Change is sweeping through Fossil Inc.
Kosta Kartsotis stepped down after nearly 24 years as chief executive officer and the embattled watchmaker said it hired Evercore as a financial adviser and would conduct “a strategic review of its current business model and capital structure.”
Kartsotis first joined the company in 1988 and steered it through decades of evolution and upheaval, but struggled recently as the company made a big push into smartwatches only to later retreat. He also stepped down from the company’s board, but will stay on in a transitional role until September and then as a consultant for another year.
Fossil is being led into the next phase by Jeffrey Boyer, who’s been executive vice president and chief operating officer since April 2021, and is now filling the spot of interim CEO. He was also named to the board.
Former Kohl’s Corp. CEO Kevin Mansell, who’s been on the Fossil board since 2019, was named chairman of the board.
“On behalf of the entire board, I thank Kosta for his unwavering commitment and leadership to Fossil,” Mansell said. “We have great confidence in Jeff to guide the company through this period of transition as we undergo a strategic review, continue to advance our Transform and Grow Plan and pursue our search for the company’s next CEO in our effort to create long-term value for our stockholders.”
Fossil’s been struggling for some time. In September, debt watchdog Standard & Poor’s said the company’s capital structure was “unsustainable” and cut its credit rating to “CCC-plus,” putting the firm’s debt deep into junk territory.
For the year ended Dec. 30, Fossil’s sales fell 16 percent to $1.4 billion with net losses of $157 million.
The company ended the year with cash and equivalents of $117 million and is clearly looking for some more breathing room with its strategic review.
Fossil said the deep dive into its business would include “efforts to optimize its business model through additional changes to its operations, as well as further structural cost reductions, which are under consideration. The Company anticipates this effort will expand on its current [Transform and Grow] Plan and could include additional debt and equity financing options, including monetization of various assets to strengthen its balance sheet.”
Boyer added: “During 2023, we made solid progress under our Transform and Grow Plan, enabling us to exit the smartwatch category, close underperforming retail stores, manage down inventories, and capture $125 million of annualized cost savings. We entered 2024 with a leaner cost structure, healthier inventory levels and sufficient liquidity. Importantly, we remain on track with our TAG Plan and expect to achieve our previously announced target of $300 million of annualized operating income benefits by the end of 2025. Additionally, we are taking deliberate actions to improve our financial performance, strengthen our balance sheet, and conduct a strategic review of our current business model and capital structure with the goal of maximizing shareholder value.”
