Executive Summary

Q3 revenue was $270.2M (-6.1% YoY) with GAAP diluted EPS of -$0.76 and adjusted EPS of -$0.63; revenue materially beat S&P consensus ($233.3M*), while EPS missed (-$0.36*) as licensed brand minimum royalty deficits and tariffs pressured margins .
Gross margin was 49.0% (-40 bps YoY; down sequentially from 57.5% in Q2) as royalty shortfalls offset benefits from full‑price selling and sourcing initiatives; CFO reiterated full‑year gross margin in the mid‑50s and expects Q4 gross margin similar to last year .
Balance sheet transformation completed post‑quarter: exchange of 7.00% 2026 notes into 2029 notes and $32.5M of new money financing; liquidity $101.9M, inventories down 26% YoY, new $150M ABL increases availability .
FY25 guidance reiterated: worldwide net sales decline mid‑teens; adjusted operating margin break‑even to slightly positive; Q4 expected to deliver positive adjusted operating margin .
Catalysts: wholesale strength (EMEA/Asia), Nick Jonas/Fantastic Four/Galactus collaborations driving AUR and brand heat, and store rationalization improving SG&A leverage; risk: ongoing tariff headwinds and licensed royalty floors .

What Went Well and What Went Wrong

What Went Well

Wholesale growth: Wholesale sales +3% in constant currency; Asia +2% CC overall; EMEA and Asia wholesale mid‑single‑digit growth with India/Japan strong .
Margin architecture: Full‑price selling, sourcing optimization, targeted price increases, and higher mix of traditional watches improved underlying gross margins despite royalty impacts .
Cost discipline: SG&A down 8.8% YoY; >$60M YTD cost savings; store closures at lease end with minimal costs; adjusted operating loss narrowed YoY .
- “Our turnaround initiatives are foundational and have resulted in a structurally higher margin business.” — CFO .
- “We… built a consumer‑focused, brand‑led operating model, strengthened our gross margin profile, right‑sized our cost structure and fortified our balance sheet.” — CEO .

What Went Wrong

DTC pressure: Direct‑to‑consumer sales -27% CC; comparable retail sales -22%; leathers -37% and jewelry -23% CC; Fossil brand down in Q3 .
Gross margin headwinds: Increased tariffs and licensed brand minimum royalty deficits reduced gross margin to 49.0% (down 40 bps YoY and meaningfully sequentially vs Q2 57.5%) .
Losses widened YoY: Net loss -$39.9M vs -$32.0M in Q3’24; GAAP diluted EPS -$0.76 vs -$0.60; other income swung to a $6.2M expense due to FX losses and $1.7M extinguishment loss .

Financial Results

Core metrics vs prior periods

Metric	Q3 2024	Q1 2025	Q2 2025	Q3 2025
Revenue ($USD Millions)	$287.8	$233.3	$220.4	$270.2
Gross Margin %	49.4%	61.3%	57.5%	49.0%
Operating Margin % (GAAP)	(8.5)%	(2.9)%	3.9%	(8.0)%
Diluted EPS (GAAP) ($)	-0.60	-0.33	-0.04	-0.76
Adjusted EPS ($)	-0.56	-0.10	-0.10	-0.63
Adjusted EBITDA ($USD Millions)	-$15.6	$9.1	$7.0	-$15.0

Actuals vs S&P Global Consensus

Metric	Q2 2025 Consensus	Q2 2025 Actual	Beat/Miss	Q3 2025 Consensus	Q3 2025 Actual	Beat/Miss
Revenue ($USD Millions)	$198.0*	$220.4	Beat	$233.3*	$270.2	Beat
Primary EPS (Normalized) ($)	-0.21*	-0.10 (Adj EPS)	Beat	-0.36*	-0.63 (Adj EPS)	Miss
EBITDA ($USD Millions)	-$8.0*	$7.0 (Adj)	Beat	-$21.0*	-$15.0 (Adj)	Beat

Values retrieved from S&P Global*.

Segment and product breakdown (Q3 2025)

Segment/Product	Q3 2024 As Reported ($M)	Q3 2025 As Reported ($M)	Q3 2025 Constant Currency ($M)
Americas	$121.3	$109.7	$109.8
Europe	$97.0	$91.2	$87.0
Asia	$69.0	$69.0	$70.2
Traditional Watches	$223.2	$222.2	$220.3
Smartwatches	$4.0	$3.8	$3.9
Leathers	$23.9	$15.1	$15.0
Jewelry	$31.5	$25.1	$24.2
Other	$5.2	$4.0	$3.9

Constant currency YoY: Americas -9%, Europe -10%, Asia +2%; Wholesale +3%, DTC -27%; DTC comparable retail sales -22% .

KPIs across quarters

KPI	Q1 2025	Q2 2025	Q3 2025
DTC Comparable Retail Sales YoY	-22%	-23%	-22%
DTC Sales YoY (Constant Currency)	-24%	-30%	-27%
Wholesale Sales YoY (Constant Currency)	+6%	-6%	+3%
Liquidity ($M)	$99.5	$110.6	$101.9
Inventory ($M)	$182.1	$178.1	$166.8
Total Debt ($M)	$180.0	$179.0	$176.0
Store Count (Total)	220	214	204

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Worldwide Net Sales (YoY)	FY 2025	Decline mid‑teens (raised from mid‑to‑high teens in Q2)	Decline mid‑teens	Maintained
Adjusted Operating Margin	FY 2025	Break‑even to slightly positive	Break‑even to slightly positive	Maintained
Gross Margin	Q4 2025	N/A	Similar to last year (qualitative)	New qualitative
Store Closures Impact	FY 2025	~$45M impact to net sales	~$45M impact to net sales	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
Margin strategy (full‑price, sourcing)	Gross margin +890 bps in Q1; exit smartwatches; sourcing and mix benefits	Underlying margins improved; royalty floors/tariffs offset; FY gross margin mid‑50s; Q4 similar to last year	Margin architecture improving; near‑term headwinds likely to fade
Channel mix	Q1 wholesale +6% CC; DTC -24% CC; Q2 wholesale -6% CC; DTC -30% CC	Wholesale +3% CC; DTC -27% CC; DTC comps -22%; intentional e‑com downsize	Wholesale stabilizing; DTC rightsizing continues
Product/brand momentum	Traditional watches +2% CC (Q1); smartwatches exit	Traditional watch mix supports margins; Nick Jonas collab driving AUR; Fantastic Four/Galactus sell‑outs	Brand heat rising; higher AUR
Regional dynamics	Q1 Europe +1% CC; Asia -10% CC	Asia +2% CC (India/Japan strong; China still weak); EMEA distributor transitions	Asia improving ex‑China; EMEA model change aids profitability
Tariffs/macro	Tariff exposure flagged (Q1)	Increased tariffs a margin headwind in Q3	Persistent headwind; managed by pricing/sourcing
Balance sheet	Refinancing plan announced Q2	Exchange completed; maturities extended to 2029; +$32.5M new money	Risk reduced; flexibility improved
Retail experience	“Store of the future” discussed in Q2	U.S. rollout complete; improved traffic/conversion	Execution traction building

Management Commentary

“The balance sheet refinancing represents a pivotal milestone in our turnaround and allows us to turn the page to Fossil Group’s next chapter.” — CEO .
“Our focus on full‑price selling has fundamentally changed our margin architecture… All of these actions helped us mitigate expected tariff headwinds in the quarter.” — CFO .
“Year‑to‑date, we have generated over $60 million in cost savings and reduced our SG&A by 260 basis points…” — CEO .
“We successfully completed the exchange… for new 9.5% notes due 2029… with $32.5 million in incremental new money financing.” — CFO .
“Initial trends in our DTC channels indicate that our holiday collection is resonating with consumers, with momentum building week over week.” — CEO .

Q&A Highlights

Channel performance gap: Management clarified the -22% “comparable retail sales” is total DTC (including e‑commerce), not store comps; physical stores performing well, e‑comm intentionally downsized to support margin integrity .
Asia strength: Region led by India, Japan improved, China still contracting; less promotional stance aiding gross margin; new Asia GM appointed to accelerate growth .
Inventory/working capital: Tighter open‑to‑buy and SKU reduction improved turns; inventory -26% YoY with better product availability; working capital down ~$90M YoY .

Estimates Context

Q3 revenue beat: $270.2M actual vs $233.3M consensus*; EBITDA beat (adj): -$15.0M vs -$21.0M consensus*; EPS miss: adjusted -$0.63 vs -$0.36 consensus* as royalty deficits and tariffs compressed margins .
Q2 also beat on revenue and EPS (adj) vs consensus*, underscoring wholesale recovery and cost control .
Consensus breadth remains thin (1 estimate for EPS/Revenue), so results may drive upward revisions to revenue/EBITDA and a reassessment of EPS trajectory given royalty timing effects [GetEstimates].
Values retrieved from S&P Global*.

Key Takeaways for Investors

Revenue over‑delivery with wholesale momentum and higher AUR indicates demand stabilization even as DTC is rightsized; watch for holiday execution to sustain top‑line into Q4 .
Margin structure is improving (pricing, sourcing, mix), but licensed royalty floors and tariffs can quarter‑weight pressure; reductions negotiated for 2026 should materially ease Q3 royalty shortfalls .
Balance sheet risk reduced: maturities pushed to 2029, liquidity >$100M, new $150M ABL access — supports turnaround investments and reduces near‑term solvency overhang .
Guidance credibility improving: reiterated FY25 outlook with Q4 set up for positive adjusted operating margin, aided by gross margin similar to last year and SG&A leverage .
Segment mix: Asia ex‑China strengthening, EMEA distributor model simplifies ops/profitability; Fossil brand collaborations and ambassador program driving higher AUR and traffic .
Near‑term trading setup: potential positive sentiment on revenue/EBITDA beats offset by EPS miss; stock reaction likely keyed to holiday comps, Q4 margin delivery, and any tariff/royalty developments .
Medium‑term thesis: turnaround pillars (core focus, cost right‑sizing, balance sheet) are intact; 2026 royalty reductions and ongoing store rationalization support sustainable margin recovery .

Footnote: Values retrieved from S&P Global* for consensus estimates and related actuals shown with asterisks.

Fossil Group, Inc. (FOSL)·Q3 2025 Earnings Summary