Fossil Registers 10% Revenue Decline In Q2, Lowers FY22 Outlook

Fossil Group Inc FOSL reported second-quarter sales of $371.2 million, a decline of 10% year-over-year and +7% on a constant currency basis, missing the consensus of $435.50 million.

Adjusted EPS was $(0.33), down from $0.08 in 2Q21.

Total digital sales were down 21% Y/Y in constant currency and reflected 35% of the sales mix compared to 41% in the prior year.

Direct-to-consumer net sales increased 5% in constant currency, led by 26% growth in store sales largely offset by decreased e-commerce sales.    

The gross margin contracted by 260 bps to 51.6%. The operating loss for the quarter was $(10.9) million, compared to an income of $14.3million a year ago.

Adjusted operating loss totaled $(7.8) million compared to income of $21.3 million a year ago. Adjusted EBITDA loss was $(0.03) million, or (0.1)% of net sales, and $30.3 million, or 7.4%, in the prior-year quarter.

As of July 2, 2022, Fossil had cash and cash equivalents of $167 million. Inventories of $438 million, an increase of 24% Y/Y. Total debt was $249 million.

“We believe consumer sentiment will continue to be pressured in the second half of the year and have adjusted our full-year outlook to reflect moderating demand globally,” commented Kosta Kartsotis, Chairman and CEO

FY22 Guidance: Fossil now expects a worldwide net sales decline of ~8% to 4%, versus prior growth of flat to ~3%. It expects an adjusted operating margin of 2% to 4% compared to prior guidance of 5.5% to 6.5%.

Price Action: FOSL shares are trading lower by 9.09% at $6 during the post-market session on Wednesday.