Business1 min read

Fossil CEO says turnaround is ahead of plan as sales return to growth

By · Published by Everything Blog

In short

The brand achieved profitability by slashing operating costs and shifting away from promotional discounting to support margins. Growth was heavily underpinned by demand in Asia, particularly India, as well as a 6.4% rise in core analog watch sales. Fossil subsequently raised its annual revenue projections, forecasting positive free cash flow before the close of the year.

Key points

  • Traditional analog watches now generate roughly 86% of the company's total business as sm…: Traditional analog watches now generate roughly 86% of the company's total business as smartwatch sales plummeted below $1 million.
  • Management lifted its full-year revenue outlook to between $980 million and $990 million…: Management lifted its full-year revenue outlook to between $980 million and $990 million while projecting positive free cash flow.
  • Regional growth was spearheaded by a 15.1% sales surge across Asian markets, with India s…: Regional growth was spearheaded by a 15.1% sales surge across Asian markets, with India serving as the primary driver.

Sources checked by our analysis pipeline: 1

Fossil Group posted quarterly results on Tuesday that could point to early signs of a turnaround for the legacy watchmaker.

The company, which has struggled to compete with new gadgets in the years since its sales and stock price peaked in the 2010s, has been quietly undertaking a comeback strategy under CEO Franco Fogliato. The company's fiscal third-quarter earnings indicate the strategy is beginning to bear fruit.

The company said Tuesday that it returned to profitability in the third quarter, posting operating income of $25.3 million, compared to an operating loss of $21.7 million last year. It also returned to sales growth, with net sales up 0.4% to $271.2 million. The company last reported a year-over-year sales increase in the first fiscal quarter of 2022.

"We're excited about improving dramatically the profitability of the company through a very strong and disciplined management of full-price sales as well as cost management," Fogliato told CNBC in an exclusive interview.

For the quarter ended Oct. 3, Fossil reported net income of $11.7 million, or 19 cents per share, compared to a net loss…

Business

More in Business