Fossil Group returned to profitability in the third quarter by posting operating income of $25.3 million, reversing an operating loss of $21.7 million from the previous year.
The legacy watchmaker also recorded net sales of $271.2 million, marking a 0.4% increase that breaks a sales slump dating back to the first quarter of 2022.
For the quarter ended Oct. 3, Fossil reported net income of $11.7 million, or 19 cents per share, compared with a net loss of $39.9 million, or 76 cents per share, during the same period last year. Operating expenses fell 11.1% to $137 million.
“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,” Franco Fogliato told CNBC in an exclusive interview.
Sales Outlook and Full-Year Guidance
With these financial improvements, the retailer raised its full-year net sales outlook to between $980 million and $990 million. That forecast represents a slight decline from just over $1 billion in net sales the prior year, but improves upon previous expectations of a 3% to 5% sales drop. The company also expects positive free cash flow by the end of the year.
Fossil stock has lost the vast majority of its value since the early-to-mid 2010s due to slumping sales, debt, and declining mall foot traffic amid the rise of smartwatches. Despite a recent surge, shares traded under $8 each on Tuesday.
Restructuring and Analog Shift
Since joining the company in 2024, Fogliato has focused on closing stores, cutting back on promotions, broadening the product range, and improving marketing to establish a sustainable baseline.
Direct-to-consumer sales fell 5.9% in the third quarter as a result of the downsizing.
“We simplified a lot of the business doing this,” Fogliato said.
“People tell me they are excited about what they are seeing in the marketplace now,” Fogliato said.
As part of its strategy, Fossil is shifting away from smartwatches, which brought in under $1 million for the quarter. Instead, the company is reinvesting in traditional analog watches, which now account for roughly 86% of sales and grew 6.4% in the quarter.
Regional Growth and 2027 Strategy
Geographically, Asia served as a primary growth engine, posting a 15.1% net sales increase led largely by the market in India.
“Priority number one is to grow our home market, and we’re doing that,” Fogliato said.
“Fossil is literally having a comeback, a strong comeback, a momentum, and we can see this,” Fogliato said. “And it comes not only through the numbers — it comes with the excitement we see in the stores, and we think we’re just at the beginning. We have so much work to do.”
“As retail is settling into a smaller, more profitable base, ready to grow again, we’re entering 2027 with plenty of opportunities,” Fogliato said.