Fossil Group, Inc.

Q2 net sales totaled $211 million, down 4% year over year and including about 220 basis points of impact from the store closure program. Gross margin was 62.4%, up 490 basis points year over year, and adjusted operating income was about $9 million / $8.6 million, roughly 2x last year. SG&A was $123 million, essentially flat excluding an $11 million gain from last year’s European distribution center sale. On the balance sheet, Fossil ended with $79 million of cash and cash equivalents, $18 million of ABL availability, and inventory of $178 million. For full-year 2026, management now expects worldwide net sales to decline 3% to 5% versus prior guidance of 4% to 6%, adjusted operating margin of 4% to 6% versus 3% to 5%, full-year gross margin in the upper 50s, and positive free cash flow.

Franco Fogliato said the quarter showed the compounding benefits of the turnaround plan and emphasized that Fossil is moving back toward sustainable top-line growth beginning in Q4. He highlighted innovation, storytelling, and full-price selling as the core drivers, pointing to new launches like Big Tic, X-1, and the premium Signature collection. His tone was upbeat and confident, repeatedly stressing that the company is ahead of its original plan and that momentum should continue into 2027.

Randy Greben focused on the financial execution: net sales of $211 million, gross margin up to 62.4%, and adjusted operating income doubling versus last year. He said the 490-basis-point gross margin improvement came from full-price selling, stronger product margins, supply-chain initiatives, and lower tariffs, while SG&A of $123 million was held essentially flat excluding last year’s $11 million gain. He also noted $79 million of cash, $18 million of ABL availability, $178 million of inventory, and improved cash usage; guidance was raised to 3% to 5% revenue decline, 4% to 6% adjusted operating margin, upper-50s gross margin, and positive full-year free cash flow.

Analysts pressed on how Fossil can turn strong traditional watch growth into consistent companywide revenue growth; management said the answer is continued innovation, design, storytelling, and product quality, and framed Q4 growth as a combination of launches, wholesale execution, and better in-store presentation. Questions also focused on whether 62%+ gross margin is sustainable and how much of the royalty headwind remains; Randy said the royalty impact in the quarter was about 1.5 points and that the main story is the strength of full-price selling. On Europe, management said the region is being hit by Middle East/geopolitical issues and weaker travel retail, but also by deliberate business-model changes that create short-term pain while improving the long-term structure.