Fossil swings to $11.7M profit as it abandons smartwatch race

Fossil Group returned to profitability and posted sales growth in its fiscal third quarter, beating its own timeline for a business turnaround. The watchmaker had struggled for years against rising debt, falling mall traffic, and competition from connected gadgets.

Refocusing on traditional watches

Under Chief Executive Officer Franco Fogliato, who joined in 2024, Fossil changed course by stepping away from digital smartwatches. Smartwatch revenue dropped below $1 million for the quarter. Instead, traditional analog timepieces generated 86% of the company’s total sales and grew 6.4% year-over-year.

The company also cut deep into its retail footprint. Fossil closed underperforming locations, slashed operating expenses by 11.1% to $137 million, and halted heavy discount promotions. While direct-to-consumer sales fell 5.9% due to store closures, sticking to full-price items lifted overall margins.

Asian markets drive growth

For the quarter ending October 3, Fossil generated net sales of $271.2 million, up 0.4% from the prior year. This marked the firm’s first year-over-year quarterly sales increase since early 2022. The business delivered net income of $11.7 million, reversing a net loss of $39.9 million from the same period last year.

International buyers powered much of the rebound. Net sales in Asia jumped 15.1%, driven mostly by demand in India. Even with global progress, leadership stated that expanding sales in the United States remains the top priority moving forward.

Raised financial outlook

Following the stronger performance, Fossil upgraded its financial forecast for the full year. The retailer now anticipates annual net sales between $980 million and $990 million, an improvement over its previous projections. Fossil also anticipates ending the year with positive free cash flow.