Fossil Group Inc., the 40-year-old Texas-based company that started out making a fashion watch with retro looks and then expanded to jewelry, handbags and accessories, reported its first-quarter net sales for 2024 declined 22 percent compared to the same period last year, coming in at $255 million.
The sales drop follows the recent announcement that the company’s longtime chief executive officer, Kosta N. Kartsotis, would step down after 20 years. He was replaced by Jeffrey N. Boyer, the chief operating office, who was named interim CEO.
The company also announced earlier that it was getting out of the smartwatch business, after facing a U.S. patent infringement lawsuit last year. Leaving the smartwatch channel and recently closing stores has resulted in about $100 million in revenue loss, the company said.
Following a dismal 2023 with a net loss of $157 million, Fossil said it would be closing underperforming stores, reducing inventories and making a strategic review of business with Evercore serving as a financial adviser.
“While we continue to navigate challenging top-line trends, we are acting with urgency to stabilize the business, taking definitive actions to strengthen our balance sheet and progressing with a strategic review of our business model and capital structure,” Boyer said in a statement.
Not only were net sales down, but the company saw a net loss of $24.3 million, which was better than one year ago when the first quarter experienced a $41.3 million net loss.
The publicly traded company, whose stock at the end of Wednesday closed at 97 cents a share, said the financial outlook this year is moderate. It expects to have annual net sales totaling $1.2 billion, compared to $1.4 billion in net sales last year. Company executives were predicting that this year, Fossil would generate positive free cash flow, helped by a $57 million tax refund in the second quarter of this year.
In an attempt to grow business, Fossil last year announced an ad campaign, called “Made for This,” to connect more deeply with customers. It looked at how the decades-old company had played a part in its customers’ daily lives and how it could continue to do so.
Fossil, founded in 1984 by Tim Kartsotis, has a number of brands in its portfolio, including owned labels Fossil, Michele, Relic, Skagen and Zodiac, and licensed brands, Armani Exchange, Diesel, DKNY, Emporio Armani, Kate Spade New York, Michael Kors and Tory Burch.
