Fossil Group Posts First Sales Increase in Over Two Years, Signaling Potential Turnaround Under CEO Franco Fogliato

Legacy watchmaker Fossil Group has posted quarterly financial results that point toward early signs of a substantial operational turnaround, signaling that the storied brand may finally be finding its footing after years of steep declines.

The company, which has struggled significantly to compete with modern tech gadgets and smart wearables in the years following the peak of its sales and stock price performance in the 2010s, has been quietly executing a disciplined comeback strategy under the leadership of Chief Executive Officer Franco Fogliato. The newly released fiscal third-quarter earnings indicate that this ongoing strategic overhaul is finally beginning to bear fruit, catching the attention of retail industry analysts and investors alike.

Reporting on Tuesday, the company announced that it officially returned to profitability during the third quarter, registering an operating income of $25.3 million. This represents a striking turnaround compared to the operating loss of $21.7 million recorded during the same period last year. Furthermore, Fossil achieved a long-awaited return to top-line sales growth, with net sales climbing 0.4% to reach $271.2 million. Notably, this marks the first time the company has reported a year-over-year sales increase since the first fiscal quarter of 2022, halting a prolonged slide that had tested investor patience.

In an exclusive interview with CNBC, CEO Franco Fogliato expressed enthusiasm regarding the company’s financial trajectory. "We’re excited about improving dramatically the profitability of the company through a very strong and disciplined management of full-price sales as well as cost management," Fogliato told the network.

For the fiscal quarter ended October 3, Fossil reported a net income of $11.7 million, translating to 19 cents per share. This performance stands in sharp contrast to the net loss of $39.9 million, or 76 cents per share, recorded during the prior year. Additionally, the company demonstrated strict financial discipline by reducing its operating expenses by 11.1%, bringing them down to $137 million for the quarter. This quarter also marks the first time Fossil has posted a quarterly net income since the third fiscal quarter of 2022.

Encouraged by these signs of operational stabilization and growth, the retailer elected to raise its full-year financial outlook. Fossil is now guiding for full-year net sales to land between $980 million and $990 million. While this range would still mark a slight decline from the just over $1 billion in net sales the company generated in the previous fiscal year, it represents a notable improvement over prior expectations. Previously, the retailer anticipated that net sales would fall between 3% and 5%. Additionally, Fossil projected that it expects to achieve positive free cash flow by the close of the calendar year.

Fogliato noted that the pace of the turnaround has exceeded internal projections, acknowledging that the leadership team had previously expected it would take another year and a half before the company could return to positive sales growth.

This stronger-than-expected quarter follows a prolonged period of severe financial turbulence for the company. Over the past several years, Fossil had been plagued by slumping sales, mounting debt, a continuous decline in mall foot traffic, and the disruptive rise of smartwatches that fundamentally altered consumer preferences in the watch industry. Consequently, Fossil stock lost the vast majority of its market value from its early-to-mid 2010s highs. Despite experiencing a recent market surge following the earnings announcement, the company’s stock was still trading under $8 a share on Tuesday.

To rightsize the business and restore financial health, Fogliato, who assumed the role of CEO in 2024, focused heavily on stabilizing the core operations. His playbook included closing underperforming retail stores, moving away from heavy discounting and promotional markdowns in favor of full-price sales, elevating marketing efforts, and carefully broadening Fossil’s product range. This strategy fundamentally required shrinking the overall business footprint to a manageable, sustainable baseline before attempting to pursue top-line growth.

As a direct result of this deliberate downsizing, the company experienced a 5.9% decrease in direct-to-consumer sales for the third quarter. However, Fogliato defended the move as a necessary measure to clear out inefficiencies and reset the brand’s market positioning.

"We simplified a lot of the business doing this," Fogliato explained, adding that consumers have responded favorably to the elimination of constant markdowns. "People tell me they are excited about what they are seeing in the marketplace now."

Geographically, Fossil highlighted that its primary growth engine for the quarter was Asia, where net sales expanded by 15.1%. Fogliato noted that a substantial portion of this international momentum was driven by strong consumer demand in the India market.

At the same time, expanding internationally represents only one pillar of the watchmaker’s multi-pronged strategy as it simultaneously works to rebuild its performance and brand resonance in its home country.

"Priority number one is to grow our home market, and we’re doing that," Fogliato said. "As retail is settling into a smaller, more profitable base, ready to grow again, we’re entering 2027 with plenty of opportunities."

A pivotal element of this domestic and global revitalization involves a strategic retreat from product categories that previously diluted the brand’s focus. Fogliato pointed out that one of the critical keys to the company’s current and future growth is abandoning the pursuit of keeping up with the smartwatch trend at all costs. While attempting to capture market share in the smartwatch space initially hampered Fossil’s financial performance and operational focus, the company has successfully pivoted back to investing heavily in its core competency: analog watches.

The shift is clearly visible in the financial breakdown. Smartwatch sales plummeted to under $1 million for the quarter, while sales for traditional, analog timepieces—which currently account for roughly 86% of Fossil’s total sales—grew by 6.4%.

"Fossil is literally having a comeback, a strong comeback, a momentum, and we can see this," Fogliato said, summarizing the company’s current standing. "And it comes not only through the numbers — it comes with the excitement we see in the stores, and we think we’re just at the beginning. We have so much work to do."