Fossil Group (FOSL) Q2 2025 earnings summary

Executive summary

• Q2 2025 delivered financial performance above expectations, with positive operating income of $8.5 million and operating margin of 3.9%, driven by cost reductions, restructuring, and gross margin expansion to 57.5%.

• Net sales declined 15.2% year-over-year to $220.4 million, mainly due to category softness, exit from smartwatches, and store closures.

• Achieved third consecutive quarter of gross margin expansion and positive adjusted operating income, supported by improved wholesale trends and better-than-expected retail sales despite reduced promotions.

• Focused on three turnaround pillars: refocusing on core business, right-sizing cost structure, and strengthening the balance sheet, with a new leadership team and major brand initiatives.

• Announced a comprehensive refinancing plan to strengthen the balance sheet and increase liquidity.

Financial highlights

• Gross margin improved to 57.5% (up 490 bps year-over-year), with Q2 gross profit at $126.7 million and operating expenses down 30.8% to $118.2 million.

• Adjusted operating income was $4 million (margin 1.7%), and adjusted EBITDA reached $7.0 million (3.2% of net sales).

• Net loss narrowed to $2.3 million (EPS $(0.04)), with adjusted net loss at $5.6 million (EPS $(0.10)).

• SG&A expenses reduced by $32 million to $122 million, with 44 fewer stores in operation year-over-year.

• Inventory levels down 12% year-over-year to $178 million; ended quarter with $110 million in cash and equivalents.

Outlook and guidance

• Raised full-year 2025 guidance: net sales expected to decline in the mid-teens, with a $40–$45 million impact from store closures.

• Adjusted operating margin now expected to be breakeven to slightly positive, versus prior guidance of a low single-digit negative margin.

• Gross margins expected in the mid to upper 50% range for the full year.

• SG&A cost savings of ~$100 million targeted for 2025, with further store closures and asset divestitures planned.

• Return to positive adjusted operating income expected in Q4.