Fossil Group Q1 Earnings Call Highlights
Fossil Group (NASDAQ:FOSL) executives said the company’s turnaround efforts continued to gain traction in the first quarter of fiscal 2026, supported by wholesale strength, improving traditional watch demand and continued expense discipline.
Chief Executive Officer Franco Fogliato said Fossil began the year with “strong financial performance” and that its turnaround pillars are “delivering results today while advancing our path to long-term profitable growth.” In his prepared remarks, Fogliato cited net sales of $280 million, gross margin of 59.7% and adjusted operating income of $10 million.
Chief Financial Officer Randy Greben later said first-quarter net sales totaled $218 million, down 6% from a year earlier. Greben said the year-over-year comparison included a 7-point unfavorable impact from the absence of an extra week in last year’s first quarter, along with another 280 basis points tied to store closures and Fossil’s exit from smartwatches. He said first-quarter gross margin was 69.7%, down 160 basis points from a year earlier, while adjusted operating income was $10 million, compared with $9 million a year ago.
Wholesale and Traditional Watches Lead First-Quarter Momentum
Fogliato said top-line results came in better than the company expected, led by strong wholesale performance, core brands, key geographies and “notable strength in traditional watches.” In the wholesale channel, Fossil grew mid-single digits, while core brand traditional watch sales rose high single digits, he said.
During the question-and-answer session, Maxim Group analyst Thomas Forte asked about the sustainability of the return to growth in traditional watches. Fogliato said the company was encouraged by its performance in wholesale, higher average unit retail and stronger gross margin. He also cited industry tailwinds, particularly in the Americas, where Fossil is seeing “a lot of younger consumer coming back to the space.”
Greben added that the combination of stronger traditional watch demand and full-price selling was flowing through to gross margin and the bottom line, calling it “a tangible proof point of the strategy coming together.”
Fossil Leans Into Brand Storytelling and Product Launches
Fogliato said Fossil is working to strengthen its brand platform through innovation, consumer engagement, growth in traditional watches and renewed focus on jewelry and leather. He highlighted the relaunch of Fossil’s Big Tic watch, which he said drew on the company’s archives and generated visibility from lifestyle media and watch industry publications.
The company said Big Tic resonated with younger male consumers and helped drive social engagement and online conversion among Gen Z and Millennial shoppers. Fossil has followed the launch with a limited-edition Big Tic World Flags collection tied to global sports moments, and recently released a Star Wars collaboration featuring The Mandalorian and Grogu. Fogliato said a Marvel collaboration is planned for the third quarter.
Northland Capital Markets analyst Owen Rickert asked whether Big Tic was creating a halo effect for the broader Fossil brand. Fogliato said the strategy was to use Fossil’s archives to bring consumers back to the brand while shifting away from promotional activity toward full-price selling. He said Big Tic was intended to drive brand heat and support sales across Fossil’s “icons.”
Store Closures Continue, but Pace Slows as Full-Price Stores Improve
Fossil continued to reshape its direct-to-consumer business during the quarter. Fogliato said the company closed seven stores in Q1 and remains on track to close about 15 locations in 2026. Greben said that would leave Fossil with 185 global stores at year-end.
However, Fogliato said Fossil has “significantly scaled back” its plans to downsize the store portfolio because of improving performance in full-price stores. He said comparable-store performance was particularly strong in that part of the retail business.
On e-commerce, Fogliato said Fossil is focused on channel profitability on a smaller sales base by maintaining full-price selling and improving the online customer journey. He pointed to a new global navigation system on Fossil’s e-commerce site that is designed to support richer storytelling, improve product discovery and give merchandising teams more flexibility.
Licensing, India and Operating Model Updates
Fogliato said Fossil’s core licensed brands are also contributing to momentum, including Armani Group, Diesel and Michael Kors. He said Michael Kors returned to year-over-year growth in the quarter, aided by wholesale productivity, newness and a more competitive jewelry pricing structure. Emporio Armani saw strong sell-through across channels, while Armani Exchange benefited from higher full-price sales, women’s product strength and newness, he said.
In India, Fogliato said Fossil added more than 70 wholesale doors during the quarter, introduced new price points that increased full-price mix and average unit retail, and implemented a new e-commerce platform and CRM integration tool. Asked about macro concerns in the region, Fogliato called India “one of our strongest assets” and said Fossil maintains a leading position in a growing watch category.
Fossil also continues to simplify its operating model. Fogliato said the company is streamlining operations, rationalizing investments and consolidating its IT stack. After quarter-end, Fossil signed an agreement to transition its South Africa subsidiary to a distributor model, which executives said is intended to reduce operating expenses and improve gross profit flow-through.
Guidance Reiterated Despite Geopolitical Uncertainty
Greben said Fossil is reiterating its fiscal 2026 outlook, despite results to date running ahead of expectations, because of uncertainty in the geopolitical environment and potential effects on input costs and consumer behavior.
- Worldwide net sales are still expected to decline 4% to 6%.
- The net impact of store closures and the extra week in 2025 is expected to be about 360 basis points.
- Adjusted operating margin is still expected to be in the range of 3% to 5%.
- The company continues to expect breakeven free cash flow for the full year.
Greben said Fossil expects 2026 to be weighted toward the second half, with a return to top-line growth anticipated in the fourth quarter. The company ended the quarter with $81 million in cash and cash equivalents, $28 million of availability under its asset-based revolver and no utilization under its at-the-market program. Inventory was $156 million, down 14% from a year earlier.
“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,” Fogliato said. “We continue to have strong conviction in the trajectory of the business.”
About Fossil Group (NASDAQ:FOSL)
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].
Where Should You Invest $1,000 Right Now?
Before you make your next trade, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis.
Our team has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and none of the big name stocks were on the list.
They believe these five stocks are the five best companies for investors to buy now...
Source MarketBeat
