Fossil Group (FOSL) Q2 2024 earnings summary

Executive summary

• Q2 2024 net sales declined 19.3% year-over-year to $260 million, primarily due to the exit from smartwatches and store closures as part of the TAG transformation plan.

• Gross margin expanded by 390 basis points to 52.6%, reflecting improved product margins and a lower smartwatch mix.

• Adjusted operating loss improved to $17 million from $28 million last year, while net loss widened to $38.8 million ($0.73 per share); adjusted net loss was $25.1 million ($0.47 per share).

• Inventory reduced 38% year-over-year to $202 million, and liquidity at quarter-end was $156 million.

• The TAG plan targets $300 million in annualized operating benefits by end of 2025, with $100–$120 million in total charges expected, including $40 million in 2024.

Financial highlights

• Q2 net sales: $260 million, down from $322 million in Q2 2023.

• Gross profit: $136.9 million (52.6% margin), up from 48.7% in Q2 2023.

• Operating loss: $34 million (vs. $35.3 million prior year); adjusted operating loss $16.7 million (vs. $27.6 million).

• Adjusted EBITDA: $(11.7) million, improved from $(15.4) million in Q2 2023.

• Cash and cash equivalents at quarter end: $104.9 million; total liquidity $156 million.

Outlook and guidance

• Full-year 2024 net sales expected at approximately $1.2 billion, with a $100 million negative impact from strategic actions.

• Adjusted operating margin loss forecasted at -3% to -5%.

• Positive free cash flow anticipated for full year 2024, including the $57 million tax refund received in Q2.

• TAG restructuring plan targets $300 million in annualized operating benefits by end of 2025, with $100–$120 million in total charges, including $40 million in 2024.