Fossil Group(US:FOSL)2024-08-08 20:17Financial 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]