Fossil Group (NASDAQ: FOSL) shares jumped 26.7% today after the watchmaker reported its first quarterly sales growth since 2022 and raised full-year guidance. The Texas-based company, which makes watches and accessories under brands including Michael Kors, Emporio Armani and Diesel, also swung to a profit.
The stock closed at $9.97, up from $7.87, in the first session after results were released following yesterday’s US market close. Some 7.7m shares changed hands against 1.83m the day before, and the intraday high of $10.55 cleared the previous 52-week high of $8.25.
Net sales rose 0.4% to $271.2m, the first year-on-year increase since the first quarter of 2022. Operating income was $25.3m against a $21.7m operating loss a year earlier. Net income was $11.7m, or $0.19 a share, well ahead of the $0.03 consensus from Zacks Investment Research.
Fossil raised full-year net sales guidance to $980m-$990m, from a previously guided 3-5% decline, and adjusted operating margin (profit from operations excluding one-offs, as a share of sales) to 5.5-6.5% from 4-6%.
Asia sales rose 15.1%, led by India, and traditional watches, about 86% of sales, grew 6.4%. Gross margin climbed 10.9 points to 59.9%, helped by lower minimum royalty guarantees (minimum fees owed to brand licensors regardless of sales) and a change to spread any shortfall across all four quarters.
Chief financial officer Randy Greben said about $10m of wholesale shipments moved from the fourth quarter into the third, so part of the growth borrowed from the holiday period:
Notwithstanding the wholesale timing that shifted that growth into Q3, results were better than expected and reflect improving trends across brands, channels, and geographies as we continue to advance our turnaround plan.
Randy Greben, CFO, Fossil Group
Chief executive Franco Fogliato said the company had not expected sales growth for another year and a half, and that growing its home market was priority number one.
The fourth quarter is the test. Management guided selling, general and administrative costs to the low 50s as a percentage of sales, up from 48.9% in the third quarter, and the shares had already risen about 114% this year before the results.