Fossil Group sees 14 percent decline in net sales for Q1

Fossil Group has announced its financials for Q1 ended April 1, where it experienced a global net sales decline of 14 percent to 325 million dollars.

The loss was largely driven by wholesale channels, which saw net sales fall 20 percent, while direct-to-consumer sales were up 8 percent, with a comparable retail sales growth of 13 percent.

The Americas region was hit the hardest, with a decline of 15 percent, while in Europe there was an 11 percent drop and a 2 percent drop in Asia.

Declines could also be seen per category, with traditional watch sales hit by 11 percent and smartwatches decreasing 34 percent, a drop that Fossil said reflected “lower consumer demand”.

Meanwhile, the group’s leather category grew by 21 percent, despite the 13 percent decrease in jewellery sales.

Fossil made an operating loss of 37 million dollars, compared to its previous 14.3 million dollars, with an adjusted operating loss of 25 million dollars, up from 11 million dollars last year.

It noted that its operating expenses in Q1 of 2023, totaling 198 million dollars, largely consisted of restructuring costs, as well as selling and administrative expenses.

Gross profit totalled 160.7 million dollars compared to 184.3 million dollars in the same period of 2022, while its gross margin increased 40 basis points to 49.4 percent versus 49 percent.

Its adjusted EBITDA was 16.4 million dollars, representing 5 percent of net sales, with its net loss sitting at 41.3 million dollars.

Fossil’s inventory came in at 337 million dollars, decreasing by 13 percent, with its cash and cash equivalents at 127 million dollars at the quarter’s end.

Fossil continues on Transform and Grow Plan

For the full year 2023, the company said it is expecting worldwide net sales to fall by around 5 percent to net sales growth of 1 percent. It is also forecast that its adjusted operating income margin will come within the range of 0 to 3 percent.

The financials come amid Fossil’s ongoing Transform and Grow Plan, with its chairman and CEO, Kosta Kartsotis, stating that its top line results fell in line with initial expectations and reflected strength in its direct-to-consumer channels.

Kartsotis continued: “Looking at the balance of 2023, we remain focused on our three major pillars designed to drive top line growth: revitalising the Fossil brand, growing our core licensed brands in watches and jewellery and expanding our premium brands and offerings.

“Most recently, we successfully renewed our worldwide licence agreement for the Emporio Armani and Armani Exchange brands for watches and jewellery through 2026, continuing a long-term partnership of more than 25 years.

“We believe the strategies under our TAG Plan will advance our goal to return to top line growth, maximise profitability and create long-term shareholder value.”