Fossil Group (FOSL) Q4 2024 earnings summary

Executive summary

• Q4 net sales were $342 million, down 18–19% year-over-year, impacted by the exit from smartwatches and store closures.

• Gross margin in Q4 expanded by 630 basis points to 53.9%, driven by improved product margins and category exits.

• Adjusted operating income for Q4 was $20–20.1 million (5.9–6% margin), up from a loss last year.

• A comprehensive turnaround plan is underway, focusing on core brands, cost structure, and balance sheet, with new leadership appointments.

• Full year 2024 net sales were $1.15 billion, down 18.9% year-over-year; adjusted operating loss was $34.3 million.

Financial highlights

• Q4 adjusted net income was $21.2 million (EPS $0.39); reported net loss was $7.6 million (EPS $(0.14)).

• Q4 adjusted EBITDA was $23.1 million (6.7% of sales); full year adjusted EBITDA was $(11.6) million.

• SG&A expenses fell by 17%, driven by store closures, workforce reduction, and lower marketing spend.

• Inventory at year-end was $178.6 million, down 29.4% year-over-year.

• Positive free cash flow of $30 million was generated in Q4; year-end liquidity was $177 million (cash $124 million, $53 million revolver availability).

Outlook and guidance

• 2025 net sales expected to decline in the mid to high teens, with $45 million impact from store closures and further impact from reduced promotional activity.

• Gross margin is expected to improve further in 2025, supported by sourcing initiatives and a shift to full-price selling.

• SG&A savings of approximately $100 million targeted for 2025, driven by workforce reduction, store closures, and distributor model transitions.

• Full-year 2025 adjusted operating margin expected in the negative low single digits, with a return to adjusted operating income profitability projected for 2026.

• By 2027, the business aims for net sales over $800 million, mid-single-digit adjusted operating margin, and positive free cash flow.