Fossil Group Q2: sales decline, profitability improves

US-based watch and lifestyle company Fossil Group (Fossil) has updated its full year guidance following performance above expectations in its second quarter ending July 4, 2026.

Net sales reached 209.7 million dollars, representing a 4.9 percent decline on a reported basis and a 4.4 percent drop in constant currency compared to 220.4 million dollars in the second quarter of 2025. Direct-to-consumer (D2C) channels drove the decrease, with store rationalisation initiatives accounting for approximately 220 basis points of the drop.

Fossil chief executive officer Franco Fogliato stated: “We delivered another quarter ahead of our expectations, driven by broad-based strength across our core brands, channels and many of our key geographies. Top line performance, gross margin expansion and disciplined cost management fueled a doubling of constant currency adjusted operating income compared to the second quarter of last year.”

Highlights of Q2 results

The company's direct-to-consumer sales, which include e-commerce and retail stores, fell 14.6 percent, while comparable retail sales dropped 8 percent. Wholesale sales increased 0.9 percent in constant currency.

Regionally, net sales in Europe fell 18.2 percent in constant currency, while Asia increased 3.7 percent and the Americas edged up 0.2 percent. By product category, traditional watch sales decreased 0.9 percent in constant currency. Leather goods dropped 31.4 percent and jewellery sales declined 11.3 percent in constant currency.

Gross profit rose to 130.8 million dollars, up from 126.7 million dollars in the second quarter of 2025. Gross margin expanded 490 basis points to 62.4 percent, supported by improved product margins from full price selling, sourcing initiatives and reduced tariffs.

Operating income stood at 3.2 million dollars compared to 8.5 million dollars in the second quarter of 2025, yielding an operating margin of 1.5 percent. Adjusted operating income in constant currency doubled to 8.6 million dollars, with an adjusted operating margin of 4.1 percent. Adjusted EBITDA reached 8.6 million dollars, or 4.1 percent of net sales.

Net loss for the quarter reached 10.6 million dollars, resulting in a net loss per diluted share of 0.18 dollars, compared to a net loss of 2.3 million dollars in the second quarter of 2025. Adjusted net loss reached 7.9 million dollars.

Outlook raised

Fogliato added: “Strong business performance in the first half of 2026 and ongoing business momentum are enabling us to confidently raise our full year financial outlook, which is highlighted by an expected return to top line growth in the fourth quarter, improved profitability and positive free cash flow generation.”

For the full year 2026, Fossil now expects worldwide net sales to decline between 3 percent and 5 percent, with a return to top line growth in the fourth quarter. Adjusted operating margin is projected to reach between 4 percent and 6 percent, alongside positive free cash flow.