Fossil Raises Full-Year Outlook After Profit Recovery

The Tip Desk · November 12, 2026 · 4 min read

Third-quarter net sales were $271.2 million, up 2.0% in constant currency, and the company lifted 2026 sales guidance to $980 million to $990 million.

Fossil Group, Inc. (FOSL), the global lifestyle-accessories designer, reported net sales of $271.2 million for the fiscal third quarter ended October 3, 2026, a 0.4% increase on a reported basis and 2.0% in constant currency versus $270.2 million a year earlier. That result reversed a 4.9% reported and 4.4% constant-currency decline in the second quarter and a 3.6% reported and 6.5% constant-currency decline in the first quarter.

The company said the sales increase was driven by strong consumer response to product innovation and storytelling. Store rationalization unfavorably impacted sales by about 190 basis points in the third quarter, after about 220 basis points in the second quarter and about 280 basis points, including smartwatch declines, in the first quarter.

In constant currency, Asia net sales increased 15.1%, after a 3.7% increase in the second quarter and a 1% decline in the first. The Americas increased 0.1%. Europe decreased 5.6%, after an 18.2% decline in the second quarter and a 14% decline in the first. Wholesale sales in constant currency increased 4.4%. Direct-to-consumer sales decreased 5.9%, after a 14.6% decline in the second quarter and a 29% decline in the first. Comparable retail sales increased 0.1%.

Traditional watch sales increased 6.4% in constant currency, after a 0.9% decline in the second quarter and approximately flat in the first. Leathers decreased 20.5% and jewelry declined 10.8%, each in constant currency. The Fossil brand increased 13.6% in constant currency.

Gross profit totaled $162.3 million. Gross margin expanded 10.8 percentage points to 59.8% versus 49.0% a year earlier, after a 490-basis-point expansion to 62.4% in the second quarter and a 140-basis-point contraction to 59.9% in the first. The company said the year-over-year increase primarily reflected reduced licensed brand minimum royalties, accelerated timing of minimum royalty recognition versus the prior year, and improved product margins in core categories from its full-price selling model, sourcing initiatives and reduced tariffs.

Operating expenses were $137.0 million, down 11.1% from $154.1 million a year earlier, and 50.5% of net sales versus 57.0%. SG&A expenses were $133.9 million, down 8.8%, and 49.4% of sales versus 54.3%. Restructuring costs were $2.9 million, versus $6.8 million a year earlier.

Operating income was $25.3 million, or a 9.3% operating margin, compared with an operating loss of $21.7 million and an (8.0)% margin a year earlier. Constant-currency adjusted operating income was $30.2 million, or an 11.0% constant-currency adjusted operating margin, versus an adjusted operating loss of $14.4 million and a (5.3)% margin. Adjusted EBITDA was $36.7 million, or 13.5% of net sales, versus $(15.0) million, or (5.6)% of sales, a year earlier.

Interest expense was $8.9 million, versus $4.2 million a year earlier, which the company attributed to increased debt issuance cost amortization, higher debt balances and increased interest rates. Other income was $4.2 million, versus $6.2 million of expense, primarily reflecting net currency gains versus net currency losses; the prior-year quarter also included a $1.7 million loss on extinguishment of debt. Net income was $11.7 million, or $0.19 a share, versus a net loss of $39.9 million, or $0.76 a share. Adjusted net income was $14.2 million, or $0.23 a share.

As of October 3, 2026, inventories were $189.2 million, up 13.4% from a year earlier, which the company said reflected investments to support product innovation and the demand pipeline. Total debt was $208.0 million. Total liquidity was $111.7 million, consisting of $77.0 million of cash and cash equivalents and $34.7 million of availability under its asset-based revolving credit facility. Total stores declined to 174 from 204 a year earlier, with 4 openings, 23 closures and 11 franchise conversions.

The company is raising 2026 financial guidance to worldwide net sales of $980 million to $990 million, adjusted operating margin of 5.5% to 6.5%, and positive free cash flow, after raising the outlook in the second quarter and reiterating it in the first. Worldwide net sales and adjusted operating margin guidance exclude impacts from foreign currency.