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Fossil (FOSL) 7 Nov 24 2024 Q3 Earnings call transcript

AInvestFriday, Nov 8, 2024 3:12 am ET
1min read

Fossil Group, the iconic watchmaker, recently held its third quarter 2024 earnings call, marking the first for Franco Fogliato as the new Chief Executive Officer. The call was an opportunity for Fogliato to outline the company's strategic direction and financial performance under his leadership. Below are some key takeaways from the call:

New Leadership and Strategic Vision

Fogliato expressed his enthusiasm for the role and acknowledged the company's rich heritage and global recognition. With a background in leading global brands and orchestrating successful turnarounds, Fogliato is optimistic about Fossil's potential for growth and value creation. His focus on disciplined, simplified, and consumer-centric strategies aligns with the company's core strengths in creating innovative watches and compelling storytelling.

Financial Performance

The third quarter performance showed a 16% decline in constant currency net sales, largely due to the exit of smartwatch sales and store closures. However, Fossil's traditional watches and selected licensed brands such as Armani Exchange, SKECHERS, and Tory Burch showed resilience, with strength in the latter two. Gross margin expanded by 240 basis points, driven by the exit of connected watches and strategic pricing initiatives. SG&A expenses decreased by 16%, reflecting cost reduction efforts.

Strategic Initiatives

Fossil's strategic initiatives aim to redefine and focus on the core business, rightsizing the infrastructure, and strengthening the balance sheet. This includes evaluating non-core assets, revitalizing key partnerships, and improving profitability in the digital business. Fossil is also working on a new brand platform and global campaign featuring a new brand ambassador. The company aims to capture $100 million of annualized P&L benefits in 2024 and $300 million by the end of 2025.

Balance Sheet and Liquidity

Fossil ended the quarter with total liquidity of $130 million, reflecting progress in asset monetization and a focus on cost reduction. Inventory levels decreased by 30% compared to the previous year, and the company is on track to achieve positive cash flow in 2024. The strategic review, which includes assessing business model, strategic initiatives, and financial plans, is ongoing.

In conclusion, Fossil Group's Q3 earnings call under Fogliato's leadership highlighted the company's financial performance, strategic initiatives, and commitment to turning around the business. The focus on disciplined strategies, consumer-centricity, and cost reduction is expected to drive growth and value creation. The upcoming year-end earnings call will provide further insights into the new strategic plan for Fossil's future.

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