Fossil Group (FOSL) Q1 2026 earnings summary

Executive summary

• Net sales for Q1 2026 were $224.8 million, down 3.6% year-over-year, with declines in most regions and categories except traditional watches, which grew 2.3%.

• Operating income improved to $12 million (5.4% margin), up from a $6.7 million loss last year, driven by lower expenses and restructuring benefits.

• Net loss narrowed to $0.8 million ($0.01 per share) from $17.6 million ($0.33 per share) in the prior year.

• Adjusted EBITDA was $14.5 million (6.5% of sales), up from $9.1 million (3.9%) year-over-year.

• Continued execution of the Turnaround Plan, focusing on profitable growth, operational optimization, and shareholder value.

Financial highlights

• Gross margin was 59.9%, down from 61.3% year-over-year, mainly due to increased tariffs and timing of royalty recognition, partially offset by tariff refunds.

• Operating expenses fell to $122.7 million (54.6% of sales), with restructuring costs dropping to $2.0 million from $15.8 million.

• Interest expense increased to $8.5 million due to higher debt and rates.

• Inventories decreased 14.3% to $156.1 million; net working capital was $182.5 million, down from $219.9 million a year ago.

• Cash and equivalents were $81.4 million at quarter end, with total liquidity of $109.5 million.

Outlook and guidance

• Full-year 2026 net sales expected to decline 4%-6%, with growth anticipated in Q4.

• Adjusted operating margin forecasted between 3%-5%.

• Free cash flow expected to be break-even for the year.

• Capital expenditures for 2026 are expected to be $9.0 million.

• Management expects continued macroeconomic and tariff-related headwinds, with ongoing inventory and supply chain challenges.