Fossil Corporation's Q2 2025 Earnings Conference Transcript
In a recent earnings call, Fossil's Chief Executive Officer, Franco Fogliato, and Chief Financial Officer, Randy Greben, discussed the company's financial performance and strategic initiatives.
The company reported a gross margin of 57.4% for Q2 2025, an expansion of 480 basis points compared to the prior year. This improvement was driven by higher product margins, improved product costing, reduced promotional activity, lower freight costs, and the exit from connected watches.
Fossil achieved an adjusted operating income of $4 million, excluding a gain from the European distribution center sale-leaseback. Selling, general, and administrative expenses decreased by $32 million to $122 million compared to the prior year, primarily due to store closures and reductions in performance marketing.
Fossil announced cost savings initiatives, inventory reductions, and an optimized store footprint. The strategic decision to dramatically scale back promotional activity in the e-commerce channel has driven significant improvement in gross margin profile and bottom-line profitability.
Net sales for the second quarter totaled $219 million, a 16% decline in constant currency compared to the prior year. Despite this decline, the company highlighted successful product launches, such as Peanuts, Superman, and Fantastic Four, which have performed well across content channels. Fossil plans to increase investment in upper-funnel marketing initiatives to enhance brand enthusiasm.
Inventory levels for fiscal Q2 2025 were $178 million, a 12% decline compared to the prior year. Year-to-date, $48 million in SG&A savings have been achieved.
Fossil is exploring the sale of non-core assets for potential incremental gains. The company is gaining traction quickly with European distributor partners, driving increased sales and profitability in those geographies. Wholesale channel trends showed a double-digit sales increase in traditional watches in the Americas during fiscal Q2 2025.
Leadership emphasized a return to a full-price selling model, citing higher average unit retail, no observed consumer pushback on surgical price increases, and improved quality of store and e-commerce traffic. Initial results from new U.S. retail store formats show month-over-month increases in conversion, average daily sales, and units per transaction.
CFO Greben stated, "In 2025, the impact will be more significant than prior years due to our smaller sales base." This indicates that fiscal Q3 2025 gross margin and adjusted operating margin will decline year-over-year and sequentially, as most royalty shortfalls are recognized in fiscal Q3.
Fossil is prioritizing key geographies where they continue to see strengthening trends, including the Americas, where traditional watch sales were up double digits in Q2, and India, where there is strong momentum across brands and channels.
The company announced a new $150 million asset-based revolving credit facility with Ares Management Credit Fund. A series of consumer activations and VIP events are planned, starting with the Fossil Diner pop-up experience in New York City next week.
Motley Fool analysts did not provide specific updates or quotes regarding Fossil's Q2 2025 earnings call in the available search results. However, the earnings call discussed several key points that were mentioned by Fossil's management, including challenges faced by the company, a robust wholesale marketing strategy, and the impact of the full-price selling model.
[1] Source: Fossil Investor Relations, Q2 2025 Earnings Call Transcript [2] Source: Fossil Investor Relations, Q2 2025 Earnings Call Presentation
- The strategic decision to reduce promotional activity in the e-commerce channel by Fossil has significantly improved their gross margin profile and bottom-line profitability.
- Fossil's Chief Financial Officer, Randy Greben, foresees a greater impact in 2025 due to the company's smaller sales base, suggesting a possible decline in gross margin and adjusted operating margin for fiscal Q3 2025.
- Fossil's leadership is focusing on key geographies such as the Americas, where traditional watch sales have grown double digits in Q2, and India, where there is strong momentum across brands and channels.
- To enhance brand enthusiasm, Fossil plans to increase investment in upper-funnel marketing initiatives, with a series of consumer activations and VIP events planned, including the Fossil Diner pop-up experience in New York City.
- In an effort to generate incremental gains, Fossil is exploring the sale of non-core assets and has secured a new $150 million asset-based revolving credit facility with Ares Management Credit Fund.
