Dive Brief:
- Over the holiday quarter Fossil Group stemmed losses, even as Q4 net sales plunged nearly 19% year over year to $342.3 million, with sales declines in all regions and channels. Net loss shrank by 73% to $7.6 million and gross margin expanded by 630 basis points to 53.9%.
- Quitting the smartwatch category and closing stores hit sales by 600 basis points. This year the accessories company expects to save about $100 million in selling, general and administrative expenses through February layoffs, a shift to a distributor model in some markets abroad and the closure of about 50 more stores.
- The company, in the midst of a turnaround including a strategic review of its business model and capital structure, also announced the hire of former Casper Chief Financial and Operating Officer Randy Greben as CFO, effective Monday. He replaces Andrew Skobe, who has been in the role on an interim basis.
Dive Insight:
Fossil is the latest brand to pull back on DTC in a quest for profitability.
Last year the company closed a net 54 stores globally, ending 2024 with 248, including 114 in the Americas. Remaining locations will get upgrades, emphasize traditional watches and highlight personalization, CEO Franco Fogliato, who arrived in September, told analysts Wednesday.
“Looking at our direct-to-consumer business, we believe there is a significant opportunity to strengthen our model, becoming smaller but much more profitable,” he said. “We are deploying a two-pronged approach which includes prioritizing the wholesale channel and transforming our direct-to-consumer business model.”
To shore up its wholesale channel and “bolster our relationships with our wholesale partners around the globe,” the company is working “to become increasingly less promotional in our DTC channels,” and helped drive gross margin expansion in Q4, he also said.
Greben has “a strong track record of business transformations – ranging from deep turnarounds to high-growth strategies for a number of leading consumer brands,” the company said in a Wednesday press release. At Casper, he led the 2023 sale of the Canadian business and cut costs. He has also served as chief financial officer at various other companies, including Blue Apron, Ann Inc. and Quidsi, the Marc Lore-founded enterprise acquired and later shuttered by Amazon.
In addition to its own branded merchandise, including Fossil, Michele, Relic, Skagen and Zodiac, Fossil has licensing agreements with Armani Exchange, Diesel, Emporio Armani, Kate Spade New York, Michael Kors, Skechers and Tory Burch. Fogliato said the company is making “progress toward achieving minimum royalty reduction with some of our long-time licensed brand partners who we continue to prioritize.”
The company in February extended its agreement with Michael Kors, a partnership of some 20 years.