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FOSL Upgraded to Outperform Amid Turnaround Plan, Margin Gains
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Fossil Group, Inc. (FOSL - Free Report) has been upgraded to an “Outperform” rating from “Neutral.” The upgrade signals growing optimism around the company’s transformation efforts and its potential to return to profitable growth. As Fossil embarks on a bold turnaround strategy and sharpens its market focus, the recent developments indicate a meaningful shift in direction.
A Turnaround Strategy With Visible Traction
At the heart of Fossil’s upward momentum is a structured and focused turnaround plan. The company is concentrating its efforts on three strategic pillars: refocusing on core brand assets, realigning its cost structure, and reinforcing its financial position. In the first quarter of fiscal 2025, gross margin surged to over 60%, an impressive 890-basis-point increase from the previous year. This improvement stemmed largely from operational streamlining, exit from the connected watch business, and reduced promotional intensity across digital channels.
Supporting these efforts, the company achieved a notable 12% year-over-year reduction in SG&A expenses, driven by tighter marketing spending, reduced administrative overhead, and the closure of underperforming stores. With 28 stores already closed in Q1 and a total of 50 targeted for closure in 2025, Fossil is shrinking its physical footprint to amplify profitability and focus on higher-yield locations.
Brand Strength and Product Innovation Drive Renewed Interest
Fossil’s reputation as a heritage lifestyle brand continues to resonate globally. In 2024, the Fossil brand was ranked fourth in the global watch market by Time Magazine, reinforcing its strong market presence. The Raquel Watch Ring, a standout product, won “Fashion Jewelry of the Year” at Inhorgenta in Munich, showcasing the company’s continued edge in design and trend execution.
New brand-building initiatives are also underway. A major global campaign led by celebrity ambassador Nick Jonas is scheduled to launch in summer 2025, aiming to modernize the Fossil brand and expand its relevance to younger audiences. At the same time, the company has extended key licensing deals, including with Michael Kors, and renewed its focus on core markets such as the United States, France, Germany and India. These efforts signal a clearer, more disciplined approach to brand equity and market reach.
Sharper Market Focus and Distribution Realignment
Fossil is transitioning smaller and less profitable markets in Europe and Asia to a distributor-based model. While this shift results in a near-term sales dip, it reduces fixed costs and is expected to drive stronger long-term margins. Simultaneously, the company is prioritizing investments in scalable regions and enhancing its wholesale presence through upgraded merchandising, POS visibility, and strategic retail partnerships.
E-commerce operations are also being retooled to boost margin performance. Promotional activity has been scaled back, improving average unit retail and traffic quality, while integration of features like Amazon’s Buy with Prime has begun to elevate the customer experience on Fossil.com.
Challenges Persist: Top-Line Pressure
Despite these positive strides, Fossil continues to face headwinds on the revenue front. Net sales for Q1 2025 declined 8.5% year over year to $233.3 million, a reflection of store closures and the strategic exit from connected watches. While these moves are part of the broader transformation plan, the company will need to demonstrate its ability to reaccelerate revenue growth through its core product lines and digital channels in upcoming quarters.
Outlook: Stronger Margins, Stronger Positioning
Fossil’s upgraded rating reflects growing belief in the company’s ability to execute on its restructuring roadmap and return to sustainable profitability. With $99.5 million in liquidity, improved margins, a stronger brand narrative, and reduced operating complexity, the business appears more agile and better positioned for the evolving retail landscape.
While revenue stabilization remains a key focus area, the foundation being laid by management through operational discipline and brand reinvigoration could provide the momentum needed for a durable recovery. Fossil may still be mid-turnaround, but the direction of travel is undeniably positive.
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FOSL Upgraded to Outperform Amid Turnaround Plan, Margin Gains
Fossil Group, Inc. (FOSL - Free Report) has been upgraded to an “Outperform” rating from “Neutral.” The upgrade signals growing optimism around the company’s transformation efforts and its potential to return to profitable growth. As Fossil embarks on a bold turnaround strategy and sharpens its market focus, the recent developments indicate a meaningful shift in direction.
A Turnaround Strategy With Visible Traction
At the heart of Fossil’s upward momentum is a structured and focused turnaround plan. The company is concentrating its efforts on three strategic pillars: refocusing on core brand assets, realigning its cost structure, and reinforcing its financial position. In the first quarter of fiscal 2025, gross margin surged to over 60%, an impressive 890-basis-point increase from the previous year. This improvement stemmed largely from operational streamlining, exit from the connected watch business, and reduced promotional intensity across digital channels.
Supporting these efforts, the company achieved a notable 12% year-over-year reduction in SG&A expenses, driven by tighter marketing spending, reduced administrative overhead, and the closure of underperforming stores. With 28 stores already closed in Q1 and a total of 50 targeted for closure in 2025, Fossil is shrinking its physical footprint to amplify profitability and focus on higher-yield locations.
Brand Strength and Product Innovation Drive Renewed Interest
Fossil’s reputation as a heritage lifestyle brand continues to resonate globally. In 2024, the Fossil brand was ranked fourth in the global watch market by Time Magazine, reinforcing its strong market presence. The Raquel Watch Ring, a standout product, won “Fashion Jewelry of the Year” at Inhorgenta in Munich, showcasing the company’s continued edge in design and trend execution.
New brand-building initiatives are also underway. A major global campaign led by celebrity ambassador Nick Jonas is scheduled to launch in summer 2025, aiming to modernize the Fossil brand and expand its relevance to younger audiences. At the same time, the company has extended key licensing deals, including with Michael Kors, and renewed its focus on core markets such as the United States, France, Germany and India. These efforts signal a clearer, more disciplined approach to brand equity and market reach.
Sharper Market Focus and Distribution Realignment
Fossil is transitioning smaller and less profitable markets in Europe and Asia to a distributor-based model. While this shift results in a near-term sales dip, it reduces fixed costs and is expected to drive stronger long-term margins. Simultaneously, the company is prioritizing investments in scalable regions and enhancing its wholesale presence through upgraded merchandising, POS visibility, and strategic retail partnerships.
E-commerce operations are also being retooled to boost margin performance. Promotional activity has been scaled back, improving average unit retail and traffic quality, while integration of features like Amazon’s Buy with Prime has begun to elevate the customer experience on Fossil.com.
Challenges Persist: Top-Line Pressure
Despite these positive strides, Fossil continues to face headwinds on the revenue front. Net sales for Q1 2025 declined 8.5% year over year to $233.3 million, a reflection of store closures and the strategic exit from connected watches. While these moves are part of the broader transformation plan, the company will need to demonstrate its ability to reaccelerate revenue growth through its core product lines and digital channels in upcoming quarters.
Outlook: Stronger Margins, Stronger Positioning
Fossil’s upgraded rating reflects growing belief in the company’s ability to execute on its restructuring roadmap and return to sustainable profitability. With $99.5 million in liquidity, improved margins, a stronger brand narrative, and reduced operating complexity, the business appears more agile and better positioned for the evolving retail landscape.
While revenue stabilization remains a key focus area, the foundation being laid by management through operational discipline and brand reinvigoration could provide the momentum needed for a durable recovery. Fossil may still be mid-turnaround, but the direction of travel is undeniably positive.