Story Highlight
– Fossil Group expects 4-6% sales decline this year.
– First quarter sales were $225 million, operating margin 5.4%.
– Store closures and declining smartwatch sales worsened performance.
– Turnaround strategy focuses on cost-cutting and brand repositioning.
– Emphasis on licensed brands and direct-to-consumer growth.
Full Story
Fossil Group has informed its investors that it anticipates a sales decline of 4-6% for the current financial year, although it expects a recovery in growth during the fourth quarter alongside an operating margin projected between 3-5%.
In its latest quarterly report covering the three months ending on 4 April 2026, the company appears to be slightly exceeding its initial performance targets, as stated by CEO Franco Gogiato.
“We are pleased to begin the year with outperformance on the top and bottom line, fuelled by strong execution against our turnaround and healthy watch industry trends,” he commented.
Gogiato highlighted that strong consumer interest in their innovative products and effective brand narratives has led to significant gains across various channels, core product lines, and significant markets. He remained optimistic, noting, “We remain confident in our full year outlook, including a return to top line growth in the fourth quarter, and believe our proven strategies and structural advantages position us to drive long-term profitable growth and value creation.”
In the first quarter, the company reported total sales of $225 million, with an operating income of $12 million and an operating margin of 5.4%. Adjusted figures, accounting for constant currency fluctuations, indicated an operating income of $10 million and an operating margin of 4.4%, reflecting some adverse effects due to a declining US dollar.
The fall in sales during the quarter has been attributed to the impact of store closures and a downturn in smartwatch sales, which contributed 2.8% to the overall decline. While wholesale sales saw a 5% increase, direct-to-consumer sales dropped by 29%, with approximately half of this decline linked to store closures.
Fossil Group’s challenges have been accumulating over several years, stemming from dwindling sales of traditional watches, excessive reliance on US department stores, diminished demand for fashion watches, aggressive discounting practices, and a failed venture into competing with high-profile smartwatches such as the Apple Watch.
Under Gogiato’s leadership, the company has initiated a comprehensive turnaround strategy consisting of five primary pillars:
1. Streamlining operations and reducing costs through workforce reductions, retail store closures, and operational efficiencies.
2. Transitioning away from the smartwatch segment to focus on traditional watches, jewellery, and leather goods where the brand still maintains a strong market presence and design capabilities.
3. Emphasising success with key licensed brands such as Armani, Michael Kors, and Tory Burch, utilising Fossil’s expertise in design, sourcing, manufacturing, and global distribution—a crucial asset for fashion brands looking to avoid the costs of building these capabilities themselves.
4. Enhancing direct-to-consumer initiatives, moving away from traditional retail into e-commerce and owned stores, reflecting a wider trend within the fashion and watch sectors.
5. Implementing financial restructuring measures aimed at preserving liquidity and ensuring stability during the transition.
