Fossil Group, Inc. (NASDAQ:FOSL) Q3 2023 Earnings Call Transcript
Fossil Group, Inc. (NASDAQ:FOSL) Q3 2023 Earnings Call Transcript November 9, 2023
Operator: Good afternoon, ladies and gentlemen and welcome to the Fossil Group Third Quarter 2023 Earnings Conference Call. [Operator Instructions] This conference call is being recorded and may not be reproduced in whole or in part without written permission from the company. I will now turn the call over to Christine Greany of The Blueshirt Group to begin.
Christine Greany: Hello, everyone and thanks for joining us today. With us on the call are Kosta Kartsotis, Chairman and CEO; Jeff Boyer, Chief Operating Officer; and Sunil Doshi, Chief Financial Officer. I would like to remind you that information made available during this conference call contains forward-looking information and the actual results could differ materially from those that will be discussed during this call. Fossil Group’s policy on forward-looking statements and additional information concerning a number of factors that could cause actual results to differ materially from such statements is readily available in the company’s Form 8-K, 10-Q and 10-K reports filed with the SEC. In addition, Fossil assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
During today’s call, you will, excuse me – during today’s call, we will refer to constant currency results. Please note that you can find a reconciliation of actual results to constant currency results and other information regarding non-GAAP financial measures discussed on this call in Fossil’s earnings release, which was filed today on Form 8-K and is available in the Investors section of fossilgroup.com. Now I’ll turn the call over to Kosta to begin.
Kosta Kartsotis: Thanks, Christine. Good afternoon, everyone and thanks for joining us today. The third quarter proved more difficult than expected mostly because of headwinds in the wholesale channel in Europe and because of soft consumer spending in China. From a high level perspective, we are facing challenging category consumer and channel dynamics. While working against these headwinds, including tough macro conditions globally, we remain focused on our objectives, most notably, the execution of our Transform and Grow Plan, which we are making solid progress on. Three quarters into the TAG plan, which we announced in February, we are tracking to deliver the cost of goods and operating expense savings we previously outlined, which are expected to drive approximately $300 million in annualized operating income benefit by the end of 2025.
Year to date in 2023, we have captured approximately $80 million in annualized expense savings. Under the extended plan we announced last quarter, we are advancing our strategies to improve our sourcing practices and to further streamline roles and responsibilities across the organization. Both of these initiatives are laying the groundwork to help us generate improved operating margins in 2024. Our third quarter net sales decline of 21% primarily reflects ongoing headwinds in the wholesale channel in both the Americas and Europe and a slower than expected recovery in Greater China. The overall decline includes approximately five points of headwinds related to declines in our smartwatch business and due to store closures. Importantly, we are seeing some encouraging signs in our core FOSSIL brand where our product and marketing initiatives are bolstering our traditional watch sales, which were up 2% and up 11% in the U.S. and India, respectively.
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