Financial Performance - Second quarter worldwide net sales decreased to $260 million, down 19% on a reported basis and 18% in constant currency, impacted by the exit from the smartwatch category and retail store optimization[1] - Operating loss was $34 million compared to a loss of $35 million in the prior year, with an adjusted operating loss of $17 million compared to $28 million last year[2] - Net loss totaled $38.8 million with a net loss per diluted share of $0.73, compared to a net loss of $26.5 million and $0.51 per diluted share in the prior year[9] - The net loss attributable to Fossil Group, Inc. for the 13 weeks ended June 29, 2024, was $(38.8) million, compared to a net loss of $(26.5) million for the same period in 2023[15] - The company reported an adjusted EBITDA of $(29.3) million for Fiscal Q3 2023, compared to $(1.6) million in Q4 2022, indicating a significant decline[21] - The adjusted net income for the fiscal year was $(25.1) million, with a significant drop in performance compared to previous periods[24] Revenue and Sales - The company anticipates full year 2024 worldwide net sales of approximately $1.2 billion, reflecting consumer and channel softness, including a $100 million negative impact from the smartwatch exit[13] - Net sales for the 13 weeks ended June 29, 2024, were $260.0 million, a decrease of 19.3% compared to $322.0 million for the same period in 2023[15] - Total net sales for the Americas segment were $119.6 million for the 13 weeks ended June 29, 2024, down from $146.7 million in the same period last year[18] Cost Management and Expenses - SG&A expenses were $154 million, down 18% year-over-year, primarily due to lower compensation costs from efficiencies under the TAG Plan[2] - Total operating expenses for the 13 weeks ended June 29, 2024, were $170.9 million, representing 65.7% of net sales, compared to 59.6% in the same period last year[15] - Interest expense for Fiscal Q3 2023 was $5.8 million, slightly down from $5.9 million in Q4 2022, while total interest expenses for the fiscal year reached $20.7 million[21] - The company experienced a restructuring expense of $16.0 million in Fiscal Q3 2023, contributing to a total of $58.3 million for the fiscal year[21] Profitability and Margins - Gross margins expanded 390 basis points to 52.6%, reflecting progress under the TAG Plan[1] - Fiscal year adjusted operating margin is expected to be in the range of -3% to -5%[13] - The operating margin for the fiscal year was reported at (13.1)% of net sales, reflecting ongoing challenges in profitability[24] Strategic Initiatives - The TAG Plan is expected to generate additional annualized operating income benefits of at least $100 million in 2024, with restructuring costs estimated at $40 million for the fiscal year[11] - The company is conducting a strategic review of its business model and capital structure, which may include additional debt and equity financing options[12] - The company plans to continue its market expansion efforts despite the current challenges, focusing on new product development and technology advancements[21] Assets and Liquidity - Inventory totaled $202 million, a decrease of 38% versus a year ago, with total liquidity of $156 million at quarter end[2] - Total assets decreased to $785.7 million as of June 29, 2024, down from $1,073.4 million as of July 1, 2023[16] - Cash and cash equivalents decreased to $104.9 million as of June 29, 2024, compared to $132.1 million as of July 1, 2023[16] Store Operations - Store count decreased from 315 stores on July 1, 2023, to 258 stores by June 29, 2024, with 62 stores closed during this period[28] Product Development - The company is focused on innovation and expanding its product offerings, including traditional and smartwatches, which generated $202.5 million in sales for the 13 weeks ended June 29, 2024[18]

"On behalf of the Board and management team, I want to thank Sunil for his leadership and dedication over the past four years," said Jeffrey N. Boyer, Interim CEO. "We wish him well as he pursues the next chapter in his career." Fossil today said that it is affirming its 2024 outlook, including worldwide net sales of approximately $1.2 billion, adjusted operating margin1 in the range of -3% to -5% and positive free cash flow2, inclusive of tax refunds of approximately $57 million, which were received in the ...

Believe it or not, electric vehicles do outperform their fossil fuel counterparts in some ways. From the perspective of sheer performance, that most obviously manifests as dramatically faster acceleration times. EV stocks to buy also outperform their fossil fuel counterparts in several important ways. I'll explain that in more depth throughout the article but it essentially all boils down to pricing. The average cost of an electric vehicle was greater than $55,000 in April 2024. The average price for a new ...

Group 1: Rivian (RIVN) - Rivian is a leading American EV company with potential for significant growth, currently trading at a discount, making it an attractive investment opportunity [2] - The company is expanding its product line and is focused on the highly anticipated R2 model, alongside building a $5 billion production facility in Georgia to increase production capacity [2] - Rivian has over $10 billion in cash reserves, which provides financial stability and reduces bankruptcy risk, while its revenue has grown over 100% in the past year [9] Group 2: Li Auto (LI) - Li Auto is a prominent Chinese EV manufacturer specializing in SUVs, addressing the common issue of limited range in EVs with its range extenders [4] - The company plans to invest over 6 billion yuan to establish 5,000 charging stations, creating a new revenue stream and enhancing accessibility for consumers [4] - Li Auto reported a remarkable 270% year-over-year growth in revenue, reaching $34.7 billion, and maintains consistent profitability, reducing bankruptcy risk [10] Group 3: General Motors (GM) - General Motors is a major automotive manufacturer that has heavily invested in its EV segment, delivering over 75,000 EVs in 2023 and projecting production of 200,000 to 300,000 EVs in 2024 [6] - The company plans to invest $35 billion in EV development through 2024, positioning itself advantageously against smaller competitors [6] - GM sold approximately 6.2 million cars in 2023, generating nearly $140 billion in revenue, with a profit margin of about 7%, allowing for substantial R&D investment in EVs [11] Group 4: Industry Overview - The EV market is rapidly growing, with around 20% of cars sold in the U.S. being EVs, valued at $50 billion in 2022, and expected to grow at a compound annual growth rate of 15.5% from 2023 to 2032 [8]

Group 1 - Zacks Investment Research has initiated coverage of Fossil Group, Inc. with a "Neutral" recommendation, highlighting both potential and challenges for the company [1] - Fossil is implementing its Transform and Grow (TAG) plan, which has resulted in a 300-basis-point improvement in gross margins and a 20% reduction in operating expenses in Q1 2024, aiming for $100 million in annualized benefits this year [2] - The company's core segments, particularly traditional watches and jewelry, are showing signs of stabilization despite revenue pressures [3] Group 2 - Fossil's geographic footprint and diverse product mix are strengths, with a robust presence in growth markets like India helping to offset weaker performance in other regions [4] - The company is enhancing its digital capabilities and marketing strategies, particularly in the traditional watch category, to strengthen direct-to-consumer channels and customer engagement [5] - Fossil aims for positive free cash flow in 2024 and recently received a $57 million tax refund under the CARES Act, providing financial support for its strategic plans [6] Group 3 - Despite positive developments, Fossil faces challenges, including significant sales declines in key segments like licensed fashion watches and leather products, which account for over 40% of revenues [7] - The strategic exit from unprofitable retail locations and the smartwatch category is expected to reduce revenues by approximately $100 million in 2024 [7] - Fossil shares are trading significantly lower than the industry average, reflecting investor concerns amid ongoing restructuring efforts [8] Group 4 - The comprehensive analysis by Zacks Investment Research provides detailed insights into Fossil's strategic initiatives, market challenges, and financial outlook, making it a valuable resource for investors [9]

[Executive Summary](index=1&type=section&id=Executive%20Summary) [First Quarter 2024 Highlights](index=1&type=section&id=1.1%20First%20Quarter%202024%20Highlights) Fossil Group reported a challenging first quarter of 2024 with a **significant decline** in worldwide net sales, primarily due to category and consumer softness, and strategic exits from the smartwatch category and retail store optimization Q1 2024 Key Financial Metrics | Metric | Q1 2024 (Reported) | Q1 2023 (Reported) | Change (YoY) | | :-------------------------------- | :------------------ | :------------------ | :------------- | | Worldwide Net Sales | **$255 million** | **$325 million** | **-22%** | | Gross Margin | **52.4%** | **49.4%** | **+300 bps** | | SG&A Expenses | **$152 million** | **$190.8 million** | **-20%** | | Operating Loss | **$(29) million** | **$(37) million** | **Narrowed** | | Adjusted Operating Loss | **$(19) million** | **$(25) million** | **Narrowed** | | Inventory | **$224 million** | **$336.5 million** | **-33%** | | Cash and Cash Equivalents | **$113 million** | **$127.1 million** | **-11.2%** | - Sales decline includes a **5-point impact** from strategic actions to exit the smartwatch category and optimize the retail store portfolio[5](index=5&type=chunk) - Gross margin **expansion** primarily reflects progress under the Transform and Grow ("TAG") Plan[5](index=5&type=chunk) - Subsequent to quarter end, the Company received a **$57 million** US tax refund associated with NOL carryback provisions from the CARES Act[5](index=5&type=chunk) [CEO Commentary](index=1&type=section&id=1.2%20CEO%20Commentary) Interim CEO Jeffrey Boyer highlighted solid execution of the TAG Plan, which improved gross margin and reduced operating expenses, **narrowing** the adjusted operating loss - The company is focused on strengthening its operating model and creating shareholder value[4](index=4&type=chunk) - Two new Directors with experience in operations, retail, turnarounds, governance, and leadership were welcomed to the Board[4](index=4&type=chunk) [First Quarter 2024 Financial Performance](index=3&type=section&id=First%20Quarter%202024%20Financial%20Performance) [Consolidated Income Statement Overview](index=3&type=section&id=2.1%20Consolidated%20Income%20Statement%20Overview) The company experienced a **significant decline** in net sales in Q1 2024, driven by broad market softness and strategic exits, yet gross margin improved due to the TAG plan and reduced costs, leading to a **narrower** operating loss and net loss for the quarter Consolidated Income Statement Data | Metric | Q1 2024 | Q1 2023 | Change (YoY) | | :-------------------------------- | :---------- | :---------- | :------------- | | Net Sales | **$254.9 million** | **$325.0 million** | **-21.6%** | | Gross Profit | **$133.5 million** | **$160.7 million** | **-16.9%** | | Gross Margin | **52.4%** | **49.4%** | **+300 bps** | | Operating Expenses | **$162.7 million** | **$198.0 million** | **-18%** | | Operating Expenses (% of Net Sales) | **63.8%** | **60.9%** | **+290 bps** | | Operating Loss | **$(29.2) million** | **$(37.3) million** | **Narrowed** | | Operating Margin | **(11.5)%** | **(11.5)%** | **Flat** | | Income (Loss) before Income Taxes | **$(30.4) million** | **$(39.6) million** | **Narrowed** | | Net Loss Attributable to Fossil Group, Inc. | **$(24.3) million** | **$(41.3) million** | **Narrowed** | | Diluted EPS | **$(0.46)** | **$(0.80)** | **Narrowed** | - Operating expenses in Q1 2024 included **$10.1 million** in restructuring costs, **up from** **$7.1 million** in Q1 2023[6](index=6&type=chunk) - The effective income tax rate was **20.1%** (benefit) in Q1 2024, **favorable** compared to **(4.1)%** (expense) in Q1 2023, due to **$9.6 million** of **favorable** discrete items[11](index=11&type=chunk) [Sales Performance by Segment and Product Category](index=3&type=section&id=2.2%20Sales%20Performance%20by%20Segment%20and%20Product%20Category) Worldwide net sales **decreased significantly** across all geographic segments and major product categories, primarily due to overall category, consumer, and channel softness, with strategic exits and store rationalization contributing approximately **5 points** to the sales **decrease** Net Sales by Segment (Constant Currency) | Segment | Q1 2024 (Constant Currency) | Q1 2023 (As Reported) | Change (YoY) | | :-------- | :-------------------------- | :-------------------- | :------------- | | Americas | **$109.2 million** | **$137.9 million** | **-21%** | | Europe | **$77.7 million** | **$105.7 million** | **-26%** | | Asia | **$67.7 million** | **$80.1 million** | **-15%** | Net Sales by Product Category (Constant Currency) | Product Category | Q1 2024 (Constant Currency) | Q1 2023 (As Reported) | Change (YoY) | | :----------------- | :-------------------------- | :-------------------- | :------------- |\ | Traditional Watches | **$186.5 million** | **$225.4 million** | **-17%** | | Smartwatches | **$8.9 million** | **$24.4 million** | **-63.5%** | | Leathers | **$27.8 million** | **$40.3 million** | **-32%** | | Jewelry | **$26.4 million** | **$29.0 million** | **-9%** | - Wholesale sales **declined** **21%** and direct-to-consumer sales **decreased** **22%** on a constant currency basis, while comparable retail sales **declined** **14%**[6](index=6&type=chunk) [Gross Margin and Operating Expenses](index=3&type=section&id=2.3%20Gross%20Margin%20and%20Operating%20Expenses) Gross margin **expanded** by **300 basis points** to **52.4%**, driven by the exit from the smartwatch category, reduced freight costs, improved product margins, and **favorable** currency impacts, while operating expenses **decreased** **18%** year-over-year but **increased** as a percentage of net sales - Gross margin **increase** reflects exiting the smartwatch category, reduced freight costs, improved product margins in core categories, and **favorable** currency impacts[6](index=6&type=chunk) - SG&A expenses were **$152.2 million**, **down** **20%** compared to Q1 2023, primarily due to lower compensation costs from TAG Plan efficiencies[6](index=6&type=chunk) [Operating Income (Loss) and Net Loss](index=3&type=section&id=2.4%20Operating%20Income%20%28Loss%29%20and%20Net%20Loss) The company reported an operating loss of **$29.2 million**, an improvement from **$37.3 million** in the prior year, with the operating margin remaining **flat** at **(11.5)%**, and the net loss also **narrowed** to **$24.3 million** from **$41.3 million** in Q1 2023 Operating Income and Net Loss Data | Metric | Q1 2024 | Q1 2023 | Change (YoY) | | :-------------------------------- | :---------- | :---------- | :------------- | | Operating Loss | **$(29.2) million** | **$(37.3) million** | **Narrowed** | | Operating Margin | **(11.5)%** | **(11.5)%** | **Flat** | | Net Loss Attributable to Fossil Group, Inc. | **$(24.3) million** | **$(41.3) million** | **Narrowed** | | Diluted EPS | **$(0.46)** | **$(0.80)** | **Narrowed** | - Interest expense **increased** slightly to **$5.1 million** from **$5.0 million**[6](index=6&type=chunk) - Other income (expense) was income of **$3.9 million**, **up from** **$2.7 million**[6](index=6&type=chunk) [Adjusted Financial Metrics](index=4&type=section&id=2.5%20Adjusted%20Financial%20Metrics) Fossil Group reported improved adjusted financial metrics for Q1 2024, with adjusted operating loss, adjusted net loss, and adjusted diluted EPS all **narrowing** compared to the prior year, reflecting the impact of strategic initiatives and cost management efforts Adjusted Financial Metrics Overview | Metric | Q1 2024 | Q1 2023 | Change (YoY) | | :-------------------------------- | :---------- | :---------- | :------------- | | Adjusted Operating Loss | **$(18.9) million** | **$(24.8) million** | **Narrowed** | | Adjusted Operating Margin | **(7.5)%** | **(7.7)%** | **+20 bps** | | Adjusted EBITDA | **$(10.7) million** | **$(16.4) million** | **Narrowed** | | Adjusted EBITDA (% of Net Sales) | **(4.2)%** | **(5.0)%** | **+80 bps** | | Adjusted Net Loss | **$(16.2) million** | **$(31.5) million** | **Narrowed** | | Adjusted Diluted EPS | **$(0.30)** | **$(0.61)** | **Narrowed** | - Currencies **favorably** affected net loss per diluted share by approximately **$0.03** in Q1 2024[11](index=11&type=chunk) [Balance Sheet and Liquidity](index=4&type=section&id=Balance%20Sheet%20and%20Liquidity) [Balance Sheet Summary](index=4&type=section&id=3.1%20Balance%20Sheet%20Summary) As of March 30, 2024, Fossil Group maintained total liquidity of **$122.8 million**, comprising cash and cash equivalents and available credit, while **significantly reduced** its inventory levels year-over-year, with total debt remaining substantial Balance Sheet Data | Metric | March 30, 2024 | April 1, 2023 | Change (YoY) | | :-------------------------- | :--------------- | :-------------- | :------------- | | Total Liquidity | **$122.8 million** | N/A | N/A | | Cash and Cash Equivalents | **$112.9 million** | **$127.1 million** | **-11.2%** | | Availability under Revolving Credit Facility | **$9.9 million** | N/A | N/A | | Inventories | **$224.1 million** | **$336.5 million** | **-33.4%** | | Total Debt | **$203.4 million** | **$235.1 million** | **-13.5%** | [Strategic Initiatives](index=4&type=section&id=Strategic%20Initiatives) [TAG Plan Update](index=4&type=section&id=4.1%20TAG%20Plan%20Update) Fossil Group remains on track with its Transform and Grow ("TAG") Plan, a comprehensive operational strategy aimed at reducing operating expenses, improving operating margins, and achieving profitable growth, targeting **$300 million** in annualized operating income benefits by 2025 - TAG Plan aims to drive **$300 million** in annualized operating income benefits by 2025[8](index=8&type=chunk) - The plan generated approximately **$125 million** in annualized operating income benefits in 2023[8](index=8&type=chunk) - Expected to generate additional annualized operating income benefits of **at least** **$100 million** in 2024[8](index=8&type=chunk) - Estimated restructuring costs associated with the TAG Plan are **$35 million** in fiscal year 2024, **down from** **$49 million** in fiscal year 2023[8](index=8&type=chunk) [Strategic Business Review](index=4&type=section&id=4.2%20Strategic%20Business%20Review) In March 2024, the company initiated a strategic review of its business model and capital structure to optimize operations through additional changes and further structural cost reductions, potentially exploring debt and equity financing options to strengthen the balance sheet - Strategic review includes efforts to optimize the business model through additional operational changes and structural cost reductions[9](index=9&type=chunk) - Potential options include additional debt and equity financing, and monetization of various assets to strengthen the balance sheet[9](index=9&type=chunk) - Evercore has been retained as the financial advisor for the strategic review[9](index=9&type=chunk) [Full Year 2024 Outlook](index=4&type=section&id=Full%20Year%202024%20Outlook) Fossil Group reiterated its full-year 2024 financial outlook, anticipating worldwide net sales of approximately **$1.2 billion**, impacted by consumer softness and strategic exits, and projects **positive** free cash flow for the full year, including a **$57 million** tax refund Full Year 2024 Outlook | Metric | Full Year 2024 Outlook | | :-------------------------- | :--------------------- | | Worldwide Net Sales | Approximately **$1.2 billion** | | Adjusted Operating Margin | **-3%** to **-5%** | | Free Cash Flow | **Positive** (inclusive of **$57 million** tax refund) | - Net sales outlook reflects approximately **$100 million negative impact** from the exit of the smartwatch business and retail store closures[10](index=10&type=chunk) [Company Information](index=5&type=section&id=Company%20Information) [About Fossil Group, Inc.](index=5&type=section&id=6.1%20About%20Fossil%20Group%2C%20Inc.) Fossil Group, Inc. is a global company specializing in lifestyle accessories, including watches, jewelry, handbags, and small leather goods, operating under a diverse portfolio of owned and licensed brands - Fossil Group is a global design, marketing, distribution, and innovation company specializing in lifestyle accessories[13](index=13&type=chunk) - Offerings include watches, jewelry, handbags, small leather goods, belts, and sunglasses[13](index=13&type=chunk) - Owned brands include Fossil, Michele, Relic, Skagen, and Zodiac; licensed brands include Armani Exchange, Diesel, DKNY, Emporio Armani, kate spade new york, Michael Kors, and Tory Burch[13](index=13&type=chunk) [Investor Relations](index=5&type=section&id=6.2%20Investor%20Relations) Contact information for investor relations is provided for inquiries regarding Fossil Group, Inc - Investor Relations contact: Christine Greany, The Blueshirt Group, (858) 722-7815, christine@blueshirtgroup.com[14](index=14&type=chunk) [Financial Statements and Non-GAAP Reconciliations](index=6&type=section&id=Financial%20Statements%20and%20Non-GAAP%20Reconciliations) [Consolidated Income Statement Data](index=6&type=section&id=7.1%20Consolidated%20Income%20Statement%20Data) This section presents the detailed consolidated income statement for the 13 weeks ended March 30, 2024, and April 1, 2023, showing net sales, cost of sales, gross profit, operating expenses, operating income (loss), interest expense, other income (expense), income (loss) before income taxes, provision for income taxes, and net income (loss) attributable to Fossil Group, Inc., along with earnings per share Consolidated Income Statement Data | ($ in millions, except per share data) | For the 13 Weeks Ended March 30, 2024 | For the 13 Weeks Ended April 1, 2023 | | :------------------------------------- | :------------------------------------ | :----------------------------------- | | Net sales | **$254.9** | **$325.0** | | Cost of sales | **121.4** | **164.3** | | Gross profit | **133.5** | **160.7** | | Gross margin | **52.4%** | **49.4%** | | Selling, general and administrative expenses | **152.2** | **190.8** | | Other long-lived asset impairments | **0.4** | **0.1** | | Restructuring charges | **10.1** | **7.1** | | Total operating expenses | **$162.7** | **$198.0** | | Operating income (loss) | **(29.2)** | **(37.3)** | | Interest expense | **5.1** | **5.0** | | Other income (expense) - net | **3.9** | **2.7** | | Income (loss) before income taxes | **(30.4)** | **(39.6)** | | Provision for income taxes | **(6.1)** | **1.6** | | Net income (loss) attributable to Fossil Group, Inc. | **$(24.3)** | **$(41.3)** | | Diluted Earnings per share | **$(0.46)** | **$(0.80)** | [Consolidated Balance Sheet Data](index=7&type=section&id=7.2%20Consolidated%20Balance%20Sheet%20Data) This section provides the consolidated balance sheet data as of March 30, 2024, and April 1, 2023, detailing assets (current and long-term), liabilities (current and long-term), and stockholders' equity Consolidated Balance Sheet Data | ($ in millions) | March 30, 2024 | April 1, 2023 | | :------------------------------------------ | :--------------- | :-------------- | | Cash and cash equivalents | **$112.9** | **$127.1** | | Accounts receivable - net | **134.4** | **168.9** | | Inventories | **224.1** | **336.5** | | Total current assets | **637.3** | **804.5** | | Total assets | **$891.0** | **$1,007.5** | | Accounts payable, accrued expenses and other current liabilities | **$294.9** | **$304.6** | | Total current liabilities | **295.4** | **305.1** | | Long-term debt | **202.9** | **234.6** | | Total long-term liabilities | **369.0** | **414.6** | | Stockholders' equity | **226.6** | **366.3** | | Total liabilities and stockholders' equity | **$891.0** | **$1,086.0** | [Constant Currency Financial Information](index=7&type=section&id=7.3%20Constant%20Currency%20Financial%20Information) This section explains the calculation and purpose of constant currency financial measures, which are non-GAAP, to help investors evaluate underlying business performance without foreign currency exchange rate fluctuations - Constant currency net sales are calculated by translating current fiscal year sales for foreign entities using prior fiscal year average exchange rates[17](index=17&type=chunk) Net Sales by Segment and Product Categories (Constant Currency) | ($ in millions) | Q1 2024 (As Reported) | Impact of Foreign Currency Exchange Rates | Q1 2024 (Constant Currency) | Q1 2023 (As Reported) | | :---------------- | :-------------------- | :---------------------------------------- | :-------------------------- | :-------------------- | | **Segment:** | | | | | | Americas | **$110.0** | **$(0.8)** | **$109.2** | **$137.9** | | Europe | **$78.7** | **$(1.0)** | **$77.7** | **$105.7** | | Asia | **$65.6** | **$2.1** | **$67.7** | **$80.1** | | Total net sales | **$254.9** | **$0.3** | **$255.2** | **$325.0** | | **Product Categories:** | | | | | | Traditional watches | **$186.5** | **$—** | **$186.5** | **$225.4** | | Smartwatches | **$8.9** | **$—** | **$8.9** | **$24.4** | | Leathers | **$27.6** | **$0.2** | **$27.8** | **$40.3** | | Jewelry | **$26.3** | **$0.1** | **$26.4** | **$29.0** | | Total net sales | **$254.9** | **$0.3** | **$255.2** | **$325.0** | [Adjusted EBITDA Reconciliation](index=8&type=section&id=7.4%20Adjusted%20EBITDA%20Reconciliation) This section defines Adjusted EBITDA as a non-GAAP financial measure and provides a reconciliation to the most directly comparable GAAP measure, income (loss) before income taxes, for Q1 2024 and prior periods - Adjusted EBITDA is defined as net income (loss) before income tax expense (benefit), plus interest expense, amortization and depreciation, impairment expense, other non-cash charges, stock-based compensation expense, restructuring expense, and unamortized debt issuance costs, minus interest income[19](index=19&type=chunk) Adjusted EBITDA Reconciliation | ($ in millions) | Q1 2024 | Q1 2023 | | :-------------------------------- | :------ | :------ | | Income (loss) before income taxes | **$(30.4)** | **$(39.6)** | | Plus: Interest expense | **5.1** | **5.0** | | Plus: Amortization and depreciation | **4.5** | **5.1** | | Plus: Impairment expense | **0.4** | **0.1** | | Plus: Stock-based compensation | **1.0** | **1.4** | | Plus: Restructuring expense | **10.1** | **7.1** | | Plus: Restructuring cost of sales | **(0.2)** | **5.3** | | Less: Interest Income | **1.1** | **0.6** | | **Adjusted EBITDA** | **$(10.7)** | **$(16.4)** | [Adjusted Operating Income, Net Income & EPS Reconciliation](index=10&type=section&id=7.5%20Adjusted%20Operating%20Income%2C%20Net%20Income%20%26%20EPS%20Reconciliation) This section provides reconciliations of Adjusted operating income (loss), Adjusted net income (loss), and Adjusted earnings (loss) per share to their most directly comparable GAAP financial measures for Q1 2024 and Q1 2023, excluding impairment and restructuring expenses for a clearer view of core operational performance - Adjusted operating income (loss) excludes impairment expense and restructuring expense[19](index=19&type=chunk) - Adjusted net income (loss) and Adjusted earnings (loss) per share exclude impairment expense, restructuring expense, and unamortized debt issuance costs[19](index=19&type=chunk) Adjusted Operating Income, Net Income & EPS Reconciliation (Q1 2024) | ($ in millions, except per share data) | As Reported | Adjustments | As Adjusted | | :------------------------------------- | :---------- | :---------- | :---------- | | Operating income (loss) | **$(29.2)** | **$10.3** (Restructuring Cost of Sales, Other Long-Lived Asset Impairment, Restructuring Expenses) | **$(18.9)** | | Operating margin (% of net sales) | **(11.5)%** | | **(7.5)%** | | Net income (loss) attributable to Fossil Group, Inc. | **$(24.3)** | **$8.1** (Restructuring Cost of Sales, Other Long-Lived Asset Impairment, Restructuring Expenses, Tax Impact) | **$(16.2)** | | Diluted earnings (loss) per share | **$(0.46)** | **$0.16** (Restructuring Cost of Sales, Other Long-Lived Asset Impairment, Restructuring Expenses) | **$(0.30)** | Adjusted Operating Income, Net Income & EPS Reconciliation (Q1 2023) | ($ in millions, except per share data) | As Reported | Adjustments | As Adjusted | | :------------------------------------- | :---------- | :---------- | :---------- | | Operating income (loss) | **$(37.3)** | **$12.5** (Restructuring Cost of Sales, Other Long-Lived Asset Impairment, Restructuring Expenses) | **$(24.8)** | | Operating margin (% of net sales) | **(11.5)%** | | **(7.7)%** | | Net income (loss) attributable to Fossil Group, Inc. | **$(41.3)** | **$9.8** (Restructuring Cost of Sales, Other Long-Lived Asset Impairment, Restructuring Expenses, Tax Impact) | **$(31.5)** | | Diluted earnings (loss) per share | **$(0.80)** | **$0.19** (Restructuring Cost of Sales, Other Long-Lived Asset Impairment, Restructuring Expenses) | **$(0.61)** | [Operational Data](index=11&type=section&id=Operational%20Data) [Store Count Information](index=11&type=section&id=8.1%20Store%20Count%20Information) Fossil Group's store count **decreased significantly** across all regions from April 1, 2023, to March 30, 2024, reflecting the company's strategic initiatives to optimize its retail store portfolio Store Count by Region | Region | April 1, 2023 | Opened | Closed | March 30, 2024 | | :------- | :------------ | :----- | :----- | :------------- | | Americas | **149** | **2** | **16** | **135** | | Europe | **99** | **2** | **28** | **73** | | Asia | **79** | **0** | **10** | **69** | | **Total stores** | **327** | **4** | **54** | **277** | - Total store count **decreased** by **50 stores** (**327** to **277**) over the year, with **54 stores closed** and **4 opened**[24](index=24&type=chunk) [Legal Disclosures](index=5&type=section&id=Legal%20Disclosures) [Safe Harbor Statement](index=5&type=section&id=9.1%20Safe%20Harbor%20Statement) This section contains a safe harbor statement, indicating that certain statements in the report are forward-looking and involve risks and uncertainties, listing various factors that could cause actual results to differ materially from those projected - Forward-looking statements include those regarding outlook, financial position, TAG plan benefits and expenses, liquidity, and strategic review[12](index=12&type=chunk) - Factors that could cause actual results to differ include worldwide economic conditions, risks related to restructuring, consumer spending patterns, supply chain disruptions, data security breaches, foreign currency valuations, competition, and compliance with debt covenants[12](index=12&type=chunk) - The company assumes no obligation to publicly update or revise any forward-looking statements, except as required by law[12](index=12&type=chunk)

COCONUT CREEK, Fla., April 18, 2024 (GLOBE NEWSWIRE) -- Kanen Wealth Management, LLC, ("KWM") owner of approximately 4% of the Fossil Group, Inc.'s (NASDAQ:FOSL) 7% Senior Notes due 2026 (NASDAQ:FOSLL), issues the following open letter to the Company's Directors: Dear FOSL Directors, Fossil is a $1 bill + co., and a solid brand with ample opportunity, one that enjoys high gross margins in excess of 50%. Judging by the actions of the board and management, there is a lack of urgency in executing its strategic ...

Use these links to rapidly review the document TABLE OF CONTENTS PART IV Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-41040 FOSSIL GROUP, INC. (Exact name of re ...

[Executive Summary & Strategic Overview](index=1&type=section&id=Executive%20Summary%20%26%20Strategic%20Overview) This section provides a high-level overview of leadership changes, key financial highlights, and the 2024 outlook [Leadership Transition and Strategic Direction](index=1&type=section&id=Leadership%20Transition%20and%20Strategic%20Direction) Fossil Group appointed Jeffrey N. Boyer as Interim CEO, achieved **$125 million** in TAG Plan savings, and initiated a strategic review - Jeffrey N. Boyer has been appointed Interim Chief Executive Officer, effective immediately[2](index=2&type=chunk) - Achieved **$125 million** of annualized cost savings in 2023 under the Transform and Grow (TAG) Plan[3](index=3&type=chunk) - Exited the smartwatch category and closed underperforming retail stores[3](index=3&type=chunk) - Initiated a strategic review of the current business model and capital structure with the goal of maximizing shareholder value[3](index=3&type=chunk) [Fourth Quarter and Full Year 2023 Financial Highlights](index=1&type=section&id=Fourth%20Quarter%20and%20Full%20Year%202023%20Financial%20Highlights) Q4 and FY2023 net sales declined significantly, resulting in increased operating losses and diluted losses per share Fourth Quarter 2023 Financial Highlights | Metric | Value (Q4 2023, USD) | Change (YoY) | | :----- | :-------------- | :----------- | | Worldwide Net Sales | $421 million | -16% (reported), -17% (constant currency) | | Operating Loss | $(24.0) million | vs. $1.3 million income (Q4 2022) | | Diluted Loss Per Share | $(0.54) | vs. $(0.18) (Q4 2022) | Full Year 2023 Financial Highlights | Metric | Value (FY 2023, USD) | Change (YoY) | | :----- | :-------------- | :----------- | | Worldwide Net Sales | $1,412 million | -16% (reported & constant currency) | | Operating Loss | $(143) million | vs. $(1) million loss (FY 2022) | | Adjusted Operating Loss | $(92) million | vs. $7 million income (FY 2022) | | Diluted Loss Per Share | $(3.00) | vs. $(0.85) (FY 2022) | - Cash and cash equivalents as of December 30, 2023: **$117 million**[4](index=4&type=chunk) [Full Year 2024 Outlook](index=4&type=section&id=Full%20Year%202024%20Outlook) Fossil Group anticipates further net sales decline in 2024, projecting negative adjusted operating margin but positive free cash flow Full Year 2024 Outlook | Metric | Expectation | | :----- | :---------- | | Worldwide Net Sales | Approximately $1.2 billion (reflecting $100 million negative impact from smartwatch exit, store closures, currency, and market softness) | | Adjusted Operating Margin | -3% to -5% | | Free Cash Flow | Positive (inclusive of an anticipated tax refund of approximately $56 million in Q2 2024) | [Detailed Financial Results](index=2&type=section&id=Detailed%20Financial%20Results) This section presents a comprehensive analysis of Fossil Group's operating results for Q4 and full fiscal year 2023 [Fourth Quarter 2023 Operating Results](index=2&type=section&id=Fourth%20Quarter%202023%20Operating%20Results) Q4 2023 net sales declined significantly across all regions and channels, resulting in an operating loss and increased net loss per diluted share [Net Sales Performance (Q4 2023)](index=2&type=section&id=Net%20Sales%20Performance%20(Q4%202023)) Q4 2023 net sales decreased by **15.6%** (reported) and **16.9%** (constant currency), driven by wholesale weakness and broad declines Q4 2023 Net Sales Overview | Metric | Value (Q4 2023, USD) | Change (YoY) | | :----- | :--------------- | :----------- | | Net Sales (Reported) | $421.3 million | -15.6% | | Net Sales (Constant Currency) | $414.8 million | -16.9% | - Sales decrease largely driven by weakness in the wholesale channel, store rationalization initiatives, and lower smartwatch sales due to category exit[5](index=5&type=chunk) - Regional sales declines (constant currency): Europe **-22%**, Asia **-16%**, Americas **-12%**[5](index=5&type=chunk) - Channel sales declines (constant currency): Wholesale **-19%**, Direct to consumer **-14%** (comparable retail sales **-10%**)[5](index=5&type=chunk) [Gross Profit and Margin (Q4 2023)](index=2&type=section&id=Gross%20Profit%20and%20Margin%20(Q4%202023)) Q4 2023 gross profit decreased to **$200.5 million**, while gross margin slightly increased by **40 basis points** to **47.6%** Q4 2023 Gross Profit & Margin | Metric | Value (Q4 2023, USD) | Value (Q4 2022, USD) | Change (YoY) | | :----- | :-------------- | :-------------- | :----------- | | Gross Profit | $200.5 million | $235.4 million | -14.8% | | Gross Margin | 47.6% | 47.2% | +40 bps | - Gross margin increase primarily reflects reduced freight and inventory costs, partially offset by unfavorable product mix (smartwatch exit) and minimum licensor product royalties[5](index=5&type=chunk) [Operating Expenses and Income (Q4 2023)](index=2&type=section&id=Operating%20Expenses%20and%20Income%20(Q4%202023)) Q4 2023 total operating expenses decreased, but rose to **53.3%** of net sales, leading to an operating loss of **$24.0 million** Q4 2023 Operating Expenses & Income | Metric | Value (Q4 2023, USD) | Value (Q4 2022, USD) | Change (YoY) | | :----- | :--------------- | :-------------- | :----------- | | Total Operating Expenses | $224.5 million | $234.1 million | -4.1% | | Operating Expenses (% of Net Sales) | 53.3% | 46.9% | +640 bps | | SG&A Expenses | $207.7 million | $232.2 million | -10.6% | | Operating Income (Loss) | $(24.0) million | $1.3 million | From income to loss | | Operating Margin | (5.7)% | 0.3% | -600 bps | | Adjusted Operating Loss | $(8.5) million | $3.2 million income | From income to loss | | Adjusted Operating Margin | (2.0)% | 0.6% | -260 bps | - SG&A decline largely driven by lower compensation costs related to TAG Plan initiatives[5](index=5&type=chunk) - Operating expenses as a percentage of net sales increased due to deleveraging on lower sales[5](index=5&type=chunk) [Net Loss and EPS (Q4 2023)](index=2&type=section&id=Net%20Loss%20and%20EPS%20(Q4%202023)) Q4 2023 net loss widened to **$28.2 million** and diluted loss per share to **$0.54** Q4 2023 Net Loss & EPS | Metric | Value (Q4 2023, USD) | Value (Q4 2022, USD) | Change (YoY) | | :----- | :--------------- | :-------------- | :----------- | | Net Loss | $(28.2) million | $(9.4) million | -200% | | Diluted Loss Per Share | $(0.54) | $(0.18) | -200% | | Adjusted Net Loss | $(16.0) million | $(7.0) million | -128.6% | | Adjusted Loss Per Diluted Share | $(0.30) | $(0.14) | -114.3% | - Currencies favorably affected loss per diluted share by approximately **$0.01** in Q4 2023[5](index=5&type=chunk) [Cash Flow from Operating Activities (Q4 2023)](index=2&type=section&id=Cash%20Flow%20from%20Operating%20Activities%20(Q4%202023)) Q4 2023 cash flow from operating activities decreased to **$49 million** from **$104 million** - Cash flow from operating activities: **$49 million** in Q4 2023 compared to **$104 million** in Q4 2022[5](index=5&type=chunk) [Full Year 2023 Operating Results](index=3&type=section&id=Full%20Year%202023%20Operating%20Results) FY 2023 saw substantial net sales decline, decreased gross margin, and a widened operating loss and net loss per diluted share [Net Sales Performance (FY 2023)](index=3&type=section&id=Net%20Sales%20Performance%20(FY%202023)) FY 2023 net sales decreased by **16.0%** (reported) and **15.9%** (constant currency) to **$1.4 billion**, driven by wholesale weakness FY 2023 Net Sales Overview | Metric | Value (FY 2023, USD) | Change (YoY) | | :----- | :-------------- | :----------- | | Net Sales (Reported) | $1.4 billion | -16.0% | | Net Sales (Constant Currency) | $1.4145 billion | -15.9% | - Sales decrease largely driven by weakness in the wholesale channel. Declines in smartwatch sales and store rationalization initiatives comprised approximately **5** points of the annual sales decline[6](index=6&type=chunk) - Regional sales declines (constant currency): Europe **-21%**, Americas **-14%**, Asia **-10%**[6](index=6&type=chunk) - Product category sales declines (constant currency): Traditional watches **-12%**, Leathers **-11%**, Jewelry **-15%**[6](index=6&type=chunk) [Gross Profit and Margin (FY 2023)](index=3&type=section&id=Gross%20Profit%20and%20Margin%20(FY%202023)) FY 2023 gross profit decreased to **$679.6 million**, and gross margin declined by **130 basis points** to **48.1%** FY 2023 Gross Profit & Margin | Metric | Value (FY 2023, USD) | Value (FY 2022, USD) | Change (YoY) | | :----- | :-------------- | :-------------- | :----------- | | Gross Profit | $679.6 million | $830.7 million | -18.2% | | Gross Margin | 48.1% | 49.4% | -130 bps | - Gross margin decrease primarily reflects increased promotions, licensor minimum royalty costs, and unfavorable currency and product mix impact, driven by the exit from the smartwatch category. These costs were partially offset by reduced freight expense[6](index=6&type=chunk) [Operating Expenses and Loss (FY 2023)](index=3&type=section&id=Operating%20Expenses%20and%20Loss%20(FY%202023)) FY 2023 total operating expenses slightly decreased, but rose to **58.2%** of net sales, leading to a widened operating loss of **$143.0 million** FY 2023 Operating Expenses & Loss | Metric | Value (FY 2023, USD) | Value (FY 2022, USD) | Change (YoY) | | :----- | :--------------- | :-------------- | :----------- | | Total Operating Expenses | $822.6 million | $832.2 million | -1.2% | | Operating Expenses (% of Net Sales) | 58.2% | 49.5% | +870 bps | | SG&A Expenses | $777.2 million | $823.7 million | -5.6% | | Operating Loss | $(143.0) million | $(1.5) million | -9433% | | Operating Margin | (10.1)% | (0.1)% | -1000 bps | | Adjusted Operating Loss | $(92.0) million | $7.0 million income | From income to loss | | Adjusted Operating Margin | (6.5)% | 0.4% | -690 bps | - SG&A expenses reduction driven by lower operating costs, primarily from initiatives in the TAG Plan[6](index=6&type=chunk) - Operating expenses as a percentage of net sales increased mainly driven by deleveraging on lower sales[6](index=6&type=chunk) [Net Loss and EPS (FY 2023)](index=3&type=section&id=Net%20Loss%20and%20EPS%20(FY%202023)) FY 2023 net loss widened to **$157.0 million** and diluted loss per share to **$3.00** FY 2023 Net Loss & EPS | Metric | Value (FY 2023, USD) | Value (FY 2022, USD) | Change (YoY) | | :----- | :--------------- | :-------------- | :----------- | | Net Loss | $(157.0) million | $(44.2) million | -255.2% | | Diluted Loss Per Share | $(3.00) | $(0.85) | -252.9% | | Adjusted Net Loss | $(116.9) million | $(36.6) million | -219.4% | | Adjusted Loss Per Diluted Share | $(2.24) | $(0.71) | -215.5% | - Currencies unfavorably affected loss per diluted share by approximately **$0.10** during fiscal year 2023[6](index=6&type=chunk) [Cash Flow from Operating Activities (FY 2023)](index=3&type=section&id=Cash%20Flow%20from%20Operating%20Activities%20(FY%202023)) FY 2023 cash used in operations was **$59 million**, an improvement from **$111 million** - Cash used in operations: **$59 million** in fiscal year 2023 compared to **$111 million** used in the prior year[6](index=6&type=chunk) [Financial Position and Strategic Initiatives](index=4&type=section&id=Financial%20Position%20and%20Strategic%20Initiatives) This section details the company's balance sheet, TAG Plan updates, and the ongoing strategic business review [Balance Sheet Summary](index=4&type=section&id=Balance%20Sheet%20Summary) As of December 30, 2023, Fossil Group maintained **$181 million** in total liquidity, with inventories down **32.8%** Balance Sheet Highlights (as of Dec 30, 2023) | Metric | Value (USD) | | :----- | :---- | | Total Liquidity | $181 million | | Cash and Cash Equivalents | $117.2 million | | Inventories | $252.8 million (32.8% decrease YoY) | | Total Debt | $207.5 million | [Transform and Grow (TAG) Plan Update](index=4&type=section&id=Transform%20and%20Grow%20(TAG)%20Plan%20Update) The TAG Plan is on track for **$300 million** in annualized operating income benefits by 2025, generating **$125 million** in 2023 - TAG Plan generated approximately **$125 million** in annualized operating income benefits in 2023[8](index=8&type=chunk) - Expected to generate additional annualized operating income benefits of at least **$100 million** in 2024[8](index=8&type=chunk) - Remains on track to achieve the previously announced target of **$300 million** of annualized operating income benefits by the end of 2025[3](index=3&type=chunk) - Estimated restructuring costs: **$35 million** in fiscal year 2024 compared to **$49 million** in fiscal year 2023[8](index=8&type=chunk) [Strategic Business Review](index=4&type=section&id=Strategic%20Business%20Review) The company initiated a strategic review of its business model and capital structure to optimize operations and strengthen the balance sheet - Announced a strategic review of its current business model and capital structure[9](index=9&type=chunk) - Efforts include optimizing the business model through additional operational changes, further structural cost reductions, and strengthening the balance sheet[9](index=9&type=chunk) - Could include additional debt and equity financing options, including monetization of various assets[9](index=9&type=chunk) - Retained Evercore to act as its financial advisor[9](index=9&type=chunk) [Corporate Information and Disclosures](index=4&type=section&id=Corporate%20Information%20and%20Disclosures) This section provides information about Fossil Group, Inc., safe harbor statements, and regulatory disclosures [About Fossil Group, Inc.](index=5&type=section&id=About%20Fossil%20Group%2C%20Inc.) Fossil Group, Inc. is a global lifestyle accessories company, designing, marketing, and distributing watches, jewelry, and leather goods - Fossil Group, Inc. is a global design, marketing, distribution and innovation company specializing in lifestyle accessories[12](index=12&type=chunk) - Offerings include watches, jewelry, handbags, small leather goods, belts and sunglasses[12](index=12&type=chunk) - Owned brands: Fossil, Michele, Relic, Skagen and Zodiac. Licensed brands: Armani Exchange, Diesel, DKNY, Emporio Armani, kate spade new york, Michael Kors, and Tory Burch[12](index=12&type=chunk) [Safe Harbor Statement](index=4&type=section&id=Safe%20Harbor%20Statement) This section details forward-looking statements, cautioning that actual results may differ due to various risks and uncertainties - Certain statements are 'forward-looking statements' and involve a number of risks and uncertainties[11](index=11&type=chunk) - Factors that could cause actual results to differ materially include risks related to the success of the TAG Plan, Nasdaq listing requirements, activist shareholders, debt ratings, profitability, economic conditions, supply chain, currency fluctuations, competition, and litigation[11](index=11&type=chunk) - The Company assumes no obligation to publicly update or revise any forward-looking statements, except as required by law[11](index=11&type=chunk) [Additional Information and Participants](index=5&type=section&id=Additional%20Information%20and%20Participants) The company will file a proxy statement for its 2024 Annual Meeting, urging investors to review it for key information - The Company intends to file with the SEC a proxy statement on Schedule 14A for the 2024 Annual Meeting of Stockholders[13](index=13&type=chunk) - Investors and security holders are urged to read the Proxy Statement and any other relevant documents filed with the SEC carefully and in their entirety[13](index=13&type=chunk) - Information about Fossil's executive officers and directors and a description of their direct and indirect interests will be included in the Proxy Statement and other relevant materials[14](index=14&type=chunk) [Supplementary Financial Data and Reconciliations](index=6&type=section&id=Supplementary%20Financial%20Data%20and%20Reconciliations) This section offers detailed financial statements, constant currency information, and non-GAAP reconciliations [Consolidated Income Statement Data](index=6&type=section&id=Consolidated%20Income%20Statement%20Data) This section presents the detailed consolidated income statement for Q4 and full fiscal years 2023 and 2022 Consolidated Income Statement Data | Metric | Q4 2023 (USD) | Q4 2022 (USD) | FY 2023 (USD) | FY 2022 (USD) | | :---------------------------------- | :------ | :------ | :------ | :------ | | Net sales | $421.3 million | $499.1 million | $1,412.4 million | $1,682.4 million | | Gross profit | $200.5 million | $235.4 million | $679.6 million | $830.7 million | | Gross margin (% of net sales) | 47.6% | 47.2% | 48.1% | 49.4% | | Total operating expenses | $224.5 million | $234.1 million | $822.6 million | $832.2 million | | Operating income (loss) | $(24.0) million | $1.3 million | $(143.0) million | $(1.5) million | | Operating margin (% of net sales) | (5.7)% | 0.3% | (10.1)% | (0.1)% | | Net income (loss) attributable to Fossil Group, Inc. | $(28.2) million | $(9.4) million | $(157.0) million | $(44.2) million | | Diluted earnings (loss) per share | $(0.54) | $(0.18) | $(3.00) | $(0.85) | [Consolidated Balance Sheet Data](index=7&type=section&id=Consolidated%20Balance%20Sheet%20Data) This section presents the consolidated balance sheet data for December 30, 2023, and December 31, 2022 Consolidated Balance Sheet Data | Metric | Dec 30, 2023 (USD) | Dec 31, 2022 (USD) | | :---------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $117.2 million | $198.7 million | | Inventories | $252.8 million | $376.0 million | | Total current assets | $710.7 million | $945.3 million | | Total assets | $978.0 million | $1,238.1 million | | Total current liabilities | $342.5 million | $425.9 million | | Long-term debt | $207.0 million | $216.1 million | | Stockholders' equity | $251.7 million | $403.0 million | | Total liabilities and stockholders' equity | $978.0 million | $1,238.1 million | [Constant Currency Financial Information](index=7&type=section&id=Constant%20Currency%20Financial%20Information) This section explains constant currency net sales methodology and provides tables breaking down net sales by segment and product categories [Net Sales by Segment (Constant Currency)](index=8&type=section&id=Net%20Sales%20by%20Segment%20(Constant%20Currency)) This section breaks down net sales by geographic segment for Q4 and full year 2023 and 2022 Q4 2023 Net Sales by Segment (Constant Currency) | Segment | As Reported (USD) | Impact of Foreign Currency Exchange Rates (USD) | Constant Currency (USD) | As Reported (Q4 2022, USD) | | :------ | :---------- | :-------------------------------------- | :---------------- | :-------------------- | | Americas | $203.7 million | $(1.4) million | $202.3 million | $229.5 million | | Europe | $135.7 million | $(6.2) million | $129.5 million | $165.2 million | | Asia | $80.9 million | $1.1 million | $82.0 million | $98.0 million | | Corporate | $1.0 million | $— | $1.0 million | $6.4 million | | **Total** | **$421.3 million** | **$(6.5) million** | **$414.8 million** | **$499.1 million** | FY 2023 Net Sales by Segment (Constant Currency) | Segment | As Reported (USD) | Impact of Foreign Currency Exchange Rates (USD) | Constant Currency (USD) | As Reported (FY 2022, USD) | | :------ | :---------- | :-------------------------------------- | :---------------- | :-------------------- | | Americas | $640.8 million | $(2.3) million | $638.5 million | $744.0 million | | Europe | $437.4 million | $(8.8) million | $428.6 million | $541.3 million | | Asia | $328.2 million | $13.2 million | $341.4 million | $377.6 million | | Corporate | $6.0 million | $— | $6.0 million | $19.5 million | | **Total** | **$1,412.4 million** | **$2.1 million** | **$1,414.5 million** | **$1,682.4 million** | [Net Sales by Product Categories (Constant Currency)](index=8&type=section&id=Net%20Sales%20by%20Product%20Categories%20(Constant%20Currency)) This section details net sales by product category for Q4 and full year 2023 and 2022 Q4 2023 Net Sales by Product Category (Constant Currency) | Product Category | As Reported (USD) | Impact of Foreign Currency Exchange Rates (USD) | Constant Currency (USD) | As Reported (Q4 2022, USD) | | :--------------- | :---------- | :-------------------------------------- | :---------------- | :-------------------- | | Traditional watches | $300.9 million | $(4.5) million | $296.4 million | $328.6 million | | Smartwatches | $21.5 million | $(0.5) million | $21.0 million | $46.9 million | | Leathers | $51.8 million | $(0.2) million | $51.6 million | $67.3 million | | Jewelry | $40.4 million | $(1.2) million | $39.2 million | $47.6 million | | Other | $6.7 million | $(0.1) million | $6.6 million | $8.7 million | | **Total** | **$421.3 million** | **$(6.5) million** | **$414.8 million** | **$499.1 million** | FY 2023 Net Sales by Product Category (Constant Currency) | Product Category | As Reported (USD) | Impact of Foreign Currency Exchange Rates (USD) | Constant Currency (USD) | As Reported (FY 2022, USD) | | :--------------- | :---------- | :-------------------------------------- | :---------------- | :-------------------- | | Traditional watches | $1,015.1 million | $1.9 million | $1,017.0 million | $1,158.9 million | | Smartwatches | $80.9 million | $0.2 million | $81.1 million | $151.6 million | | Leathers | $158.5 million | $0.9 million | $159.4 million | $178.5 million | | Jewelry | $131.4 million | $(1.0) million | $130.4 million | $154.1 million | | Other | $26.5 million | $0.1 million | $26.6 million | $39.3 million | | **Total** | **$1,412.4 million** | **$2.1 million** | **$1,414.5 million** | **$1,682.4 million** | [Non-GAAP Financial Measures Explanation](index=9&type=section&id=Non-GAAP%20Financial%20Measures%20Explanation) This section defines non-GAAP financial measures like Adjusted EBITDA, Adjusted operating income, and Adjusted EPS - Defines Adjusted EBITDA as net income (loss) before the impact of income tax expense (benefit), plus interest expense, amortization and depreciation, impairment expense, other non-cash charges, stock-based compensation expense, restructuring expense and unamortized debt issuance costs included in loss on extinguishment of debt minus interest income[19](index=19&type=chunk) - Defines Adjusted operating income (loss) as operating income (loss) before impairment expense and restructuring expense[19](index=19&type=chunk) - Defines Adjusted net income (loss) and Adjusted earnings (loss) per share as net income (loss) attributable to Fossil Group, Inc. and diluted earnings (loss) per share, respectively, before impairment expense, restructuring expense and unamortized debt issuance costs included in loss on extinguishment of debt[19](index=19&type=chunk) [Adjusted EBITDA Reconciliation](index=9&type=section&id=Adjusted%20EBITDA%20Reconciliation) This section provides a detailed reconciliation of Adjusted EBITDA to income (loss) before income taxes for FY2023 and FY2022 Adjusted EBITDA Reconciliation (FY 2023) | Metric | Q1 (USD) | Q2 (USD) | Q3 (USD) | Q4 (USD) | Total (USD) | | :----- | :--- | :--- | :--- | :--- | :---- | | Income (loss) before income taxes | $(39.6) million | $(33.5) million | $(55.2) million | $(27.8) million | $(156.1) million | | Plus: Interest expense | $5.0 million | $5.3 million | $5.8 million | $5.7 million | $21.8 million | | Plus: Amortization and depreciation | $5.1 million | $4.8 million | $4.5 million | $4.6 million | $19.1 million | | Plus: Impairment expense | $0.1 million | $0.2 million | $0.6 million | $1.3 million | $2.2 million | | Plus: Stock-based compensation | $1.4 million | $1.6 million | $1.5 million | $1.1 million | $5.7 million | | Plus: Restructuring expense | $7.1 million | $4.6 million | $16.0 million | $15.5 million | $43.3 million | | Plus: Restructuring cost of sales | $5.3 million | $2.9 million | $(1.3) million | $(1.3) million | $5.5 million | | Less: Interest Income | $0.6 million | $0.8 million | $1.0 million | $0.9 million | $3.2 million | | **Adjusted EBITDA** | **$(16.4) million** | **$(15.4) million** | **$(29.3) million** | **$(1.6) million** | **$(62.6) million** | Adjusted EBITDA Reconciliation (FY 2022) | Metric | Q1 (USD) | Q2 (USD) | Q3 (USD) | Q4 (USD) | Total (USD) | | :----- | :--- | :--- | :--- | :--- | :---- | | Income (loss) before income taxes | $(16.7) million | $(16.9) million | $15.5 million | $(4.0) million | $(22.1) million | | Plus: Interest expense | $4.0 million | $4.3 million | $5.1 million | $5.8 million | $19.2 million | | Plus: Amortization and depreciation | $6.2 million | $5.8 million | $5.6 million | $5.7 million | $23.3 million | | Plus: Impairment expense | $0.3 million | $0.2 million | $0.6 million | $1.2 million | $2.4 million | | Plus: Stock-based compensation | $2.2 million | $3.8 million | $(0.3) million | $2.3 million | $8.0 million | | Plus: Restructuring expense | $2.6 million | $2.9 million | $— | $0.7 million | $6.1 million | | Plus: Unamortized debt issuance costs | $— | $— | $— | $1.1 million | $1.1 million | | Less: Interest Income | $0.1 million | $0.2 million | $0.1 million | $0.4 million | $0.8 million | | **Adjusted EBITDA** | **$(1.7) million** | **$(0.3) million** | **$26.0 million** | **$12.1 million** | **$36.1 million** | [Adjusted Operating Income, Net Income and EPS Reconciliation](index=10&type=section&id=Adjusted%20Operating%20Income%2C%20Net%20Income%20and%20EPS%20Reconciliation) This section provides detailed reconciliations of Adjusted operating income, net income, and EPS to GAAP measures Q4 2023 Adjusted Operating Income, Net Income & EPS Reconciliation | Metric | As Reported (USD) | Restructuring cost of sales (USD) | Other long-lived asset impairment (USD) | Restructuring expenses (USD) | As Adjusted (USD) | | :----- | :---------- | :-------------------------- | :-------------------------------- | :-------------------- | :---------- | | Operating income (loss) | $(24.0) million | $(1.3) million | $1.3 million | $15.5 million | $(8.5) million | | Net income (loss) attributable to Fossil Group, Inc. | $(28.2) million | $(1.0) million | $1.0 million | $12.2 million | $(16.0) million | | Diluted earnings (loss) per share | $(0.54) | $(0.02) | $0.02 | $0.23 | $(0.30) | FY 2023 Adjusted Operating Income, Net Income & EPS Reconciliation | Metric | As Reported (USD) | Restructuring cost of sales (USD) | Other long-lived asset impairment (USD) | Restructuring expenses (USD) | As Adjusted (USD) | | :----- | :---------- | :-------------------------- | :-------------------------------- | :-------------------- | :---------- | | Operating income (loss) | $(143.0) million | $5.5 million | $2.2 million | $43.3 million | $(92.0) million | | Net income (loss) attributable to Fossil Group, Inc. | $(157.1) million | $4.3 million | $1.7 million | $34.2 million | $(116.9) million | | Diluted earnings (loss) per share | $(3.00) | $0.08 | $0.03 | $0.65 | $(2.24) | FY 2022 Adjusted Operating Income, Net Income & EPS Reconciliation | Metric | As Reported (USD) | Other long-lived asset impairment (USD) | Restructuring expenses (USD) | Unamortized debt issuance costs included in loss on extinguishment of debt (USD) | As Adjusted (USD) | | :----- | :---------- | :-------------------------------- | :-------------------- | :---------------------------------------------------------------- | :---------- | | Operating income (loss) | $(1.5) million | $2.4 million | $6.1 million | $— | $7.0 million | | Net income (loss) attributable to Fossil Group, Inc. | $(44.2) million | $1.9 million | $4.8 million | $0.9 million | $(36.6) million | | Diluted earnings (loss) per share | $(0.85) | $0.04 | $0.09 | $0.01 | $(0.71) | [Store Count Information](index=12&type=section&id=Store%20Count%20Information) This section details store count by region, including openings and closures in 2023, with a total of **302** stores Store Count Information | Region | Dec 31, 2022 (number) | Opened (2023, number) | Closed (2023, number) | Dec 30, 2023 (number) | | :------- | :----------- | :------------ | :------------ | :----------- | | Americas | 151 | 2 | 10 | 143 | | Europe | 111 | 2 | 27 | 86 | | Asia | 80 | 1 | 8 | 73 | | **Total stores** | **342** | **5** | **45** | **302** |

Financial Data and Key Metrics Changes - Global sales for the third quarter were $344 million, down 21% or 22% in constant currency, with a $10 million headwind due to a timing shift from Q3 into Q4 [3][6][35] - Gross margin for Q3 was 47%, down 330 basis points year-over-year, impacted by various factors including minimum product royalties and foreign currency settlements [5][28] - Adjusted operating loss was $31 million, with an adjusted operating margin of negative 9% [28][41] Business Line Data and Key Metrics Changes - In the Americas, net sales declined 18% in constant currency, with wholesale channel sales down 23% [4][35] - The traditional watch category saw a 15% decline in sell-in, lagging behind a 6% decline in sell-out [4] - E-commerce sales grew by 8%, driven by investments in digital capabilities [17][49] Market Data and Key Metrics Changes - Sales in Europe declined 30% in constant currency, with wholesale channel sales down 36% [27] - In Asia, sales were down 14% in constant currency, with India showing a 6% growth while Mainland China sales declined 30% [50] - Retail store counts decreased, with 143 stores in the Americas and 87 in Europe, down 7% and 22% respectively [4][27] Company Strategy and Development Direction - The company is focused on revitalizing the FOSSIL brand and maximizing its licensed brand portfolio, with targeted investments in marketing [23][40] - The Transform and Grow Plan aims to achieve $300 million in annualized operating income benefits by 2025, with $80 million captured year-to-date in 2023 [22][48] - The company is addressing challenges in the wholesale channel and enhancing performance in third-party e-commerce [17][34] Management's Comments on Operating Environment and Future Outlook - Management noted that consumer spending is softening, particularly in discretionary categories, impacting sales [40][41] - The outlook for Q4 anticipates net sales declines of 8% to 19%, reflecting ongoing challenges in wholesale and store closures [6][41] - Management remains confident in the long-term trajectory for the brand, particularly in emerging markets and jewelry [30][40] Other Important Information - Working capital levels decreased by approximately $100 million or 24%, with inventory down 28% year-over-year [51] - The company is implementing various initiatives to improve gross margins and reduce organizational complexity [54] Q&A Session Summary Question: What are the key strategies to stabilize sales and when do you expect to see an inflection point? - The company is focusing on driving higher sell-throughs and profitability through various TAG initiatives, including SKU reductions and improved market pricing [30] Question: Could you provide more details on the TAG program and its progress? - The TAG program is on track to deliver $300 million in benefits, with $100 million expected by the end of 2024 [55] Question: How does the company view capital allocation in the near term given expected sales declines? - The focus is on preserving capital for business operations while executing the Transform and Grow plans, with expectations for healthier free cash flow in the long term [55]