10%. In contrast, the Wholesale segment’s inventory declined 1.2%. The increase in the Retail segment inventory was primarily driven by higher net sales and early inventory receipts aimed at mitigating potential shipping disruptions related to the Middle East conflict.During the first quarter of fiscal 2027, the company repurchased and retired 4.6 million shares for approximately $300 million. As of April 30, 2026, 10 million common shares remained authorized for repurchase under the existing program. Urban Outfitters’ management expects second-quarter fiscal 2027 total company sales to grow in the high-single-digit range, supported by continued momentum across the Retail, Wholesale and Subscription businesses.The Retail segment’s comparable sales are projected to increase in the mid-single-digit range, driven by high-single-digit positive comparable sales growth at Urban Outfitters and FP Group, while Anthropologie is expected to deliver low to mid-single-digit positive comparable sales growth. Nuuly is expected to post mid to high-20% revenue growth on the back of continued subscriber momentum, while the Wholesale segment is projected to generate mid-teens growth.For the fiscal second quarter, URBN expects the gross profit margin to be flat to decline 25 basis points year over year. The anticipated pressure primarily reflects lower initial merchandise margins due to higher tariffs than the last year, along with elevated fuel surcharge costs tied to the Middle East conflict.Management noted that current oil surcharges are expected to remain in place for the remainder of fiscal 2027 and are estimated to create a 70-basis-point unfavorable impact per quarter through higher inbound freight and delivery expenses.Management expects fiscal second-quarter SG&A growth to be at or slightly ahead of sales growth due to higher marketing investments across brands to support customer acquisition, along with increased technology and AI-related investments. For fiscal 2027, management continues to expect positive high-single-digit total company sales growth. This outlook is expected to be supported by mid-single-digit Retail segment comparable sales growth, mid-20% revenue growth at Nuuly and high-single-digit growth in the Wholesale segment.URBN expects the fiscal 2027 gross profit margin to increase by 25 basis points year over year, with the second half anticipated to benefit from improved initial merchandise margins. The company also expects to receive $100 million in tariff refunds in the fiscal second quarter related to previously imposed IEEPA tariffs, which management plans to record as a one-time benefit.For the full year, SG&A growth is expected to be in line with sales growth, while inventory growth is projected to remain at or below the pace of sales growth as the company focuses on improving product turns.Capital expenditure for fiscal 2027 is planned at approximately $475 million. About 35% of the spending is expected to support retail store expansion and store-related investments, nearly 50% will be allocated toward logistics investments and automation capabilities, while the remaining 15% will support technology initiatives and home office expansion.Management also expressed confidence in the underlying health of the business, highlighting strong momentum at Free People and FP Movement, continued progress at Urban Outfitters in North America and Europe, improving trends at Anthropologie and Nuuly’s path toward its long-term $1 billion revenue opportunity. The company believes its diversified portfolio positions URBN for continued positive comparable sales growth, margin expansion and record profitability in fiscal 2027. In the past month, investors have witnessed a upward trend in estimates revision. At this time, Urban Outfitters has a average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for value investors. Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in. Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Urban Outfitters has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months. Urban Outfitters belongs to the Zacks Retail - Apparel and Shoes industry. Another stock from the same industry, Fossil Group (FOSL), has gained 5.2% over the past month. More than a month has passed since the company reported results for the quarter ended March 2026. Fossil Group reported revenues of $224.8 million in the last reported quarter, representing a year-over-year change of -3.6%. EPS of -$0.03 for the same period compares with -$0.10 a year ago. For the current quarter, Fossil Group is expected to post a loss of $0.29 per share, indicating a change of -190% from the year-ago quarter. The Zacks Consensus Estimate has changed -81.3% over the last 30 days. Fossil Group has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Urban Outfitters, Inc. (URBN) : Free Stock Analysis Report Fossil Group, Inc. (FOSL) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

A week ago, Fossil Group, Inc. (NASDAQ:FOSL) came out with a strong set of quarterly numbers that could potentially lead to a re-rate of the stock. Results overall were solid, with revenues arriving 9.8% better than analyst forecasts at US$225m. Higher revenues also resulted in substantially lower statutory losses which, at US$0.01 per share, were 9.8% smaller than the analysts expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. Taking into account the latest results, the two analysts covering Fossil Group provided consensus estimates of US$954.5m revenue in 2026, which would reflect a perceptible 4.2% decline over the past 12 months. Losses are predicted to fall substantially, shrinking 49% to US$0.56. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$948.6m and losses of US$0.51 per share in 2026. While this year's revenue estimates held steady, there was also a noticeable increase in loss per share expectations, suggesting the consensus has a bit of a mixed view on the stock. Check out our latest analysis for Fossil Group Although the analysts are now forecasting higher losses, the average price target rose 17% to 6, which could indicate that these losses are expected to be "one-off", or are not anticipated to have a longer-term impact on the business. These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Fossil Group's past performance and to peers in the same industry. One thing that stands out from these estimates is that shrinking revenues are expected to moderate over the period ending 2026 compared to the historical decline of 13% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 5.3% per year. So while a broad number of companies are forecast to grow, unfortunately Fossil Group is expected to see its revenue affected worse than other companies in the industry. The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Fossil Group. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time. Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At least one analyst has provided forecasts out to 2027, which can be seen for free on our platform here. And what about risks? Every company has them, and we've spotted 1 warning sign for Fossil Group you should know about. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

This article first appeared on GuruFocus. Net Sales: $218 million, down 6% from last year. Gross Margin: 59.9%, down 140 basis points year over year. Adjusted Operating Income: $10 million, compared to $9 million a year ago. SG&A Expenses: Reduced by 13%, driven by fewer stores and lower compensation and administrative expenses. Store Closures: Closed 7 stores in Q1; plan to close up to 15 in total for 2026. Cash and Cash Equivalents: $81 million at quarter end. Inventory: $156 million, down 14% versus last year. Free Cash Flow Guidance: Expect to achieve breakeven on a full-year basis. Worldwide Net Sales Guidance: Expected to decline 4% to 6% for 2026. Adjusted Operating Margin Guidance: Expected in the range of 3% to 5% for 2026. Warning! GuruFocus has detected 3 Warning Signs with FOSL. Is FOSL fairly valued? Test your thesis with our free DCF calculator. Release Date: May 13, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Fossil Group Inc (NASDAQ:FOSL) reported strong financial performance in Q1 2026, with net sales of $218 million and a healthy gross margin of 59.9%. The company achieved positive adjusted operating income of $10 million, driven by strict expense control and strong performance in wholesale core brands. Fossil Group Inc (NASDAQ:FOSL) saw notable strength in traditional watches, marking a return to top-line growth in this category for the first time in years. The company is successfully executing its turnaround strategy, focusing on profitable growth, optimizing its operating model, and building shareholder value. Fossil Group Inc (NASDAQ:FOSL) is making progress in its omnichannel initiatives, improving e-commerce profitability and enhancing the customer journey with new navigation features on its website. Net sales in Q1 2026 were down 6% from the previous year, impacted by the absence of an extra week in last year's first quarter and store closures. Gross margin decreased by 140 basis points year over year, affected by higher tariff expenses and licensed brand minimum royalties. The geopolitical climate and potential impacts on consumer behavior and input costs pose uncertainties for the company's future performance. Fossil Group Inc (NASDAQ:FOSL) continues to face challenges in its direct-to-consumer channel, with ongoing store closures and a focus on reducing sales from older inventory. The company is cautious about its full-year guidance, maintaining expectations for a 4% to 6% decline in worldwide net sales despite strong Q1 results. Q: Franco, you mentioned a return to top-line growth in traditional watches. How sustainable is this performance? A: Franco Fogliato, CEO: We're excited about the performance in traditional watches, especially in the wholesale channel. We've been focusing on higher Average Unit Retail (AUR) and better gross margins. The work we've done since I joined is starting to show results, and we have a strong pipeline for the future. The industry tailwinds, particularly in the Americas, are encouraging, with younger consumers returning to the space. Q: How is Fossil preparing for agentic commerce, and what could it mean for the company? A: Franco Fogliato, CEO: We're focusing on AI, particularly agentic AI, as an opportunity across marketing, e-commerce, and supply chain. We're at the beginning of this journey, but it's shaping how we work and improving execution. Randy Greben, CFO: AI is central to our turnaround strategy, driving efficiency and cost reduction. We're just scratching the surface but are committed to this journey. Q: Regarding the Big Tic launch, where are you in the rollout, and is there a halo effect on the broader Fossil brand? A: Franco Fogliato, CEO: The Big Tic launch has been well-received, with strategic distribution in key channels. It's driving consumer interest back to our brand and supporting our full-price selling model. The Big Tic World Flags collection and other upcoming releases will continue to build brand momentum and drive sales across our product icons. Q: What is the retail door plan for the Signature launch, and how are you managing inventory risk? A: Franco Fogliato, CEO: The Signature launch will be limited, focusing on scarcity to drive brand demand. We're working closely with partners to ensure quality and differentiation. Randy Greben, CFO: While Signature is a step up in price, we have experience with higher price points in other brands. We'll maintain inventory discipline to mitigate risk and drive consumer demand. Q: How is the India business performing amid macro concerns in the region? A: Franco Fogliato, CEO: Our India business is a strong asset, with a leading position in the watch category. Despite global challenges, we have a competitive advantage and a strong team driving momentum in the region. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Fossil Group (NASDAQ:FOSL) reported first-quarter financial results on Wednesday. The transcript from the company's first-quarter earnings call has been provided below. This content is powered by Benzinga APIs. For comprehensive financial data and transcripts, visit https://www.benzinga.com/apis/. Access the full call at https://edge.media-server.com/mmc/p/cbh26wjz/ Fossil Group reported net sales of $218 million for Q1, with a gross margin of 59.7%, indicating a strong start to the year. The company reiterated its full-year guidance despite a challenging macro environment, driven by strong performance in wholesale core brands and traditional watches. Fossil Group is focused on its three strategic turnaround pillars: returning to profitable growth, optimizing its operating model, and building shareholder value. The company is advancing several initiatives, including expanding its brand platform, strengthening consumer engagement, and leveraging AI for operational efficiency. Fossil Group noted improvements in key geographies such as the US, India, and Asia Pacific, and emphasized the success of its traditional watches and licensed brands. The company closed 7 stores in Q1 and plans to close approximately 15 in 2026, while also focusing on enhancing the customer experience in its full-price stores. Fossil Group maintains a cautious outlook due to geopolitical uncertainties but remains confident in achieving breakeven free cash flow for the full year. OPERATOR Hello and welcome to Fossil Group Q1 2026 earnings conference call. Just a few reminders that all lines have been placed on mute to prevent any background noise. And that. This call is being recorded and this call may not be reproduced in whole or in part without the Company's permission. I will now be passing the call over to the presenters. You may begin to remind you that information made available during this conference call contains forward looking information and actual results could differ materially from those that will be discussed during this call. Fossil Group's policy on forward looking statements and additional information concerning a number of factors that could cause actual results to differ materially from such statements is readily available in the company's Form 8K, 10Q and 10K reports filed with the SEC. In addition, Fossil Group assumes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise, except as required by law. During today's call we will refer to constant currency results as well as certain non GAAP financial measures. Please note that you can find a reconciliation of actual results to constant currency results and other information regarding non GAAP financial measures discussed on this call in Fossil's earnings release which was filed today on Form 8K and is available in the Investors section of fossilgroups.com with that, I'll now turn the call over to Franco to begin Franco Good afternoon. Thank you Christine and welcome everyone. We're pleased to begin the year with strong financial performance. Our turnaround pillars are delivering results today while advancing our path to long term profitable growth. I want to recognize our exceptional global teams. Their commitment, creativity and disciplined execution are driving tremendous progress in our Turnaround. In the first quarter we delivered net sales of 218 million, healthy gross margin of 59.7% and strict expense control which drove another quarter of positive adjusted operating income totaling 10 million. Top line results were better than we expected, led by strong performance in wholesale core brands and key geographies as well as notable strength in traditional watches. Looking at the balance of the year, strong first quarter performance combined with continuing industry tailwinds is enabling us to confidently reiterate our full year guidance based despite the dynamic macro environment. Importantly, our teams remain rather focused on our three strategic turnaround pillars, returning to profitable growth, optimizing our operating model and building shareholder value. We're executing several initiatives across these pillars. I will now turn to sharing updates on our progress and plans. First, returning to profitable growth. We're strengthening the Fossil brand platform through action to fuel innovation, deepen consumer engagement, grow the traditional watch business and reinvigorate our jewelry and leather categories. Our creative teams are delivering compelling innovation to consumer through a blend of creativity and logic that leverage our unique heritage to build the brand heat. The quarter was highlighted by the return of Fossil bigtik which reflects our creative evolution as we draw from fossil rich archives. The storytelling around BigTic has generated tremendous visibility from global lifestyle media and leading watch industry publication. Experiential seedings of the product have drove a nostalgic excitement and placed Big Tick in the hands of media influencers and celebrities early on. In fact, Y2K media resonates with younger males driving social engagement and online conversion among Gen Z and Millennial consumers. We will be carrying this momentum forward with additional Big Tech animation launching throughout the year. In Q2 we introduced a limited edition Big Peak World Flags collection which leverages engaged fan base and excitement around global sports moments such as the FIFA World cup and Olympics. More recently we released our latest Star wars collaboration on May 4. A new Mandalorian Plus Grogu collection is garnering attention from Star wars superfan Sci fi audiences and watch enthusiasts. Next up we have exciting new collaboration with Marvel rollie out in Q3. Great storytelling remains a hallmark of the Fossil brand. Our market investments are helping us drive brand hit and new customer acquisitions and we're amplifying our messaging around important times of the year. Our recent Mother's Day campaign focused on our icon product offerings and doubled down on Minis which drove excitement around a well loved collection such as Aloe and Raquel. Next month we will be in the market with Father's Day's messaging and local events. Moving now to our Omnichannel initiatives which are focused on modernizing our brand expression wholesale, improving our e commerce business and optimizing our Fossil store portfolio. Our focus on full price integrity, channel discipline and operational excellence is building traction in key areas of the business. During Q1, wholesale grew mid single digit with our core brand traditional watch sales up high single digits in the channel. Performance was strong with both our long term wholesale partners as well as a specialty in energy retails, a new channel that is helping us build the brand awareness and create excitement among a younger democratic. From a regional standpoint in Q1 we saw broad based strength in both the US and India. Additionally, we were pleased to see improved performance in key Asia Pacific markets such as Japan and Australia in the quarter. The results are a testament to new leadership that is advancing our commercial strategy across the region from a high level perspective. Our wholesale partner relationship are strengthened as we continue to walk the walk on full price selling and deliver compelling product as sources. In fact, our order books are building earlier and we're beginning to develop longer term plans together, demonstrating the confidence our partners have in our brands. Our direct to consumer model keeps us close to consumer, providing a deeper understanding of customer needs and fostering more relevant brand building. On the E commerce front, we're continuing to drive channel profitability on a smaller sales base through two key focus areas 1 our commitment to full price selling and 2 initiatives to strengthen the online customer journey. This included continuous improvement to our new fossil brand platform with fresh content and functional updates that enable us to showcase a more cohesive brand presentation, drive customer engagement and strengthen brand perception as we aim to build scale. A great example of this is the recent launch of a new navigation across our fossil e commerce site globally. This enables richer brand storytelling within the navigation experience and sharpened focus on our collection making it easier for customers to discover and shop key product stories. The enhancement reduces friction points across the whole journey and empower our merchandising team with greater flexibility to respond quickly to trends and key commercial moments in the retail channel. We closed 7th store in Q1 and remain on track to close approximately 15 locations in 2026. It is worth noting that we have significantly scaled back our plans to downsize the portfolio as a result of improving performance in our full price stores. It is clear that our initiative to deliver a more engaging customer experience very first in Q1 harm performance was particularly strong in our full price stores. In the near term we're further advancing our store of the future strategy by rolling out an expanded suite of selling tools that equip our associates with the skills needed to maximize full price sales. Longer term, we plan to test and learn to build a refined store model that generates compelling returns and presents an opportunity for major expansion. Moving now to our core licensed brand where we are seeing growth across the spectrum including Armani Group, Diesel and Michael Kors. I will start with the Michael Kors brand where we were pleased to see year over year growth in Q1 productivity and newness towards momentum in the wholesale channel, further supported by the ongoing work being done by the Michael Kors team to drive brand heat. Additionally, the shift toward a more competitive pricing architecture in Jewelry is driving increased AUR and improved brand positioning in employer money. The brand achieved a strong sell through across channels driven by elevated assortment, a shift toward premium offerings and compelling high visibility marketing campaigns. In the Armani Exchange trend, healthy performance is attributable to higher full price sales, strengthening winners and product new looking now at India where we successfully scaling a proven growth engine during Q1 we executed against the key initiatives we outlined on our last earning call. Specifically, we broadened our reach with the addition of more than 70 new wholesale doors. We drove a premium position with new price points resulting in a higher mix of full priced sales as well as a higher average retail detail We implemented new E Commerce platform and CRM integration tool to enhance our omnichannel capabilities and we continue to leverage our market leadership position and build brand it through strong execution across Hostel, Armani, Diesel and Coast. Moving to our second turnaround pillar optimizing our operating model, Our teams are actually a number of initiatives to strengthen our go to market execution including both operational investment and infrastructure improvement. Simplification across the organization continue as we further streamline operation, rationalize our investment and consolidate our IT stack. This includes the ongoing simplification of our analytics platform which has reduced cost and enhanced our capabilities establishing the data architecture required for generative AI as part of our broader strategy to build a more competitive and profitable model in small and international geographies. Subsequent to a quarter end we signed an agreement to transition another international market to a distributor model aligning with the best in class partner in South Africa. This strategy enabled us to leverage the local knowledge and the expertise of regional distributors while lowering our operating expenses driving strong flow through of gross profit to the bottom line. I will now turn to our third and final pillar, building shareholder value. Ongoing progress across the business is setting the stage for us to continue to drive improved profitability and deliver positive free cash flow. Our strong start to 2026 reinforced the effectiveness and durability of our turnaround plan. The impact of simplification and focus is clear. Our brand led consumer focus model is enabling us to build a smaller, more profitable business that is positioned to return to growth in the fourth quarter of this year. The progress and momentum we saw throughout 2025 carried into the first quarter of 2026 with only one quarter of the year delivered. We are holding our guidance in light of the geopolitical climate and its potential impact on the consumer. We continue to have a strong condition in the trajectory of the business and am I committed to building long term shareholder value. Now I will turn the call to Randy to discuss the financials. Randy Thank you Franco. We delivered another strong quarter across the P&L reflecting the strength of our brand portfolio and continued traction within our turnaround pillars. While our top line outperformance was primarily driven by better than expected wholesale results including the shift of some receipts previously anticipated in Q2. Moving into Q1 we continue to make progress towards strengthening our D2C channel. In fact, every facet of our business is contributing to the success of our turnaround. Net sales in Q1 totaled $218 million. That's down 6% from last year. Looking deeper, the comparison versus last year includes 7 points of unfavorable impact as we lapped the extra week in last year's first quarter as well as another 280 basis points related to the net impact of our store closure program and our smartwatch exit. Taking these factors into account, we are clearly demonstrating that the business is stabilizing and poised to return to top line growth. First quarter gross margin came in at 69.7%, down 160 basis points year over year, reflecting both strong product margins and our ongoing focus on full price selling. Similar to revenue, there's quite a bit to unpack as it relates to the inputs to our results. First, we incurred higher tariff expenses this year versus Q1 of 2025. While prevailing tariff rates at present remain lower than they were before this year's court ruling, they are still elevated as compared to where they were prior to Liberation Day, which you will recall with the Q2 2025 eventually. Next, we recognized a portion of our anticipated full year minimum royalty shortfall in the quarter. As a reminder in recent years, the GMR true-up was recognized in our second half with the majority of it being booked in Q3. Concurrent with negotiating more favorable license agreement terms for 2026 last year, we are now amortizing the shortfall throughout all four quarters. It bears reminding that the quantum amount of shortfall is forecast to be materially lower than in recent years and should result in much more consistent quarterly gross margin which we continue to anticipate being in the mid to upper 50% range. These two impacts, higher tariff expense and licensed brand minimum royalties, were partially offset by the recognition of a tariff refund claim during the quarter. Of the total $5.9 million claim, $4 million was recognized as a reduction to cost of sales, $900,000 was recognized as a reduction to SG&A, and the remaining $1 million was recorded as a reduction to inventory. On the balance sheet, the majority of the $4 million cost of goods benefit is related to costs incurred in 2025 and therefore has been adjusted out of our operating income Net-net. Our Q1 gross margin is very healthy and reflects not only the power of our portfolio of brands but also the strength of our robust supply chain. Importantly, we remain confident that we can maintain this margin profile throughout the balance of the year. It's also worth noting that we have not embedded any further refunds into our 2026 outlook. Turning now to operating expenses, we lowered SG&A dollars by 13% which exceeded our sales decline and drove expense leverage in the quarter. The improvement is attributable to 27 fewer stores in operation versus a year ago, as well as lower compensation and administrative expenses. During Q1 we closed seven stores and expect to close up to 15 in total this year. This would put us at 185 locations globally at the end of 2026. As you heard from Franco, we are continuing to focus on optimizing our operating model by capturing efficiencies and rationalizing investments across key areas of the business, including go to market and information. I will also point out that restructuring costs have come down considerably, totaling just $2 million in Q1 2026 versus $16 million a year ago. The leverage we achieved in SGA with costs coming out in excess of our sales decline is a tangible example of the discipline that underpins all of the efforts of the group today and subsequent to quarter end, we've continued to fine tune the operating model, including as Franco mentioned, signing the agreement to transition our South Africa subsidiary to a distributor during Q2. The combination of healthy gross margins and expense control absolutely translated to the bottom line. When we delivered another quarter of profitability, Q1 adjusted operating income came in at $10 million versus $9 million a year ago. Turning to the balance sheet, we ended the quarter with $81 million of cash and cash equivalents and $28 million of availability under our asset based revolver, reflecting our seasonal working capital cadence. Additionally, as of quarter end we had no utilization under our ATM program. Inventory at quarter end totaled $156 million, down 14% versus last year, which is in line with our expectations to increase turns even as we lean into more full price selling. In Q1 of this year, our cash used in operations reduced by over 50% from the same period last year, reflecting our strengthening profitability and improved working capital management. Moving now to guidance, strong execution against our turnaround pillars is enabling us to reiterate our outlook for the full year. 2026, while up to date, are in fact ahead of expectations. We believe this is prudent given the uncertainty that exists in the geopolitical environment and the potential effects on input costs and consumer behavior. We continue to expect worldwide net sales to decline in the range of 4% to 6%. Of note, the net impact of store closures and the extra week in 2025 are worth about 360 basis points. Further. Further, we continue to anticipate that 2026 will be second half weighted and will be punctuated by an expected return to top line growth in the fourth quarter as we continue to harness the compounding benefits of our turnaround initiatives. On the bottom line, we continue to expect adjusted operating margin in the range of 3% to 5%. Lastly, we continue to expect to achieve breakeven free cash flow on a full year basis. Now I'll ask the operator to open the call to Q and A. OPERATOR Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a kindly press Star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press Star one again. If you are called upon to ask question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute. When you are asking a question, your question comes from the line. Thomas Forte from Maxium Group, please go ahead. Thomas Forte (Equity Analyst) Great, thanks. So first off, Franco and Randy, congratulations on super impressive performance. I have one question and one follow up. I'll go one at a time. I think you commented Franco in your prepared remarks that you had a return to top line growth in traditional watches which believe it's the first time in years. How should we think about the sustainability of that performance? Franco Tom, thank you very much. Look, we're excited. We're one quarter in. In particular we're excited about the performances across the traditional watches in the wholesale channel where we've been performing very well. We're still doing a lot of work from our DTC in particular with closing stores and reducing some of the sales we were doing on E Comm that were, you know, at the beginning of 2025 we still had a lot of inventory that was old and bought prior to joining the company. The greatest thing is not only we're making progress with the whole state account, but also we're seeing we're selling at a higher AUR driving better gross margin. So overall we're very encouraged. I mentioned a lot of work we'd done at the beginning when I joined the company only got to market towards the end of 24. The pipeline in 25 sorry, got to the market at the end of 25. In particular the Nick Jonas collection. We have a big tick now in 2026 and we have a full pipeline ready to go as we Enter later this year, the second half and we're working on 2027. So a lot of work we've done has been into turning around our traditional watch categories. We were very excited and this is honestly combined with a tailwind in the industry, particularly in the American region where we're seeing a lot of younger consumers coming back to the space, which is very encouraging for all of us. Randy, anything? Randy The only thing that I would add is the combined power of not only having the traditional watch category perform in a manner of strength that it hasn't in some time, but coupling that with full price selling. You really see that flow through the gross margin. And this is a quarter where we've demonstrated the ability to translate that gross margin through to the bottom line. It's a tangible proof point of the strategy coming together. Thomas Forte (Equity Analyst) Excellent. And then for my follow up, Franco, you used the word generative commerce, which is something I've heard a lot from Amazon, really from all the big mega cap technology companies. What are your thoughts on how you're preparing for fossil for generative commerce mean for you in the future? Franco It's a great question. Look, we're absolutely focused on driving, generally speaking AI as an opportunity for the company. In particular generative AI we're seeing, we're making great progress. We're at the beginning of journey where a lot of barriers in the company from marketing e comm supply chain where we're applying AI already we got a great vision for the company and we're just the beginning of the journey is shaping the way we work. We are definitely better in the, you know, this is a different company from what we used to do. Right now we're focusing to execution and generative AI is an opportunity for us to improve our execution of the plan as we progress forward. Randy When we created the current version of the pillars that we're using that power, this phase of our turnaround strategy AI was at the heart not just of growth, which is where you started this question, Tom, but also very much within pillar two, which is the optimization of the operating model. We already have a number of use cases that drive efficiency and or remove cost. And I think like a lot of companies, we recognize that we're just scratching the surface. We're at the very beginning of this journey and but important to know that we're on it alongside many of our other competitors and other companies out there. Thomas Forte (Equity Analyst) Thank you, Franco. Thank you, Randy. Thank you very much. OPERATOR Your question comes from Owen Rickard with Northland Capital Market. Please go ahead. Owen Rickard (Analyst) Hey guys, congrats on a Great quarter and thanks for taking my questions here. Firstly, on Big Tick sounds like the initial launch has been great and that the rollout is going to be over a few quarters here. Where are we in that rollout right now? How many doors is it in today versus the eventual target? And secondly on Big Tick, are you seeing any evidence of a halo effect on the broader fossil brand at accounts that are carrying bigtic? Franco Yeah, thank you very much for the question. Look, we're excited because the BigTic in particularly Y2K has been really, really well covered from the press. We're seeing great sell out. We have chosen a strategy of varying key distribution in particular with energy retailers, our DTC and stores that we feel like they're driving branded and brand demand. So initially the strategy was to use our incredible archives to drive the consumer back into our brand as we'd be moving off the, you know, really the promotional activity into a full price selling model and this is paying off release. We have the BigTic world flags coming out now which is really celebrating some of the big sports moments. In particular think about the FIFA World cup or you know, other events related to countries which are very exciting. We also have additional movements on BigTic coming out later this year. This as a two effect continue to drive consumer towards the archives of the brand and we have a unique history and heritage but also drives the positive effect around what we call the icons because it drive a brand, it drive a brand momentum and that really always this the goal has always been to build BigTick as the brand story which drive consequently sales across all our icons and it's paying off. Owen Rickard (Analyst) Got it, thanks. And secondly for me it sounds like Signature is launching later this year. What does the initial retail door plan look like for Signature? How selective will distribution be and how are you thinking about inventory risk at a price point that Fossils really never operated in before? Franco Great question. Look, we're excited this is going to be a limited launch. We're working with strategy of scarcity and we're driving brand, we're driving brand demand. We started to show to some of our partners our product. They are excited about the quality of the product. So to your point, we will be very much measured on the inventory we're going to produce. We will create scarcity, we will make sure that they, the presence and the way we come at retail is unique and differentiated and we want this to be the pinnacle with the brand with the ultimate goal to drive brand credibility in the watch industry as we have a, we are a watch company with more than 40 years of history, but also drive sales on our icons. Randy If I can add one thing, while it is a step up from where we are currently selling the majority of our fossil timepieces, it is worth reminding that we have got a number of other brands and many of those brands participate at points that are significantly higher than where we are aiming to launch Signature, which suggest that we've got the right supply chain in place to make sure that we're mitigating any sort of risk buying appropriately. We won't lose the discipline that you can already see on the balance sheet, Owen, with respect to turns. So we'll buy it smart. And to Franco's point, scarcity allows us to do that, also drives consumer demand and is again a haloing effect for all of the partners that will launch that will carry it. Owen Rickard (Analyst) Great. Super helpful. And then lastly, for me, you guys previously called out India as the closest thing to a vertically integrated operation fossil really has anywhere globally. Can you just give us a sense about how you're feeling about the India business right now, just given some of the ongoing macro concerns in the region? Franco Well, I got to say, our India business is one of our strongest assets. We're very pleased with our performances. We call that out as a pillar. We remain not only a leader in the region, but we're very well performing. We're excited about the opportunities. I think I spent a lot of time down in India. It's a growing industry and the watch category is very strong and we have a leading position. So not concerned from our side what we're not immune from what the world, what is happening in the world, but we know our business and we have a competitive advantage there with probably one of the best team in the industry and we've seen great momentum. Owen Rickard (Analyst) Awesome. Thanks for taking my questions, guys. Franco Thank you, Owen, thank you very much. OPERATOR Thank you. There are no further questions at this time, so I will now turn the call back to management for the closing comments. Please go ahead. Thank you everyone for joining today. We're pleased with our turnaround progress and we look forward to updating everyone on our Q2 earning call. Thank you, Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice. UNLOCKED: 5 NEW TRADES EVERY WEEK. Click now to get top trade ideas daily, plus unlimited access to cutting-edge tools and strategies to gain an edge in the markets. Get the latest stock analysis from Benzinga: FOSSIL GROUP (FOSL): Free Stock Analysis Report This article Full Transcript: Fossil Group Q1 2026 Earnings Call originally appeared on Benzinga.com ﾩ 2026 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.