News · Fossil

Fossil's gross margin hit 62 per cent and it still posted a wider loss

Fossil's gross margin climbed 490 basis points last quarter, its watch sales sat still, and the loss got bigger anyway.

Hen & Mills Editorial · 3 min read · 14 August 2026

Fossil's gross margin for the quarter was 62.4 per cent, up from 57.5 a year earlier. Retail businesses do not usually move margin 490 basis points in twelve months. Net sales were 209.7 million US dollars, down 4.9 per cent. The filing landed on 12 August and covers the thirteen weeks to 4 July.

Fossil credits three things: holding full price, changes to where it sources from, and a lighter tariff bill. Two of those it controls. The tariff line it does not, and it reverses the day policy does, so read that slice of the improvement as on loan. A timing quirk helps as well. Royalties from the licensed brands landed earlier in the year than they did last year, lifting the figure with nothing extra sold.

Watches flat, leathers down 31.4 per cent

Traditional watches came in 0.9 per cent below last year in constant currency. On a base that size, call it flat. Leathers fell 31.4 per cent. Jewellery fell 11.3. The watch side is holding its ground while the accessories side gives way, and the gap between them widened again.

Owned brands are Fossil, Michele, Relic, Skagen and Zodiac. The licences are the fashion roster: Armani Exchange, Diesel, Emporio Armani, Michael Kors, Skechers and Tory Burch. If you are wondering why a watch site reads a handbag company's accounts, Zodiac is on that first list.

Regionally, Europe was the hole, down 18.2 per cent in constant currency, with Asia up 3.7 and the Americas up 0.2. Wholesale grew 0.9 per cent, direct to consumer fell 14.6, and comparable retail sales were down 8. Not all of that retail number is bad news. Closing stores under the rationalisation program accounts for roughly 220 basis points of the overall sales decline.

Trading profit doubled, then the interest bill turned up

This is where the release argues with itself. Reported operating income was 3.2 million dollars, down from 8.5 million. On constant currency adjusted operating income, the measure Fossil steers by, it was 8.6 million against 4.3 million. The trading profit doubled.

Go below the operating line and the picture changes. Interest expense was 8.3 million dollars against 4.3 million, on more debt, higher rates and more amortisation of debt issuance costs. Loss before tax was 6.9 million. Net loss attributable to Fossil was 10.6 million, or 18 cents a diluted share, against a 2.3 million loss and 4 cents last year. Total debt sits at 203 million against 96.6 million of liquidity. Fossil is trading better and paying more to stay funded, and it is the funding that turns a 62.4 per cent gross margin into a wider loss.

Everything now rides on the fourth quarter

The full-year outlook went up slightly: sales down 3 to 5 per cent with growth returning in the fourth quarter, adjusted operating margin of 4 to 6 per cent, and positive free cash flow. Inventories closed at 177.9 million, roughly flat year on year. No glut waiting to be discounted, which is what a full-price strategy needs to stay true.

Chief executive Franco Fogliato put the move to a "brand-led, consumer-focused operating model" alongside what he called "healthy watch industry fundamentals". That is a sunnier read of the market than most of the trade has offered this year, and it comes from a business whose own watch sales did not grow. Fossil has staked the return to growth on the fourth quarter, so that is the forecast to check.