Fossil Group CEO steps down as strategic review launches

The chief executive officer of Fossil Group, Kosta N. Kartsotis, has stepped down from his position alongside the launch of strategic review for the company after its net sales for the full financial year dropped by 16 percent.

Stepping into Kartsotis’ place will be chief operating officer, Jeffrey N. Boyer, who has been appointed interim CEO, effective immediately.

Kartsotis’ departure comes on the back of a disappointing financial period for the company, with fourth quarter 2023 sales falling 15.6 percent to 421.3 million dollars. The group said the decrease had largely been driven by “weakness in the wholesale channel, store rationalisation initiatives and lower smartwatch sales”.

Wholesale channel drives sales declines in Q4

Sales fell 22 percent in Europe, 16 percent in Asia and 12 percent in the Americas, while wholesale sales saw a decline of 19 percent, compared to a 10 percent drop across direct-to-consumer channels.

Fossil Group’s gross profit also fell, dropping from 235.4 million dollars in the same period of the year prior to 200.5 million dollars, with its gross margin sitting at 47.6 percent. Its operating expenses totaled 224.5 million dollars, reflecting 53.3 percent of net sales, while operating losses widened to 24 million dollars from its initial 1.3 million dollars.

The company’s overall income loss before taxes was 27.8 million dollars, compared to its previous four million dollar loss, while its adjusted EBITDA came to 1.6 million dollars. Its net loss for the period totaled 28.2 million dollars, up from 9.4 million dollars.

Yearly losses amount to 157 million dollars

Financials were also bleak for the full year 2023, during which time net sales dropped to 1.4 billion dollars from the prior year’s 1.7 billion dollars. Fossil Group’s gross profit came to 679.6 million dollars, a significant fall from the previous 830.7 million dollars, while gross margin fell to 48.1 percent.

The company’s operating income loss totaled 143 million dollars, a notable widening on the prior year’s 1.5 million dollars, akin to its income loss, which heightened from 22.1 million dollars to 156.1 million dollars. Its net loss for the year rose from 44.2 million dollars to 157 million dollars.

Review to set about on structural cost reductions

In light of the disappointing results, Fossil Group said it was to launch a strategic review of its current business model and capital structure, with the goal of optimising the business through operational changes and structural cost reductions. The move builds on the company’s ongoing Transform and Grow (TAG) Plan, announced in March 2023 with the mission of reducing operating expenses and improving operating margins.

According to the latest update, the plan has generated annualised operating income benefits of around 125 million dollars in 2023, and is expected to generate additional annualised operating benefits of up to 100 million dollars in 2024.

In a release, Boyer said the TAG Plan allowed the company to exit the smartwatch category, close underperforming retail stores and manage down inventories. He continued: “We entered 2024 with a leaner cost structure, healthier inventory levels and sufficient liquidity. Importantly, we remain on track with our TAG Plan(...).”

For 2024, the company is expecting international net sales to amount to 1.2 billion dollars, reflecting around 100 million dollars of negative impact related to moves made under the plan. It forecasts its operating margin to be in the range of -3 to -5 percent.