Fossil Group, Inc. Q3 FY2024 earnings call

• Franco Fogliato emphasized his admiration for the Fossil brand, his experience leading global brands, and his focus on redefining and focusing on the core business, rightsizing the business, and strengthening the balance sheet. - He mentioned prioritizing redefining the core, including reassessing non-core assets, working on a new brand platform, adjusting promotion, and leveraging product lines. - Andrew Skobe discussed financial results, store closures (7 stores closed in Q3, 53 year-to-date with up to 58 expected by year-end), margin expansion, SG&A cost reductions, and progress on asset monetization and strategic review.

Third quarter net sales totaled $288 million, down 16% in constant currency. 600 basis points of the decline is attributable to smartwatch exit and store closures. Fossil traditional watches declined 4% globally on a comp basis in Q3, while India was up about 10% excluding connected. Gross margin expanded 240 basis points versus last year to 49.4% due to smartwatch exit, retail pricing, promotional initiatives, and account renegotiations, partially offset by incremental royalties. SG&A expenses were down $31 million to $161 million, a 16% decrease due to lower store operating costs, reduced compensation and administrative expenses, and decreased marketing spend. Adjusted operating loss narrowed to $19 million in Q3 from $31 million last year.

• Revised full-year outlook: worldwide net sales expected to be approximately $1.1 billion. - Adjusted operating margin loss expected to range from negative 6% to negative 8%. - Expected positive cash flow in 2024 with sufficient liquidity. - On track to achieve at least $100 million of annualized P&L benefits in 2024 under TAG Plan. - Restructuring costs related to TAG estimated at approximately $40 million for full year 2024.