fossil group reported quarterly results on Tuesday that may show early signs of a turnaround for the traditional watchmaker.
The company has struggled to compete with new equipment for several years since its sales and stock price peaked in the 2010s, but under CEO Franco Foliato it has quietly embarked on a revival strategy. The company’s third-quarter results show that this strategy is starting to bear fruit.
The company announced Tuesday that it was back in the black for the third quarter, posting an operating profit of $25.3 million, compared with an operating loss of $21.7 million in the same period a year earlier. Sales also started to increase, with net sales increasing 0.4% to $271.2 million. The last time the company reported year-over-year sales growth was in the first quarter of 2022.
“I’m excited about the dramatic improvement in the company’s profitability through very strong and disciplined management of fixed price sales and cost controls,” Folliato told CNBC in an exclusive interview.
For the quarter ended Oct. 3, Fossil reported net income of $11.7 million, or 19 cents per share, compared with a net loss of $39.9 million, or 76 cents per share, in the year-ago period. The company also announced that operating expenses decreased 11.1% to $137 million. The last time the company posted a quarterly net profit was in the third quarter of 2022.
Given the growth signs, the company also raised its full-year outlook, now calling for full-year net sales of $980 million to $990 million, down slightly from last year’s net sales of just over $1 billion. This compares with previous expectations for net sales to decline between 3% and 5%. Fossil also said it expects to be free cash flow positive by the end of the year.
Folliato said Fossil had not previously anticipated sales growth for another year and a half.
The strong quarter came after the company experienced weak sales and financial losses in the past few years. The company was struggling with the rise of smartwatches, mounting debt, and declining mall foot traffic.
Fossil stocks have lost much of their value since the early to mid-2010s and were trading at less than $8 a share on Tuesday despite a recent surge.
Folliato, who joined Fossil in 2024, said he focused on right-sizing the business by closing stores, moving from promotions to full-price sales, improving marketing and expanding Fossil’s product range. That meant we had to scale our business down to a sustainable baseline before we could grow it.
The company’s direct sales revenue fell 5.9% in the third quarter, which Foliato attributed to the company’s “aggressive” headcount reductions.
“This has simplified a lot of our operations,” Folliato said, adding that customers responded well when the company moved away from price cuts. “People tell me they’re excited about what they’re seeing in the market right now.”
Fossil added that Asia was the main growth driver for the quarter, with net sales increasing 15.1%. Foliart said much of that growth was driven by the Indian market.
At the same time, international growth is only part of the watchmaker’s strategy to improve its performance in its home country.
“Our top priority is to grow the domestic market and we are doing that,” he said. “The retail industry has settled into a smaller, more profitable base and is poised to grow again, entering 2027 with plenty of opportunity.”
Foliart said one of the keys to growth is keeping up with smartwatch trends. Fossil’s performance initially suffered as it tried to make money in the smartwatch space, but it is now investing in analog watches again.
Smartwatch sales for the quarter were less than $1 million, while traditional watch sales, which account for about 86% of Fossil’s sales, rose 6.4%.
“Fossil is literally coming back, coming back strong, coming back strong, and you can see it,” Folliato said. “You can see that not just in the numbers, but in the excitement we’re seeing in stores. We think we’re just getting started. We have a lot of work to do.”
