Fossil Raises 2026 Outlook After Gross-Margin Turn

The Tip Desk · August 12, 2026 · 3 min read

Gross margin reached 62.4% in the 13 weeks ended July 4, 2026, and the company lifted its full-year outlook to a 4%–6% adjusted operating margin.

Fossil Group, Inc. (FOSL) raised its full-year 2026 outlook after gross margin expanded 490 basis points to 62.4% in the 13 weeks ended July 4, 2026, reversing a 140-basis-point year-over-year compression in the immediately preceding quarter.

The lifestyle-accessories company now expects worldwide net sales to decline 3% to 5% for the full year, with a return to growth in the fourth quarter, an adjusted operating margin of 4% to 6%, and positive free cash flow. Those sales and margin ranges exclude foreign-currency effects. In May, after first-quarter results, the company had reiterated its 2026 outlook rather than raising it.

Net sales were $209.7 million, down 4.9% as reported and 4.4% in constant currency from $220.4 million a year earlier. The constant-currency decline narrowed from 6.5% in the first quarter, when the reported drop of 3.6% included a 13-week versus 14-week calendar effect. Store rationalization accounted for about 220 basis points of the second-quarter sales decline.

Gross profit was $130.8 million. The year-over-year margin increase primarily reflected improved product margins in core categories from a full-price selling model, sourcing initiatives, and reduced tariffs, partly offset by earlier recognition of licensed-brand minimum royalties. Sequentially, gross margin rose 240 basis points from 59.9% in the first quarter.

Constant-currency adjusted operating income was $8.6 million, or 4.1% of sales, compared with $4.3 million, or 2.0%, a year earlier. GAAP operating income was $3.2 million, or 1.5% of sales, versus $8.5 million, or 3.9%, a year earlier. Adjusted EBITDA was $8.6 million, or 4.1% of net sales.

Direct-to-consumer sales fell 14.6% in constant currency, a narrower drop than the 29% decline in the first quarter. Comparable retail sales declined 8%. Wholesale sales rose 0.9% in constant currency. Traditional watch sales decreased 0.9% in constant currency. Leathers fell 31.4% and jewelry 11.3%.

In constant currency, Europe net sales decreased 18.2%. The Americas increased 0.2% after a 3% decline in the first quarter, and Asia increased 3.7%. Reported segment sales were $96.7 million in the Americas, $55.8 million in Europe and $56.8 million in Asia.

Operating expenses were $127.6 million, or 60.8% of net sales. The quarter included $3.4 million of restructuring costs, primarily professional services and employee costs. SG&A was $123.5 million, or 58.9% of sales. Store count ended at 176, down from 214 a year earlier, after 28 closures and 11 franchise conversions in the second quarter.

Interest expense was $8.3 million, driven by increased debt-issuance cost amortization, higher debt balances and increased interest rates. Other expense was $1.8 million on higher net currency losses. Net loss was $10.6 million, or $0.18 a share, compared with a $2.3 million loss, or $0.04 a share, a year earlier.

As of July 4, 2026, total liquidity was $96.6 million, including $79.0 million of cash and cash equivalents and $17.6 million of availability under the asset-based revolving credit facility. Inventories were $177.9 million. Total debt was $203.0 million.

Chief Executive Franco Fogliato said the company delivered another quarter ahead of expectations, driven by broad-based strength across core brands, channels and many key geographies, and that top-line performance, gross-margin expansion and disciplined cost management fueled a doubling of constant-currency adjusted operating income versus the second quarter of last year. He said first-half strength and ongoing momentum enabled the company to raise its full-year outlook, highlighted by an expected return to top-line growth in the fourth quarter, improved profitability and positive free cash flow.