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]

Consumer Spending and Market Environment - Fossil Group reported a cautious consumer spending environment due to macroeconomic factors, expecting continued pressure on discretionary spending in Q4 2023[98]. - Factors affecting actual results include changes in consumer spending patterns, supply chain interruptions, and competition in the market[184]. Financial Performance - Consolidated net sales decreased by $92.2 million, or 21.1%, in Q3 2023 compared to Q3 2022, with declines across all regions[126]. - Gross profit decreased by 26.4% to $161.7 million, with a gross profit margin of 47.0%, down from 50.3% in the prior year quarter[133]. - Total operating expenses increased by 5.5% to $208.1 million, representing 60.5% of net sales, compared to 45.2% in the prior year quarter[134]. - Operating loss was $46.4 million, with an operating margin of (13.5)%, compared to an operating income of $22.5 million and a margin of 5.2% in the prior year quarter[135]. - Net income attributable to Fossil Group, Inc. for the third quarter was a loss of $61.1 million, or $1.16 per diluted share, compared to a net income of $5.8 million, or $0.11 per diluted share, in the prior year[140]. - Adjusted net loss for the third quarter was $49.0 million, with an adjusted loss per diluted share of $0.93, compared to an adjusted net income of $6.3 million, or $0.12 per diluted share, in the prior year[141]. - Consolidated net sales decreased by $192.2 million, or 16.2% (15.5% in constant currency), for the year-to-date period compared to the prior year[146]. - Net loss attributable to Fossil Group, Inc. was $128.9 million, or $2.47 per diluted share, compared to a loss of $34.7 million, or $0.67 per diluted share, in the prior year YTD period[160]. - Adjusted net loss for the Year To Date Period was $101.0 million, with an adjusted loss per diluted share of $1.94, compared to an adjusted net loss of $29.5 million, or $0.57 per diluted share, in the prior year YTD period[161]. Sales Performance - Wholesale sales declined by 24.2% (25.4% in constant currency), driven by lower purchases by wholesale accounts and reduced consumer demand[126]. - Direct to consumer sales decreased by 11.4% (11.9% in constant currency), attributed to a reduced store footprint, which was down by 41 stores (12%) since the end of the prior year quarter[126]. - Net sales in the Americas decreased by $31.7 million, or 17.2% (17.6% in constant currency), primarily in the FOSSIL and MICHAEL KORS brands[128]. - Europe net sales decreased by $36.0 million, or 25.1% (29.6% in constant currency), with significant declines in MICHAEL KORS and FOSSIL brands[130]. - Asia net sales decreased by $17.2 million, or 17.2% (14.2% in constant currency), with notable declines in the EMPORIO ARMANI brand[132]. - Traditional watch sales decreased by 18.5% (19.4% in constant currency), while smartwatch sales declined by 48.0% (49.1% in constant currency)[126]. Operational Strategy and Initiatives - The company anticipates generating approximately $300 million in annualized operating income benefits by the end of 2025 through its expanded Transform and Grow Plan (TAG)[106]. - Fossil Group expects to incur charges of approximately $100 million to $120 million over the duration of TAG, with an estimated $50 million of charges in fiscal year 2023[106]. - Fossil Group's TAG plan includes initiatives to exit or minimize certain product offerings and strengthen gross margins[106]. - The company is focused on optimizing its core categories and brands to improve gross margins and reduce operating expenses through better inventory management[107]. Liquidity and Financial Stability - Fossil Group's total liquidity, defined as cash and cash equivalents plus available borrowings, is monitored to ensure financial obligations can be met[120]. - The cash and cash equivalents balance at the end of the third quarter was $116.1 million, down from $162.6 million at the end of the prior year quarter[168]. - Net working capital decreased to $436.4 million from $586.6 million at the end of the prior year quarter[169]. - Total liquidity as of September 30, 2023, was $139.5 million, down from $213.0 million a year earlier[175]. - The company had available borrowing capacity of $23.4 million under the revolving facility as of September 30, 2023[181]. - The company is in compliance with all debt covenants related to its credit facilities as of September 30, 2023[181]. Risks and Uncertainties - Actual results may differ materially due to various risks and uncertainties outlined in the Quarterly Reports on Form 10-Q and the Annual Report on Form 10-K for the fiscal year ended December 31, 2022[185]. - Forward-looking statements involve risks such as increased political uncertainty, worldwide economic conditions, and pandemic effects[184]. - Risks related to the success of the TAG Plan and business strategy could impact future performance[184]. - Changes in foreign currency valuations and costs of materials and labor are potential risks[184]. - Customer acceptance of new product designs and lines is crucial for future sales performance[184]. - The company faces challenges from government regulations, tariffs, and potential litigation outcomes[184]. - Loss of key personnel and management of retail store traffic are significant operational risks[184]. - Compliance with debt covenants and meeting debt service obligations are critical for financial stability[184].

Company Participants Kosta Kartsotis - Chairman and CEO Conference Call Participants Now I'll turn the call over to Christine Greany of the Blueshirt Group to begin. I would like to remind you that information made available during this conference call contains forward-looking information and actual results could differ materially from those that will be discussed during this call. Fossil Group's policy on forward-looking statements and additional information concerning a number of factors that could cause ...

Fossil Group, Inc. (NASDAQ:FOSL) Q1 2023 Earnings Conference Call May 10, 2023 5:00 PM ET Christine Greany - The Blueshirt Group, Investor Relations Sunil Doshi - Chief Financial Officer Company Participants Kosta Kartsotis - Chairman and CEO Jeff Boyer - Chief Operating Officer Operator Now I'll turn the call over to Christine Greany of Blueshirt Group to begin. Hello, everyone, and thank you for joining us. With us today on the call are Kosta Kartsotis, Chairman and CEO; Jeff Boyer, Chief Operating Office ...

Financial Performance - Net sales for fiscal year 2022 were $1,682,439, a decrease of 10.0% from $1,870,036 in 2021[336]. - Gross profit for 2022 was $830,679, down from $966,374 in 2021, reflecting a gross margin decline[336]. - Operating loss for 2022 was $(1,473), compared to an operating income of $92,637 in 2021[336]. - Net loss attributable to Fossil Group, Inc. for 2022 was $(44,157), a significant decline from a net income of $25,434 in 2021[336]. - The company reported a total comprehensive loss of $(52,569) for 2022, compared to a comprehensive income of $18,249 in 2021[336]. - Basic earnings per share for 2022 were $(0.85), down from $0.49 in 2021[336]. - Fossil Group reported a net loss of $43.526 million for fiscal year 2022, compared to a net income of $26.624 million in 2021 and a net loss of $95.940 million in 2020[342]. - Total revenue for fiscal year 2022 was $1,682,439,000, a decrease from $1,870,036,000 in fiscal year 2021, representing a decline of approximately 10.0%[382]. - Consolidated net sales for fiscal year 2022 were $1,682,439, a decrease of 10.0% from $1,870,036 in fiscal year 2021[473]. Assets and Liabilities - Total current assets decreased to $945,300 in 2022 from $1,022,755 in 2021, a reduction of approximately 7.6%[333]. - Total assets decreased to $1,238,128 in 2022 from $1,368,719 in 2021, a decline of about 9.5%[333]. - Total current liabilities decreased to $425,920 in 2022 from $535,647 in 2021, a reduction of approximately 20.5%[333]. - The company had a total stockholders' equity of $403.009 million at the end of 2022, down from $440.032 million at the end of 2021[341]. - Total debt borrowings increased to $386.067 million in 2022, up from $254.717 million in 2021[342]. - The Company had total debt outstanding as of December 31, 2022, was $216.4 million, with principal amounts repayable of $223.3 million[420]. - The Company had deferred income tax assets totaling $197.1 million and deferred income tax liabilities totaling $37.1 million as of December 31, 2022[422]. Cash Flow and Expenses - The company experienced a net cash used in operating activities of $110.856 million in 2022, compared to a net cash provided of $50.029 million in 2021[342]. - Cash paid for interest in fiscal year 2022 was $17.5 million, an increase from $16.1 million in 2021 and a decrease from $21.2 million in 2020[460]. - The company reported cash paid for income taxes, net of refunds, of $5.8 million in 2022, compared to a refund of $16.7 million in 2021[460]. - The company incurred stock-based compensation expenses of $8.060 million in 2022, compared to $9.497 million in 2021[342]. - Operating lease costs for fiscal year 2022 were $76,528,000, down 12% from $86,994,000 in fiscal year 2021[435]. Inventory and Sales - Inventory at the end of fiscal year 2022 totaled $376,028,000, an increase from $346,850,000 in fiscal year 2021[385]. - The company’s finished goods inventory increased to $355,030,000 in fiscal year 2022 from $323,180,000 in fiscal year 2021[385]. - Fossil Group's consolidated net sales from licensed products accounted for 46.5% of total sales in 2022, down from 50.5% in 2021[348]. - Revenue from traditional watches in the Americas was $518,995,000, while smartwatches generated $65,649,000, contributing to a total of $584,644,000 for watches in the Americas[382]. - Traditional watches accounted for 68.9% of total net sales in fiscal year 2022, generating $1,158,889, while smartwatches contributed 9.0% with $151,602[473]. Foreign Currency and Interest Rate Risks - The company reported a significant exposure to foreign currency exchange rate risks, particularly with the euro and Chinese yuan, which could materially impact supply channels and manufacturing costs[313]. - A 10% unfavorable change in the U.S. dollar against foreign currencies would decrease net pre-tax income by approximately $13.7 million and reduce consolidated stockholders' equity by about $37.3 million[316][317]. - As of December 31, 2022, a 100 basis point increase in interest rates would increase annual interest expense by approximately $0.7 million[318]. - The company employs forward contracts to manage foreign currency risks, with no significant changes anticipated in its exposure management strategies[314]. - The Company had forward contracts designated as cash flow hedges with a total amount of $1,070.5 million in Japanese yen and $337.6 million in Mexican pesos as of December 31, 2022[393]. Operational Risks and Strategies - The company has no long-term contracts with customers, facing intense competition in both specialty retail and e-commerce sectors[23]. - The company is subject to risks from supply chain disruptions due to changes in U.S. trade policy with China and the ongoing impacts of the COVID-19 pandemic[19]. - The company’s ability to grow sales is dependent on its business strategy and consumer acceptance of new products and technologies[19]. - The company has a significant reliance on its license agreements for globally recognized fashion brand names, which could impact its operations if lost[19]. - The TAG Plan is expected to generate estimated annualized benefits of at least $100 million by the end of 2024, with an approximate 8% reduction in the global workforce in 2023[479]. Segment Performance - The company evaluates its reportable segments based on net sales and operating income, with segments including Americas, Europe, and Asia[468]. - Operating income for the Americas segment in fiscal year 2022 was $116,401, down from $157,012 in fiscal year 2021, representing a decline of 26.0%[470]. - Net sales from the United States in fiscal year 2022 were $619,981, a decrease from $682,900 in fiscal year 2021, reflecting a decline of 9.2%[474]. - Net sales from Germany were approximately $194.1 million in fiscal year 2022, accounting for more than 10% of consolidated net sales[477]. Tax and Deferred Tax Assets - The Company recorded $58.6 million of deferred tax assets for net operating losses of foreign subsidiaries as of December 31, 2022[423]. - The total valuation allowance against deferred tax assets was $143.3 million at December 31, 2022, with $75.5 million attributable to U.S. operations and $67.8 million to foreign operations[427]. - The Company had unrecognized tax benefits of $24.0 million as of December 31, 2022, which could favorably impact the effective tax rate if recognized[429]. - The balance of unrecognized tax benefits decreased from $29,833,000 in 2022 to $23,998,000 in 2022, reflecting a reduction of approximately 19.4%[431].

Fossil Group, Inc. (NASDAQ:FOSL) Q4 2022 Earnings Conference Call March 8, 2023 5:00 PM ET Company Participants Christine Greany - IR, Blueshirt Group Kosta Kartsotis - Chairman & Chief Executive Officer Jeff Boyer - Chief Operating Officer Sunil Doshi - Chief Financial Officer Greg McKelvey - EVP & Chief Commercial Officer Conference Call Participants Operator Good afternoon, ladies and gentlemen, and welcome to the Fossil Group’s Fourth Quarter and Full Year 2022 Earnings Call. At this time, all parties a ...

Fossil Group, Inc. (NASDAQ:FOSL) Q3 2022 Earnings Conference Call November 9, 2022 5:00 PM ET Company Participants Christine Greany - IR, Blueshirt Group Kosta Kartsotis - Chairman Chief Executive Officer Jeff Boyer - Chief Operating Officer Sunil Doshi - Chief Financial Officer Greg McKelvey - EVP, Chief Commercial Officer Conference Call Participants Operator Good afternoon, ladies and gentlemen, and welcome to the Fossil Group Third Quarter 2022 Earnings Call. At this time, all parties are in a listen-on ...