Fossil Group returned to profitability in its fiscal third quarter, posting operating income of $25.3 million versus an operating loss of $21.7 million a year earlier. Net sales rose 0.4% to $271.2 million, marking the company's first year-over-year sales increase since the first fiscal quarter of 2022.
Net income for the quarter ended Oct. 3 reached $11.7 million, or 19 cents per share, compared with a net loss of $39.9 million, or 76 cents per share, in the prior year. Operating expenses fell 11.1% to $137 million.
CEO Franco Fogliato, who joined in 2024, said the turnaround is ahead of earlier expectations. "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 CNBC.
Fogliato said Fossil had not expected sales growth for another year and a half. The company previously anticipated sales falling between 3% and 5% for the full year, but raised its outlook to project full-year net sales of $980 million to $990 million, compared with just over $1 billion in the prior year. Fossil also said it expects positive free cash flow by year end.
The turnaround strategy involved closing stores, eliminating markdowns, improving marketing, and broadening product range. Direct-to-consumer sales fell 5.9% for the third quarter due to what Fogliato called the company's "aggressive" downsizing. Traditional watches grew 6.4% and represent around 86% of sales, while smartwatch sales came in under $1 million for the quarter.
Asia drove growth, with net sales rising 15.1%, led by the India market.
Fossil stock traded under $8 per share on Tuesday after losing the vast majority of its value since the early-to-mid 2010s.