Fossil Q3 2024 Earnings Report
Key Takeaways
Fossil Group reported a decrease in worldwide net sales to $288 million, a 16% drop compared to the previous year, impacted by strategic actions to exit the smartwatch category and optimize retail stores. However, gross margins expanded by 240 basis points to 49.4%, and operating expenses decreased by 16% due to efficiencies from the TAG Plan. The company's operating loss improved to $24 million from $46 million year-over-year, and inventory decreased by 31% to $226 million.
Net sales decreased by 16% to $288 million, impacted by strategic exits and overall category softness.
Gross margins expanded 240 basis points to 49.4% due to the Transform and Grow (TAG) Plan.
Operating expenses decreased by 16% due to lower compensation costs from TAG Plan efficiencies.
Operating loss improved to $24 million compared to $46 million in the prior year.
Fossil
Fossil
Fossil Revenue by Geographic Location
Forward Guidance
Fossil Group expects worldwide net sales to be approximately $1.1 billion and adjusted operating margin to be in the range of (6)% to (8)% for the full year 2024. The company anticipates generating positive free cash flow in full year 2024, including tax refunds of approximately $57 million received in the second quarter.
Positive Outlook
- Company expects to generate positive free cash flow in full year 2024.
- Tax refunds of approximately $57 million were received in the second quarter of 2024.
- The company remains on track with its TAG Plan.
- TAG Plan is expected to generate additional annualized operating income benefits of at least $100 million in 2024.
- Strategic review to optimize business model and capital structure.
Challenges Ahead
- Worldwide net sales are expected to be approximately $1.1 billion.
- Net sales reflect consumer and channel softness.
- Approximately $100 million of negative impact related to the exit of its smartwatch business.
- Closure of owned retail stores negatively impacted net sales.
- Fiscal year adjusted operating margin is expected to be in the range of (6)% to (8)%.
Revenue & Expenses
Visualization of income flow from segment revenue to net income