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Fossil Stock Sinks 18% as Q3 Loss Widens Y/Y Amid DTC Weakness
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Shares of Fossil Group, Inc. (FOSL - Free Report) have declined 17.7% since the company reported its third-quarter earnings for the period ended Oct. 4, 2025, underperforming the broader market. Over the past month, the stock has tumbled 24%, significantly steeper than the S&P 500 index’s 1.2% loss in the same period. The post-earnings selloff reflects investor concern about ongoing operational challenges and a difficult retail environment.
For the third quarter of fiscal 2025, Fossil incurred an adjusted net loss of 63 cents per share, wider than a loss of 56 cents per share a year earlier.
The company reported net sales of $270.2 million, a 6.1% decrease from $287.8 million in the same period last year. On a constant currency basis, sales dropped 7.1%. The decline was primarily attributed to weakness in direct-to-consumer (DTC) channels, where comparable retail sales plummeted 22% and overall DTC revenue fell 27%.
On the profitability front, the company incurred a net loss of $39.9 million, widening from a loss of $32 million in the prior-year period. Adjusted net loss came in at $32.8 million, wider than a loss of $30 million a year earlier.
Fossil Group, Inc. Price, Consensus and EPS Surprise
Gross profit declined 6.9% to $132.4 million, with gross margin contracting slightly to 49% from 49.4% in the prior year. Operating expenses fell 7.5% year over year to $154.1 million, reflecting ongoing restructuring efforts, though operating loss remained sizable at $21.7 million. On an adjusted constant currency basis, operating loss narrowed to $14.9 million from $22 million in Q3 2024, narrowing the operating margin to -5.5% from -7.6%.
Segment Performance:
By geography, net sales in constant currency declined 9% in the Americas and 10% in Europe but rose 2% in Asia. In terms of product categories, traditional watch sales dipped just 1%, while the leather and jewelry segments saw steeper declines of 37% and 23%, respectively. Wholesale sales grew 3% in constant currency, partially offsetting the DTC weakness.
Management Commentary
CEO Franco Fogliato struck an optimistic tone, framing the quarter as one of “progress and momentum” in Fossil’s turnaround strategy. The company highlighted success in improving product margins through sourcing initiatives and emphasized its shift to a brand-led, consumer-centric model. Fogliato also stressed the importance of recently completed balance sheet actions, stating they mark a “pivotal milestone” that positions the company for long-term growth.
Drivers Behind the Numbers
The top-line weakness largely stemmed from Fossil’s store rationalization efforts and broader challenges in the DTC channel. Approximately three percentage points of the quarterly sales decline were linked directly to store closures. Additionally, pressure from increased tariffs and higher licensed brand royalty costs contributed to the modest gross margin compression. However, these were partially offset by cost savings and efficiencies achieved through restructuring initiatives, which also drove an 8.8% year-over-year reduction in SG&A expenses.
Guidance
Despite the Q3 results, Fossil reiterated its full-year 2025 guidance. The company continues to expect a mid-teens decline in worldwide net sales, with an adjusted operating margin ranging from break-even to slightly positive. The revenue forecast includes a roughly $45 million headwind from retail store closures. Notably, this guidance excludes the effects of foreign currency fluctuations.
Other Developments
In a significant post-quarter move, Fossil completed a major restructuring of its balance sheet. This included the successful exchange offer for its 7.00% Senior Notes due 2026 and a concurrent rights offering. These actions extended the company’s debt maturity by three years and generated $32.5 million in new financing. Moreover, the transaction lifted certain restrictions under the company’s newly secured $150 million asset-based revolving credit facility (ABL), enhancing liquidity. As of Oct. 4, Fossil had total liquidity of $101.9 million and inventory levels declined 26% year over year to $166.8 million.
Additionally, the company continued its store rationalization strategy, closing 50 stores during the quarter. This brought the global store count down to 204 from 251 at the end of the prior-year period, a 19% reduction.
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Fossil Stock Sinks 18% as Q3 Loss Widens Y/Y Amid DTC Weakness
Shares of Fossil Group, Inc. (FOSL - Free Report) have declined 17.7% since the company reported its third-quarter earnings for the period ended Oct. 4, 2025, underperforming the broader market. Over the past month, the stock has tumbled 24%, significantly steeper than the S&P 500 index’s 1.2% loss in the same period. The post-earnings selloff reflects investor concern about ongoing operational challenges and a difficult retail environment.
For the third quarter of fiscal 2025, Fossil incurred an adjusted net loss of 63 cents per share, wider than a loss of 56 cents per share a year earlier.
The company reported net sales of $270.2 million, a 6.1% decrease from $287.8 million in the same period last year. On a constant currency basis, sales dropped 7.1%. The decline was primarily attributed to weakness in direct-to-consumer (DTC) channels, where comparable retail sales plummeted 22% and overall DTC revenue fell 27%.
On the profitability front, the company incurred a net loss of $39.9 million, widening from a loss of $32 million in the prior-year period. Adjusted net loss came in at $32.8 million, wider than a loss of $30 million a year earlier.
Fossil Group, Inc. Price, Consensus and EPS Surprise
Fossil Group, Inc. price-consensus-eps-surprise-chart | Fossil Group, Inc. Quote
Other Key Business Metrics
Margins and Operating Income:
Gross profit declined 6.9% to $132.4 million, with gross margin contracting slightly to 49% from 49.4% in the prior year. Operating expenses fell 7.5% year over year to $154.1 million, reflecting ongoing restructuring efforts, though operating loss remained sizable at $21.7 million. On an adjusted constant currency basis, operating loss narrowed to $14.9 million from $22 million in Q3 2024, narrowing the operating margin to -5.5% from -7.6%.
Segment Performance:
By geography, net sales in constant currency declined 9% in the Americas and 10% in Europe but rose 2% in Asia. In terms of product categories, traditional watch sales dipped just 1%, while the leather and jewelry segments saw steeper declines of 37% and 23%, respectively. Wholesale sales grew 3% in constant currency, partially offsetting the DTC weakness.
Management Commentary
CEO Franco Fogliato struck an optimistic tone, framing the quarter as one of “progress and momentum” in Fossil’s turnaround strategy. The company highlighted success in improving product margins through sourcing initiatives and emphasized its shift to a brand-led, consumer-centric model. Fogliato also stressed the importance of recently completed balance sheet actions, stating they mark a “pivotal milestone” that positions the company for long-term growth.
Drivers Behind the Numbers
The top-line weakness largely stemmed from Fossil’s store rationalization efforts and broader challenges in the DTC channel. Approximately three percentage points of the quarterly sales decline were linked directly to store closures. Additionally, pressure from increased tariffs and higher licensed brand royalty costs contributed to the modest gross margin compression. However, these were partially offset by cost savings and efficiencies achieved through restructuring initiatives, which also drove an 8.8% year-over-year reduction in SG&A expenses.
Guidance
Despite the Q3 results, Fossil reiterated its full-year 2025 guidance. The company continues to expect a mid-teens decline in worldwide net sales, with an adjusted operating margin ranging from break-even to slightly positive. The revenue forecast includes a roughly $45 million headwind from retail store closures. Notably, this guidance excludes the effects of foreign currency fluctuations.
Other Developments
In a significant post-quarter move, Fossil completed a major restructuring of its balance sheet. This included the successful exchange offer for its 7.00% Senior Notes due 2026 and a concurrent rights offering. These actions extended the company’s debt maturity by three years and generated $32.5 million in new financing. Moreover, the transaction lifted certain restrictions under the company’s newly secured $150 million asset-based revolving credit facility (ABL), enhancing liquidity. As of Oct. 4, Fossil had total liquidity of $101.9 million and inventory levels declined 26% year over year to $166.8 million.
Additionally, the company continued its store rationalization strategy, closing 50 stores during the quarter. This brought the global store count down to 204 from 251 at the end of the prior-year period, a 19% reduction.