Fossil returns to profit and sales growth as turnaround gains traction

Fossil returned to quarterly profit and sales growth on Tuesday, providing fresh evidence that its turnaround is gaining traction. Chief Executive Franco Fogliato said performance was exceeding expectations as the watchmaker raised its full-year financial outlook following results for the quarter ended Oct. 3.

Net sales increased 0.4% to $271.2 million, while net income reached $11.7 million, or 19 cents per diluted share. That compared with a loss of $39.9 million, or 76 cents per share, a year earlier. Operating income swung to $25.3 million from a $21.7 million loss.

The results marked Fossil’s first year-over-year quarterly sales increase since the first fiscal quarter of 2022, according to CNBC. They also represented its first quarterly net profit since the third fiscal quarter of that year, breaking a prolonged stretch of declining revenue and financial losses.

Fogliato, who joined in 2024, told CNBC the recovery followed efforts to close stores, reduce promotions, improve marketing and broaden the product range. The approach involved shrinking the business to a more sustainable base before pursuing expansion. Fossil is again emphasizing traditional watches rather than trying to compete through smartwatches.

The improvement was uneven across the business. Asia sales rose 15.1% in constant currency, while Europe declined 5.6%. Traditional watch sales increased 6.4%, but leather goods and jewelry remained weaker, underscoring that the return to overall growth does not yet extend across every region or product category.

Management also identified an important timing benefit behind the quarter’s performance. On the earnings call, Chief Financial Officer Randy Greben said approximately $10 million in wholesale shipments moved from the fourth quarter into the third. That helped bring forward the return to growth, which management had most recently projected for the fourth quarter.

Profitability benefited from more than higher sales. Greben said reduced minimum royalty guarantees and changes in when royalty shortfalls were recognized supported the margin recovery. Full-price selling, supply-chain improvements and lower prevailing tariff rates also helped, meaning the earnings improvement reflected both operating changes and royalty-related effects.

The next phase will test whether Fossil can build demand after downsizing its retail footprint. Greben said the store optimization program was essentially complete and that the company was working on a refreshed store strategy to improve productivity. Management continues to view physical stores as part of its broader retail model rather than a channel to abandon.

Fossil now forecasts annual sales of $980 million to $990 million and an adjusted operating margin of 5.5% to 6.5%, excluding currency effects. It also continues to expect positive free cash flow. Fogliato said execution during the holiday season would be the immediate priority as the company seeks to turn the quarter’s progress into sustained profitable growth.