FOSL

• Core Strategic Turnaround Pillars: Progress across the three turnaround pillars has been on track, driving improving profitability and setting the stage for a return to top-line growth:
  • Return to profitable growth: The company is strengthening the core Fossil brand platform via sustained product innovation, leveraging 40+ years of design heritage to turn nostalgia into a competitive advantage. The brand has been nominated for three 2026 Watch Pro Awards (American Watch Brand of the Year, Volume Watch Brand of the Year, Best Marketing Campaign) in recognition of product and marketing strength. Upcoming launches include the premium Machine X1 evolution, and the new Swiss-made Signature collection launching in October 2024 as part of the brand’s premiumization strategy. Marketing investment has been accelerated, with a digital-first, culture-focused approach driving strong consumer engagement, including a high-impact K-pop event in Malaysia that generated 600,000 impressions in one day.
  • Omnichannel optimization: The company is modernizing wholesale partnerships, growing specialty retail footprint driven by strong innovation, full-price selling discipline, and engaging storytelling. DTC e-commerce is seeing higher margins and AUR from full-price integrity and improved customer experience. The

• Full-year 2026 worldwide net sales guidance was raised from an expected 4-6% year-over-year decline to a narrower 3-5% decline. Approximately 360 bps of the full-year net sales decline comes from the net impact of store closures and an extra week in 2025’s results, and management maintains its expectation that the company will return to year-over-year top-line growth in Q4 2026.
• Full-year 2026 adjusted operating margin guidance was raised from the prior 3-5% range to 4-6%.
• Full-year 2026 gross margins are now expected to land in the upper 50% range, with Q2 2026 gross margins reaching 62.4%, up 490 bps year-over-year, supported by full-price selling discipline, supply chain improvements, and lower year-over-year tariffs.
• Management now expects to generate positive full-year 2026 free cash flow, an upgrade from prior outlooks.

Fossil Group’s total Q2 2026 net sales came to $211 million, a 4% year-over-year decline (with 220 bps of the decline attributable to the ongoing store closure program). The Fossil brand traditional watch business delivered 12% global growth in the wholesale channel, with 16% traditional watch growth in the key U.S. wholesale market. Core licensed brands showed mixed but generally improving performance: Michael Kors watches and jewelry delivered improved results across key channels and geographies; Emporio Armani generated strong sell-through driven by premium innovation; Armani Exchange benefited from new products and celebrity collaborative curated events. By region, the U.S. saw mid-single-digit growth that stabilized the overall Americas region, the Asia region grew 4% led by double-digit growth in India across all brands and channels, and the EMEA region faced ongoing headwinds linked to Middle East geopolitical volatility. Direct-to-consumer channels saw improved average unit retail (AUR) and product margins from the company’s full-price selling strategy, with the

• Geopolitical volatility in the Middle East is creating growing headwinds for the EMEA region, including reduced travel retail activity that negatively impacts regional results.
• Short-term profitability pressure from recent business model transitions (converting South Africa to a distributor model and Malaysia/Singapore to a new hybrid operating model) will create temporary top-line headwinds even as they reduce long-term operating costs and improve bottom-line profitability.
• Macroeconomic uncertainty, including potential commodity price volatility and broader market instability, could impact consumer demand and alter the trajectory of the company’s return to growth.
• Minimum royalty shortfalls for licensed brands create a modest ongoing margin headwind, with a ~150 bps impact recorded in Q2 2026.

Q: What is required for traditional watches to deliver consistent, sustainable year-over-year revenue growth after the strong recent performance? / A: Management states that sustained growth depends entirely on ongoing innovation in design, creativity, product storytelling, and technology. The company is already ahead of its original turnaround plan for traditional watches, with 12% global wholesale growth in Q2 2026 exceeding expectations. Teams have built a strong pipeline of upcoming new products for the second half of 2026 and 2027, and management aims to continue leveraging the 40-year-old Fossil brand’s existing emotional connection with consumers to drive sustained growth.

Q: How does 2026 marketing strategy and spending differ from 2025, and what are future plans? / A: After downsizing and simplifying the corporate structure, the company is reallocating more cost savings to demand creation marketing across the full year, rather than concentrating large campaigns in the back half. The company is shifting spending from lower-funnel performance marketing to upper-funnel brand building to drive long-term brand strength. Key 2026 campaigns like the Big Tick Y2K campaign have already earned industry recognition, and existing celebrity partners like Nick Jonas will continue to be leveraged with channel-specific storytelling to expand the consumer funnel.

Q: What are the drivers of Q4 2026’s expected return to top-line growth, and how much visibility does management have into this target? / A: The return to growth is expected to come from a combination of new product launches, wholesale door expansion, easier year-over-year comparables, improved in-store product presentation, and stronger partner confidence. While management notes it cannot control external macroeconomic factors, it has high confidence in its product pipeline, marketing plans, and operational discipline, with wholesale partners reporting renewed enthusiasm for the refreshed Fossil Group product portfolio.

Q: What is driving weakness in EMEA, and what actions are being taken to stabilize the region? / A: EMEA weakness stems largely from geopolitical disruption in the Middle East that has suppressed travel retail demand, compounded by short-term headwinds from recent business model transitions that shift direct territories to distribution partners to reduce long-term risk and costs. Management notes EMEA was the company’s best-performing region in 2025, and it is taking a long-term approach, prioritizing profitability over short-term sales growth while supporting the regional team to stabilize performance.