Dive Brief:
- Fossil on Wednesday reported first-quarter net sales fell 8.5% year over year to $233.3 million.
- By channel, wholesale sales increased 6%, while direct-to-consumer sales fell 24%. Within its DTC channel, comparable retail sales fell 22% from the year-ago period.
- Fossil’s net loss narrowed to $17.6 million from $24.3 million last year, and its operating loss contracted to $6.7 million from $29.2 million in Q1 2024.
Dive Insight:
Amid sales declines, Fossil is working to right-size its footprint. In Q1, the company closed 28 stores as part of its plan to shutter 50 locations this year.
Fossil also recently signed an agreement for a sale-leaseback of its European distribution center. The transaction, which should close in the second quarter, is expected to add about $20 million to its balance sheet, CFO Randy Greben said.
Closing its “unproductive” retail stores, making its international distributor model more profitable and laying off some of its staff are all moves expected to save the company roughly $100 million this year in selling, general and administrative expenses, CEO Franco Fogliato said during the earnings call, adding that the company is also weighing selling “non-core assets.”
The moves also come after the company experienced leadership changes over the past year. In March 2024, the company announced that its former chief executive, Kosta Kartsotis, would step down, ending his tenure at the company that began in 1988. He will remain in a consulting role with the company through September.
In contrast to other brands and retailers expressing tariff concerns, Fossil during its earnings call was optimistic about its ability to navigate the tariff situation. The company can lean into its global footprint to minimize its tariff exposure, Fogliato said.
“Notably, our diverse global footprint limits our tariff exposure and we have a number of levers and mitigation strategies that are expected to help offset impacts and protect our healthy gross margin profile in 2025,” Fogliato said in a statement. “Additionally, based on our strong first quarter performance and conviction in our turnaround plan, we believe we are on the right path to driving long-term profitable growth.”
