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Fossil Group reported signs of recovery on Tuesday, posting its first profitable quarter in more than a year as new leadership presses a turnaround strategy. The results show small sales gains and a swing to operating income that executives say validate recent changes to the business.
Sharp swing to profit
The heritage watchmaker recorded operating income of $25.3 million for the fiscal third quarter, reversing an operating loss of $21.7 million a year earlier. Net sales edged up 0.4% to $271.2 million, marking the company’s first year-over-year sales increase since the first quarter of fiscal 2022.
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Fossil reported net income of $11.7 million, or $0.19 per share, compared with a net loss of $39.9 million, or $0.76 per share, in the same quarter last year. Management also cut operating expenses by 11.1% to $137 million.
Restructuring the business
CEO Franco Fogliato, who joined Fossil in 2024, said the company deliberately shrank parts of the business to reach a more sustainable baseline before pursuing growth. That program included store closures, a reduction in promotional activity, and investments in marketing and product variety.
“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.
The retailer’s direct-to-consumer channel fell 5.9% in the quarter, a decline Fogliato attributed to the company’s “aggressive” downsizing of lower-performing footprints and promotions.
Where growth came from
International markets provided the clearest uplift. Asia led the quarter, with net sales up 15.1%, a recovery Fogliato said was largely driven by demand in India. At the same time, Fossil aims to rebuild momentum in its U.S. home market.
On product mix, traditional analog watches remain dominant, accounting for roughly 86% of sales. Fossil said sales of conventional watches rose 6.4% in the quarter. By contrast, smartwatch revenue was minimal, coming in at under $1 million for the period.
Guidance and next steps
Based on the stronger quarter, Fossil raised its full-year net sales guidance to a range of $980 million to $990 million, a slight dip from the prior year’s just-over-$1 billion total but an improvement from an earlier outlook that had expected a 3%–5% decline. Management also forecasts positive free cash flow by year-end.
Fogliato noted that earlier plans had assumed sales growth would not return for another 18 months. He suggested the company is now positioning itself to grow again from a smaller, more profitable base and flagged opportunities looking toward 2027.
Market context
The results follow several challenging years for Fossil, including pressure from the rise of smartwatches, increased debt and weaker mall traffic. The stock has lost most of its value since the early-to-mid 2010s and was trading below $8 per share on Tuesday.
“Fossil is literally having a comeback, a strong comeback, a momentum, and we can see this,” Fogliato said. He added that the recovery shows up both in the numbers and in renewed customer interest at retail, though he cautioned there is still “so much work to do.”
