Fossil Group returned to profitability in its fiscal third quarter, posting operating income of $25.3 million compared with an operating loss of $21.7 million a year earlier. Net sales grew 0.4% to $271.2 million, marking the company's first year-over-year sales increase since the first fiscal quarter of 2022.
The watchmaker reported net income of $11.7 million, or 19 cents per share, versus a net loss of $39.9 million, or 76 cents per share, in the prior year. Operating expenses fell 11.1% to $137 million.
CEO Franco Fogliato, who joined the company in 2024, attributed the turnaround to disciplined management of full-price sales and cost control. The company moved away from heavy promotions and closed underperforming stores. Direct-to-consumer sales fell 5.9% as part of this downsizing, which Fogliato called "aggressive."
Traditional watches, which represent around 86% of sales, grew 6.4% for the quarter. Smartwatch sales came in under $1 million. Asia drove growth with net sales up 15.1%, led primarily by the India market.
Fossil raised its full-year guidance to net sales between $980 million and $990 million, compared with a prior expectation of a 3% to 5% decline. The company expects positive free cash flow by year-end. Fogliato said the company had not previously expected sales growth for another year and a half.
Fogliato told CNBC the company is prioritizing growth in its home market. He said customers responded well to the shift away from markdowns and that Fossil is investing in analog watches rather than trying to compete in the smartwatch space.