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What changed in Fossil Group, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Fossil Group, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+328 added−324 removedSource: 10-K (2025-03-12) vs 10-K (2024-03-13)

Top changes in Fossil Group, Inc.'s 2024 10-K

328 paragraphs added · 324 removed · 252 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

55 edited+25 added−30 removed35 unchanged
Biggest changeTrade Representative that a country has denied adequate intellectual property rights or fair and equitable market access to U.S. firms that rely on intellectual property, trade disputes between the U.S. and a country that leads to withdrawal of "most favored nation" status for that country and economic and political changes within a country that are viewed unfavorably by the U.S. government.
Biggest changeFactors that may influence the modification or imposition of these restrictions include determinations imposing increased tariffs by, for example, the President or the U.S. Trade Representative that there is a national 9 Table of Contents emergency or that a country has denied fair and equitable market access to U.S. firms that rely on intellectual property.
Distribution We distribute our products globally through regional warehouses with our warehouse in Dallas, Texas serving the Americas, our warehouse in Eggstätt, Germany serving Europe and our warehouse in Hong Kong serving Asia. For those countries in which our products are distributed, but where we don’t have a physical presence, we use third-party distributors.
Distribution We distribute our products globally through regional warehouses with our warehouse in Dallas, Texas serving the Americas, our warehouse in Eggstätt, Germany serving Europe and our warehouse in Hong Kong SAR serving Asia. For those countries in which our products are distributed, but where we don’t have a physical presence, we use third-party distributors.
Customer Data Platform We utilize a next generation, cloud-based Customer Data Platform (CDP) to better capture, identify, and manage our customer narrative and further enable our sales programs and interactive marketing initiatives in a more personalized, secure and dynamic manner.
Customer Data Platform We utilize a next generation, cloud-based Customer Data Platform to better capture, identify, and manage our customer narrative and further enable our sales programs and interactive marketing initiatives in a more personalized, secure and dynamic manner.
Each reportable operating segment provides similar products and services. Brands We are home to a collection of world-class owned and licensed brands that share our passion for design, innovation and doing good. We make distinctive watches and lifestyle accessories, bringing each brand to life through an extensive global channel and distribution network.
Each reportable operating segment provides similar products and services. Brands We are home to a collection of world-class owned and licensed brands that share our passion for design and innovation. We make distinctive watches and lifestyle accessories, bringing each brand to life through an extensive global channel and distribution network.
We create the best possible brand experience through a blend of art and science, which means that we prioritize both data-driven decision-making and creativity in our marketing approach. At our core, we are storytellers and demand generators and have the ability to craft beautiful products and deliver brand experiences worth talking about.
We create the best possible brand experience through a blend of art and science, which means that we prioritize both data-driven decision-making and 7 Table of Contents creativity in our marketing approach. At our core, we are storytellers and demand generators and have the ability to craft beautiful products and deliver brand experiences worth talking about.
We design, develop, market and distribute products under our owned brands FOSSIL, SKAGEN, MICHELE, RELIC and ZODIAC and licensed brands ARMANI EXCHANGE, DIESEL, DKNY, EMPORIO ARMANI, KATE SPADE NEW YORK, MICHAEL KORS, and TORY BURCH.
We design, develop, market and distribute products under our owned brands FOSSIL, SKAGEN, MICHELE, RELIC and ZODIAC and licensed brands ARMANI EXCHANGE, DIESEL, EMPORIO ARMANI, KATE SPADE NEW YORK, MICHAEL KORS, SKECHERS and TORY BURCH.
Significant Customer No customer accounted for 10% or more of our consolidated net sales in fiscal years 2023, 2022 or 2021. Competition The businesses in which we compete are highly competitive and fragmented.
Significant Customer No customer accounted for 10% or more of our consolidated net sales in fiscal years 2024, 2023 or 2022. Competition The businesses in which we compete are highly competitive and fragmented.
Information Systems Enterprise Resource Planning We utilize SAP ERP in our U.S. operations and throughout most of our European operations to support our human resources, sales and distribution, inventory planning, retail merchandising and operational and financial reporting systems of 10 Table of Contents our business, and Navision in our Asian operations to support many of the same functions on a local country level.
Information Systems Enterprise Resource Planning We utilize SAP ERP in our U.S. operations and throughout most of our European operations to support our human resources, sales and distribution, inventory planning, retail merchandising and operational and financial reporting systems of our business, and Navision in our Asian operations to support many of the same functions on a local country level.
In a world that evolves rapidly, our commitment to cultivating our culture remains steadfast. To surpass our goals and realize our ambitions, we are dedicated to a cycle of listening, learning, and collaboration. We aim to set impactful objectives, foster innovation, and maintain transparency about our journey, including both our achievements and the challenges we face.
In a world that evolves rapidly, our commitment to cultivating our culture remains steadfast. To surpass our goals and realize our ambitions, we are dedicated to a cycle of listening, learning, and collaboration. We aim to set impactful objectives, foster innovation, and maintain transparency about our journey, including our achievements and challenges.
This allows us to bypass a local distributor's cost structure in certain countries, resulting in more competitively priced products, while also generating higher product and operating margins. Governmental Regulation Imports and Import Restrictions Most of our products are assembled or manufactured overseas.
This allows us to bypass a local distributor's cost structure in certain countries, resulting in more competitively priced products, while also generating higher product and operating margins. Governmental Regulation Import Tariffs and Other Import Restrictions Most of our products are assembled or manufactured overseas.
We offer a robust online and in-store experience in the United States, Europe and Asia that connects our customers to the stories, trends and latest innovations in the world of watches. 7 Table of Contents Marketing Our marketing approach meets the consumer wherever they are, both online and offline.
We offer a robust online and in-store experience in the United States, Europe and Asia that connects our customers to the stories, trends and latest innovations in the world of watches. Marketing Our marketing approach meets the consumer wherever they are, both online and offline.
As a result, we have been granted, and have pending, various U.S. and international design and utility patents related to certain product designs, features, and technologies. As of December 30, 2023, none of our patents were material to our business. We rely upon unpatented trade secrets, know-how, and continuing technological innovation to develop and maintain our competitive position.
As a result, we have been granted, and have pending, various U.S. and international design and utility patents related to certain product designs, features, and technologies. As of December 28, 2024, none of our patents were material to our business. We rely upon unpatented trade secrets, know-how, and continuing technological innovation to develop and maintain our competitive position.
Our distinctive business model of owning the distribution in many key markets and offering a globally recognized portfolio of proprietary and licensed products allows for many competitive advantages over smaller, regional or 9 Table of Contents local competitors.
Our distinctive business model of owning the distribution in many key markets and offering a globally recognized portfolio of proprietary and licensed products allows for many competitive advantages over smaller, regional or local competitors.
We also have rights in certain copyrights and designs both in the United States and in other countries where our products are principally sold. We continue to explore innovations in the design and assembly of our products.
We also 8 Table of Contents have rights in certain copyrights and designs both in the United States and in other countries where our products are principally sold. We continue to explore innovations in the design and assembly of our products.
Sales of watches for fiscal years 2023, 2022 and 2021 accounted for approximately 77.6%, 77.9% and 80.9%, respectively, of our consolidated net sales. Licensed Brands We have entered into multi-year, worldwide exclusive license agreements for the manufacture, distribution and sale of watches bearing the brand names of certain globally recognized fashion brands.
Sales of watches for fiscal years 2024, 2023 and 2022 accounted for approximately 78.4%, 77.6% and 77.9%, respectively, of our consolidated net sales. Licensed Brands We have entered into multi-year, worldwide exclusive license agreements for the manufacture, distribution and sale of watches bearing the brand names of certain globally recognized fashion brands.
This comprehensive initiative encompasses various domains such as: • organization and operating model optimization; • sourcing and cost of goods sold opportunities; • pricing, promotion, and markdown improvements; • end-to-end product planning and inventory management enhancements; • indirect procurement efficiencies, including marketing and information technology areas; • logistics and distribution center operations efficiencies; • store rationalization and optimization programs.
This comprehensive program encompassed various workstreams such as: • organization and operating model optimization; • sourcing and cost of goods sold opportunities; • pricing, promotion, and markdown improvements; • end-to-end product planning and inventory management enhancements; • indirect procurement efficiencies, including marketing and information technology areas; • logistics and distribution center operations efficiencies; and • store rationalization and optimization programs.
To maintain our status as a competitive and fair employer where every individual feels esteemed, we employ a standardized compensation framework. This system ensures equitable pay by defining, documenting, and benchmarking positions against local market standards, utilizing third-party, leading-edge salary data to establish fair pay ranges for each role.
We also employ a standardized compensation framework to maintain our status as a competitive and fair employer. This system ensures equitable pay by defining, documenting, and benchmarking positions against local market standards, utilizing third-party, leading-edge salary data to establish fair pay ranges for each role.
We are investing in and strengthening each brand within our diverse owned and licensed portfolio, connecting with customers across price point, channel, geography and styles. The ability to build and activate strong lifestyle brands is key to our success.
We are investing in and strengthening our core brands within our diverse owned and licensed portfolio, connecting with customers across price point, channel, geography and styles. The ability to manage strong lifestyle brands is key to our success.
As a result, the U.S. and countries in which our products are sourced or sold may from time to time modify existing or impose new quotas, duties (including anti-dumping or countervailing duties), tariffs or other restrictions in a manner that adversely affects us.
As a result, the U.S. and countries in which our products are sourced or sold may from time to time modify existing import restrictions or barriers to trade, including duties (e.g., anti-dumping or countervailing duties), tariffs or other restrictions in a manner that adversely affects us.
Sales of our accessory lines accounted for 20.5%, 19.8% and 16.9% of our consolidated net sales in fiscal years 2023, 2022 and 2021, respectively.
Sales of our accessory lines accounted for 19.7%, 20.5% and 19.8% of our consolidated net sales in fiscal years 2024, 2023 and 2022, respectively.
The following table sets forth certain information with respect to the breakdown of our net sales and percentage change among proprietary, licensed and other brands for the fiscal years indicated (in millions, except for percentage data): Fiscal Year 2023 2022 2021 Dollars % Change Dollars % Change Dollars Net sales Proprietary $ 720.4 (10.8) % $ 807.7 (6.0) % $ 859.3 Licensed 631.0 (19.3) 781.7 (17.2) 944.3 Other 61.0 (34.4) 93.0 40.1 66.4 Total $ 1,412.4 (16.0) % $ 1,682.4 (10.0) % $ 1,870.0 Traditional Watches Watches are our core global business.
The following table sets forth certain information with respect to the breakdown of our net sales and percentage change among proprietary, licensed and other brands for the fiscal years indicated (in millions, except for percentage data): Fiscal Year 2024 2023 2022 Dollars % Change Dollars % Change Dollars Net sales Proprietary $ 588.1 (18.4) % $ 720.4 (10.8) % $ 807.7 Licensed 509.1 (19.3) 631.0 (19.3) 781.7 Other 47.8 (21.6) 61.0 (34.4) 93.0 Total $ 1,145.0 (18.9) % $ 1,412.4 (16.0) % $ 1,682.4 Traditional Watches Watches are our core global business.
For example, our products imported for distribution in the U.S. are subject to U.S. customs duties, and in the ordinary course of our business, we may from time to time be subject to claims by the U.S. Customs Service for duties and other charges.
For example, our products imported for distribution in the U.S. are subject to normal U.S. customs duties and, sometimes, special tariff regimes. In the ordinary course of our business, we may also from time to time be subject to claims by the U.S. Customs & Border Protection for duties and other charges.
We believe that the way we use our time matters, and we’ve made it our goal to create lasting change at the intersection of fashion and technology, while investing in the communities around the world where we live, work and play. Our consumer-first mindset drives every decision we make.
We believe that the way we use our time matters, and we’ve made it our goal to create lasting change at the intersection of fashion and technology. Our consumer-first mindset drives every decision we make.
Customer Master Data Migration We transitioned our master customer data from an on-premise, proprietary data repository to a cloud native, industry standard design based on the Google Cloud Platform (GCP) architecture, in order to better secure and improve the long-term performance and integration for future key marketing, analytics, AI, and sales systems.
Customer Master Data Our master customer data is stored in a cloud native, industry standard design based on the Google Cloud Platform architecture, in order to better secure and improve the long-term performance and integration for future key marketing, analytics, artificial intelligence, and sales systems.
Based on our range of accessory products, brands, distribution channels and price points, we are able to target style-conscious consumers across a wide age spectrum on a global basis. Operating Strategy Our goal is to drive shareholder value and make a positive impact on our people, planet and communities.
Based on our range of accessory products, brands, distribution channels and price points, we are able to target style-conscious consumers across a wide age spectrum on a global basis. Operating Strategy Our goal is to drive shareholder value. We continue to operate in a very challenging business environment for our product offerings.
We will continue to invest in growing our e-commerce capabilities in fiscal year 2024, with a focus on improving the end-to-end consumer experience, creating stronger CRM journeys via first party data and bringing more engaging and accessible experiences across our channels. Manufacturing and Sourcing The vast majority of our products are sourced internationally.
Third, we directly sell to consumers on major third-party platforms. We will continue to invest in growing our e-commerce capabilities in fiscal year 2025, with a focus on improving the end-to-end consumer experience, creating stronger customer relationship management ("CRM") journeys via first party data and bringing more engaging and accessible experiences across our channels.
To align our employees' aspirations with our business objectives, we have developed a workplace culture that includes: • Comprehensive health and wellness benefits; • Dynamic two-way communication strategies; • Employee development programs that foster value creation; • A performance management system that encourages growth opportunities through company support; • Meaningful recognition mechanisms; • A values-driven culture and workplace environment.
Our findings consistently highlight the importance of: • Career growth and development; • Effective communication; • Recognition; • A clear understanding of the company's future; • Attractive compensation and benefits; • And the chance to contribute to something greater. 11 Table of Contents To align our employees' aspirations with our business objectives, we have developed a workplace culture that includes: • Comprehensive health and wellness benefits; • Dynamic two-way communication strategies; • Employee development programs that foster value creation; • A performance management system that encourages growth opportunities through company support; • Meaningful recognition mechanisms; • A hybrid work model that balances flexibility with in-person collaboration; and • A values-driven culture and workplace environment.
The following table sets forth information with respect to our primary watch licenses: 6 Table of Contents Brand Expiration Date 1 ARMANI EXCHANGE 12/31/2026 DIESEL 12/31/2027 DKNY 12/31/2024 EMPORIO ARMANI 12/31/2026 KATE SPADE NEW YORK 12/31/2025 MICHAEL KORS 12/31/2025 TORY BURCH 12/30/2028 ___________________________________________________________________ (1) Subject to early termination in certain circumstances We also license certain internationally known brand names, such as Skechers, for limited distribution in select markets.
The following table sets forth information with respect to our primary watch licenses: 6 Table of Contents Brand Expiration Date 1 ARMANI EXCHANGE 12/31/2026 DIESEL 12/31/2027 EMPORIO ARMANI 12/31/2026 KATE SPADE NEW YORK 12/31/2025 MICHAEL KORS 12/31/2027 SKECHERS 12/31/2029 TORY BURCH 12/30/2028 ___________________________________________________________________ (1) Subject to early termination in certain circumstances Fashion Accessories In addition to our core watch business, we also design and create handbags, small leather goods, and belts across certain of our owned brands and jewelry under our owned brands and certain licensed brands.
Stores Our products are sold across approximately 150 countries worldwide through 23 Company-owned sales subsidiaries and through a network of 65 independent distributors. Our network of Company-owned stores included 130 retail stores and 172 outlet stores as of December 30, 2023.
Stores Our products are sold across approximately 130 countries worldwide through 22 Company-owned sales subsidiaries and through a network of 72 independent distributors. Our network of Company-owned stores included 110 retail stores and 138 outlet stores primarily operated under the FOSSIL brand as of December 28, 2024.
In addition, we believe that the relative size of our business with watch manufacturers gives us priority within their production schedules. Furthermore, the manufacturers understand our quality standards, which allow us to produce quality products supporting overall operating margins. Our quality control program attempts to ensure that our products meet the standards established by our product development and quality staff.
Furthermore, the manufacturers understand our quality standards, which allow us to produce quality products supporting overall operating margins. Our quality control program attempts to ensure that our products meet the standards established by our product development and quality staff. Development samples of products are inspected by us prior to placing orders with factories to ensure compliance with our designs.
In certain international markets, our products are also sold through licensed and franchised FOSSIL retail stores, retail concessions operated by us and kiosks. We also operate stores under the WATCH STATION and WSI brands, in which we partner with some of the world's most iconic brands to curate a unique collection of designer watches and jewelry for women and men.
We also operate stores under the WATCH STATION and WSI brands, in which we offer certain of our owned and licensed brand products to curate a unique collection of designer watches and jewelry for women and men.
We believe that these growth pillars are best enabled by our digital transformation, marketing capabilities and technology investments. To execute TAG, we have established a Transformation Office. The Transformation Office is composed of members of our senior management supported by a leading management consulting firm specializing in assisting companies in complex reorganizations.
To execute TAG, we established a Transformation Office in July 2023, composed of members of our senior management supported by a leading management consulting firm specializing in assisting companies in complex reorganizations.
SKAGEN embraced Danish minimalism, creating slim styles and color combinations that reflect coastal living—an understated style that’s still authentic to the brand today. Denmark has much to celebrate. As SKAGEN honors its heritage, the brand is expanding its range of influence to include areas of relevance that are of the moment.
SKAGEN 5 Table of Contents Since 1989, SKAGEN has been inspired by the city of Skagen and the Danish coastline. SKAGEN embraced Danish minimalism, creating slim styles and color combinations that reflect coastal living—an understated style that’s still authentic to the brand today. Denmark has much to celebrate.
Each luxury timepiece is distinctly and recognizably MICHELE with signature elements and bold art deco-inspired details. RELIC RELIC by Fossil is an American watch and lifestyle brand creatively delivering accessible, updated casual designs. With each of our signature watches and accessories, we create styles that fit your everyday lifestyle.
MICHELE's beautifully-feminine timepieces use precise Swiss movements, genuine gemstones and diamonds, and premium finishes. Each luxury timepiece is distinctly and recognizably MICHELE with signature elements and bold art deco-inspired details. RELIC RELIC by Fossil is an American watch and lifestyle brand creatively delivering accessible, updated casual designs.
We deliver increasingly better personalization through ongoing test-and-learn methods as well as through consumer insights and predictive analytics capabilities we have built over the past few years. We are strategically increasing our marketing investment and are telling fewer stories better so that our consumers understand the enduring role our brands play in their lives.
We deliver increasingly better personalization through ongoing test-and-learn methods as well as through consumer insights and predictive analytics capabilities we have built over the past few years.
MICHELE MICHELE timepieces are an extension and reflection of the women who wear them. Every MICHELE watch is built to celebrate feminine ambition and boldness—a reminder of all a woman has accomplished as she builds her legacy. MICHELE's beautifully-feminine timepieces use precise Swiss movements, genuine gemstones and diamonds, and premium 5 Table of Contents finishes.
As SKAGEN honors its heritage, the brand is expanding its range of influence to include areas of relevance that are of the moment. MICHELE MICHELE timepieces are an extension and reflection of the women who wear them. Every MICHELE watch is built to celebrate feminine ambition and boldness—a reminder of all a woman has accomplished as she builds her legacy.
We cannot predict the effect these events would have on our operations, if any, especially in light of the concentration of our assembly and manufacturing operations in Hong Kong, and mainland China.
We cannot adequately predict the effect these events have on our operations, even though many of our assembly and manufacturing operations are in China.
All of our major licensing relationships are exclusive for the brands we license and include traditional watches, and for certain other brands, smartwatches and/or jewelry. Products We design, develop, market and distribute accessories across a variety of product categories: traditional watches, jewelry, handbags, small leather goods, belts and sunglasses.
Products We design, develop, market and distribute accessories across a variety of product categories: watches, jewelry, handbags, small leather goods, belts and sunglasses. Additionally, we manufacture and/or distribute products under private label brands.
These relationships developed due to the significant length of time we have conducted business with the same manufacturers. We believe that we are able to exert some operational control with regard to our principal watch assemblers because of our long-standing relationships.
We believe that we are able to exert some operational control with regard to our principal watch assemblers because of our long-standing relationships. In addition, we believe that the relative size of our business with watch manufacturers gives us priority within their production schedules.
We continue to operate in a very challenging business environment for our product offerings. In early 2023, we initiated our Transform and Grow plan (“TAG”), which was initially designed to reduce operating expenses, improve operating margins and advance our path to profitable growth.
In early 2023, we initiated our Transform and Grow plan (“TAG”), which was initially designed to reduce operating expenses, improve operating margins and advance our path to profitable growth. In August 2023, as a result of a more comprehensive business review, we expanded TAG to address a broader transformation and capture a greater level of benefits.
Licensed Brands Our main licensed brands include ARMANI EXCHANGE, DIESEL, DKNY, EMPORIO ARMANI, KATE SPADE NEW YORK, MICHAEL KORS, and TORY BURCH. As a result of our vertical integration, we are uniquely positioned to launch an accessory category, such as watches, in partnership with a licensor in a timely and consistent manner.
As a result of our vertical integration, we are uniquely positioned to launch an accessory category, such as watches, in partnership with a licensor in a timely and consistent manner. Many of our major licensing relationships are exclusive for the brands we license and include traditional watches, and for certain other brands, jewelry.
Through this wider lens, we intend to restructure our operations to achieve improved gross margins, lower operating expenses and to reduce our working capital requirements.
Under the expanded program, we focused on optimizing our core categories, brands, geographies and channels to restructure our operations to achieve improved gross margins, lower operating expenses and to reduce our working capital requirements.
Today, we are on a mission, continuing our decade-long commitment to "Make Time For Good," while building a dynamic, multi-channel organization connecting with customers all over the world. SKAGEN Since 1989, SKAGEN has been inspired by the city of Skagen and the Danish coastline.
FOSSIL takes pride in creating timeless and exceptionally crafted watches, leather goods and jewelry designed to accompany you on every journey life presents. Today, we are on a mission, continuing our decade-long commitment to "Make Time For Good," while building a dynamic, multi-channel organization connecting with customers all over the world.
Development samples of products are inspected by us prior to placing orders with factories to ensure compliance with our designs. We also typically inspect or audit inspections of "top of production" samples of each product for compliance before or at the start of commencing production.
We also typically inspect or audit inspections of "top of production" samples of each product for compliance before or at the start of commencing production. The operations of the Hong Kong SAR and mainland Chinese factories that produce our products are monitored on a periodic basis by Fossil East.
It sets measurable objectives in key areas of environmental and social sustainability. "Make Time for Good" focuses on three pillars: a. Good for Planet: Reducing our environmental footprint through sustainable design and operations. b. Good for Communities: Supporting empowerment initiatives and improving community well-being. c. Good for People: Promoting inclusion within our workforce.
Corporate Social Responsibility (CSR) & Sustainability As part of our “Make Time for Good” CSR strategy, we focus on: • Good for the Planet: Reducing our environmental footprint through sustainable design and operations. • Good for Communities: Supporting empowerment initiatives and local community well-being. • Good for People: Advancing inclusion and equity within our workforce.
Most watch product sourcing is coordinated through our Hong Kong subsidiary, Fossil (East) Limited (“Fossil East”). We have some limited watch assembly operations through owned facilities in India and Switzerland. Although we do not have long-term contracts with our unrelated watch and accessory manufacturers, we maintain long-term relationships with several manufacturers.
Manufacturing and Sourcing The vast majority of our products are sourced internationally. Most watch product sourcing is coordinated through our Hong Kong SAR subsidiary, Fossil (East) Limited (“Fossil East”). We have some limited watch assembly operations through an owned facility in India.
Human Capital Resources As of December 30, 2023, our global team consisted of approximately 6,100 people, with 4,300 based in our international subsidiaries. None of our domestic or foreign-based employees are represented by a trade union.
Human Capital Resources As of December 28, 2024, our global workforce was approximately 5,200 employees, with 3,200 based in our international subsidiaries. None of our domestic or foreign-based employees are represented by a trade union; however, certain European-based employees engage in works councils that negotiate with management on behalf of applicable employees.
This point-of-sale system will significantly enhance our omni-channel capabilities allowing us to better serve our customers across channels with inventory and fulfillment.
The Hyperion planning tool also provides more dynamic and robust budgeting and forecasting capabilities. Point-of-Sale System 10 Table of Contents We recently implemented a new point-of-sale system at our retail stores globally. This point-of-sale system significantly enhances our omni-channel capabilities, allowing us to better serve our customers across channels with inventory and fulfillment.
Our aim is to cultivate a high-performance culture enriched with individuals possessing the necessary skills and behaviors to drive company success and achieve personal excellence daily. By regularly surveying our employees, we gain valuable insights into their viewpoints, motivations, and the areas where we, as an organization, can enhance our operations.
By regularly surveying our employees, we gain valuable insights into their viewpoints, motivations, and the areas where we, as an organization, can enhance our operations. This process is crucial for building and maintaining genuine engagement.
Aided by these measures, our long-term goal is to achieve adjusted gross margins above 50% and adjusted operating margins of approximately 10%. Segments 4 Table of Contents We report segment information based on the “management approach”. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company's reportable segments.
In January 2025, the Strategic Planning and Finance Committee further assumed the responsibilities of the Special Committee and the Special Committee was dissolved. Segments We report segment information based on the “management approach”. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company's reportable segments.
Our Board of Directors also established in 2023 a Special Committee of the Board to oversee the Company's strategic transformation initiatives, including those relating to our organizational structure. We take pride in the strides we have made toward creating a work environment that is not only rewarding, but also deeply engaging and inspiring for our team members.
We have also been recognized for five consecutive years as a top employer for LGBTQ+ employees by the Human Rights Campaign. Engaging the Fossil Group Workforce We take pride in the strides we have made toward creating a work environment that is not only rewarding, but also deeply engaging and inspiring for our team members.
ZODIAC With a rich legacy dating back to 1882, ZODIAC is dedicated to excellence in precision, bold design and craftsmanship with authentic Swiss horology. Today, ZODIAC creates exclusive watches that maintain historical authenticity to vintage models while incorporating contemporary updates, proprietary movements and always-improving functionality.
With each of our signature watches and accessories, we create styles that fit your everyday lifestyle. ZODIAC With a rich legacy dating back to 1882, ZODIAC is dedicated to excellence in precision, bold design and craftsmanship with authentic Swiss horology.
Proprietary Brands Our owned brands include FOSSIL, SKAGEN, MICHELE, RELIC and ZODIAC. FOSSIL FOSSIL is a leading global lifestyle accessories brand inspired by creativity and ingenuity, dedicated to connecting people to what matters most: time. FOSSIL takes pride in creating timeless and exceptionally crafted watches, leather goods and jewelry designed to accompany you on every journey life presents.
Our multi–channel model delivers engaging experiences directly to our consumers through our owned channels of distribution, direct 1P marketplaces and via third party distributors. Proprietary Brands Our owned brands include FOSSIL, SKAGEN, MICHELE, RELIC and ZODIAC. FOSSIL FOSSIL is a leading global lifestyle accessories brand inspired by creativity and ingenuity, dedicated to connecting people to what matters most: time.
Additionally, the Board of Directors has established a Special Board Committee to provide primary board oversight of the Transformation Office and drive accountability, timeliness and results of the program. As we execute against the entire scope of TAG, we have an opportunity to improve our operating fundamentals, right size our cost structure, and return to sales growth.
Additionally, in August 2023, the Company’s Board of Directors (the “Board”) established a Special Board Committee (the "Special Committee") to provide primary board oversight of the Transformation Office and drive accountability, timeliness and results of the program. We successfully concluded TAG in 2024, achieving annualized operating income benefits of $280 million.
Our latest CSR report, also serving as our UN Global Compact Communication on Progress, outlines our achievements and future goals. Access the report at https://www.fossilgroup.com/sustainability/ to see how we are making a difference. Available Information Our website address is www.fossilgroup.com .
Our annual CSR report , available at https://www.fossilgroup.com/sustainability/ , outlines achievements and future sustainability goals.
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In August 2023, as a result of a more comprehensive business review, we expanded TAG to address a broader transformation and capture a greater level of benefits. Under the expanded program, the “Transform” aspect of TAG focuses on optimizing our core categories, brands, geographies and channels.
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In September 2024, we appointed Franco Fogliato Chief Executive Officer and a member of the Board and moved quickly to implement change and create a plan to return the Company to profitable growth (the "Turnaround Plan").
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Under TAG, the Company is targeting approximately $300 million of annualized operating income benefits by the end of 2025. In addition to the economic benefits of TAG, the Company expects to significantly improve its operating model, moving from a decentralized, regional focused organization to a global brand and commercial model.
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Our Turnaround Plan is centered on three key areas: (i) refocusing on our core, (ii) rightsizing our cost structure, and (iii) strengthening our balance sheet.
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We expect these changes will enable us to: • adapt our operations to more effectively address challenges through enhanced global focus, top-down alignment, and decision-making rigor; • instigate an ongoing, sustainable operating model, underscored by a culture of enhanced accountability; • establish a more effective and efficient leadership structure.
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The first key area, focused on our core, includes workstreams such as: • building an operating model that is brand-led and consumer focused; • returning to our core businesses with a renewed focus on traditional watches; • our go-to market execution; • launching a new FOSSIL brand platform; • leveraging our major licensed brands; • optimizing our wholesale global footprint; and • driving channel profitability.
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The “Growth” aspect of TAG consists of investing in three key growth pillars to drive sustained and profitable revenue growth. These growth pillars are: (1) revitalizing the FOSSIL brand, (2) maximizing our licensed brand portfolio in watches and jewelry and (3) growing our premium watch offerings.
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The second key area of our Turnaround Plan is focused on aligning the cost structure to our newly defined strategy. In 2025, we have initiatives including a corporate workforce reduction which occurred in late February, reduced costs associated with the transition of smaller international markets to a distributor model, and the closing of approximately 50 underperforming retail stores.
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Our multi–channel model delivers engaging experiences directly to our consumers through our owned channels of distribution, direct 1P marketplaces and via third party distributors. Being consumer-first means we walk in their shoes, learning from first party data, as well as fashion and style trends, to deliver relevant and memorable brand experiences.
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We also expect to divest certain non-core assets and will seek to identify additional cost reduction opportunities across the organization. 4 Table of Contents Under our third key area, strengthening our balance sheet, we are pursuing initiatives to monetize non-core assets, improve working capital and strengthen liquidity.
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Additionally, we manufacture and/or distribute private label brands, as well as branded products purchased for resale in certain of our other branded retail stores.
Added
We are also continuing to work with strategic advisors to address our upcoming debt maturities in the third and fourth quarters of 2026. In March 2024, we announced that we would undertake a strategic review of our current business model and capital structure.
Removed
Our license agreement with DKNY expires at the end of 2024, and we do not plan to renew the license. Fashion Accessories In addition to our core watch business, we also design and create handbags, small leather goods, and belts across certain of our owned brands and jewelry under our owned brands and certain licensed brands.
Added
This includes a broader set of efforts to optimize our business model and further reduce structural costs, monetize various assets, and could include additional debt and equity financing options. In July 2024, the Company formed a special Strategic Planning and Finance Committee of the Board to oversee this review.
Removed
The license agreement provides for royalties to be paid to us based on a percentage of net sales and includes certain guaranteed minimum royalties. Sales of licensed eyewear accounted for approximately 0.6%, 0.5% and 0.4% of our consolidated net sales for fiscal years 2023, 2022 and 2021, respectively.
Added
Today, ZODIAC creates exclusive watches that maintain historical authenticity to vintage models while incorporating contemporary updates, specialized movements and always-improving functionality. Licensed Brands Our main licensed brands include ARMANI EXCHANGE, DIESEL, EMPORIO ARMANI, KATE SPADE NEW YORK, MICHAEL KORS, SKECHERS and TORY BURCH.
Removed
Third, we directly sell to consumers on major third-party platforms. Our e-commerce capabilities and total revenue contribution continue to grow as a part of our total business. In fiscal year 2023, our digital sales comprised 38% of consolidated net sales. This included sustained positive comps on our owned e-commerce channels year-over-year.
Added
In certain international markets, our products are also sold online and through licensed and franchised FOSSIL retail stores, retail concessions operated by us and kiosks.
Removed
The operations of the Hong Kong and Chinese 8 Table of Contents factories that produce our products are monitored on a periodic basis by Fossil East, and the operations of our Swiss factories are monitored on a periodic basis by Montres Antima SA, one of our foreign operating subsidiaries.
Added
Although we do not have long-term contracts with our unrelated watch and accessory manufacturers, we maintain long-term relationships with several manufacturers. These relationships developed due to the significant length of time we have conducted business with the same manufacturers.
Removed
Factors that may influence the modification or imposition of these restrictions include the determination by the U.S.
Added
The Trump Administration, during its first term from 2017 to 2021, imposed certain tariffs and retaliatory tariffs, as well as other trade restrictions on products and materials.
Removed
The Hyperion planning tool also provides more dynamic and robust budgeting and forecasting capabilities. Point-of-Sale System We began the global implementation of a new point-of-sale system in 2023 at our retail stores beginning in Europe with additional implementation in the Americas and Asia planned in 2024.
Added
In the new Administration, beginning in 2025, President Trump has imposed national emergency tariffs on trading partners and begun the process of reciprocal tariffs on trading partners, among other tariff and national security investigations.
Removed
However, certain European-based employees are represented by work councils, which include a number of our current employees who negotiate with management on behalf of all the applicable employees. Our Commitment We pride ourselves on being a purpose driven consumer-centric organization where our employees have the opportunity to thrive.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

100 edited+23 added−22 removed199 unchanged
Biggest changeOur level of indebtedness could have other important consequences, including the following: • it limits our ability to borrow money or sell stock to fund our working capital, capital expenditures, acquisitions and debt service requirements; • it may limit our flexibility in planning for, or reacting to, changes in our business and future business opportunities; • we are more highly leveraged than some of our competitors, which may place us at a competitive disadvantage; • it may make us more vulnerable to a downturn in our business or the economy; • it may increase our cost of borrowing and; • there would be a material adverse effect on our business and financial condition if we were unable to service our indebtedness or obtain additional financing as needed.
Biggest changeAs of December 28, 2024, we had $168.1 million of outstanding indebtedness, not including $3.3 million of debt issuance costs, and we paid $23.8 million of interest during fiscal year 2024. 20 Table of Contents Our high level of indebtedness and corresponding high cash debt service obligations, could have important consequences, including the following: • they may limit our ability to obtain additional financing or sell stock to fund our working capital, capital expenditures, debt repayments and debt service requirements; • they may limit our flexibility in planning for, or reacting to, changes in our business and future business opportunities; • we are more highly leveraged than some of our competitors, which may place us at a competitive disadvantage; • they may make us more vulnerable to a downturn in our business or general adverse economic, regulatory and industry conditions, including rising tariffs; • they may increase our cost of borrowing; • they may limit our ability to reinvest in our business; • they may limit our ability to refinance our indebtedness; • they may require us to dedicate a substantial portion of our cash flow to service our debt; and • there would be a material adverse effect on our business and financial condition if we were unable to service our indebtedness or obtain additional financing as needed.
Because we depend on foreign manufacturing, we are vulnerable to changes in economic and social conditions in Asia, particularly China, and disruptions in international travel and shipping.
Because we depend on foreign manufacturing, we are vulnerable to changes in economic and social conditions in Asia, particularly in China, and disruptions in international travel and shipping.
Further, the restrictive 24 Table of Contents covenants in the Revolving Facility can be amended or waived with the consent of the lenders under the Revolving Facility, who may have interests that are opposed to the interests of our equity holders, the holders of our other debt obligations, and other stakeholders.
Further, the restrictive covenants in the Revolving Facility can be amended or waived with the consent of the lenders under the Revolving Facility, 24 Table of Contents who may have interests that are opposed to the interests of our equity holders, the holders of our other debt obligations, and other stakeholders.
In addition, certain of our license agreements are with named globally recognized fashion designers. Should one of these fashion designers, or any or our licensor companies, conduct themselves inappropriately or make controversial statements, the underlying brand, and consequently our business under that brand, could suffer.
In addition, certain of our license agreements are with named globally recognized fashion designers. Should one of these fashion designers, or any of our licensor companies, conduct themselves inappropriately or make controversial statements, the underlying brand, and consequently our business under that brand, could suffer.
This could in turn negatively affect our ability to access public debt or equity markets for capital. Item 1B. Unresolved Staff Comments None. 31 Table of Contents
This could in turn negatively affect our ability to access public debt or equity markets for capital. 31 Table of Contents Item 1B. Unresolved Staff Comments None.
While we do have initiatives in place to diversify certain of our manufacturing outside of China, because the establishment of new manufacturing relationships involves numerous uncertainties, including those relating to payment terms, costs of manufacturing, adequacy of manufacturing capacity, quality control and timeliness of delivery, we are unable to predict whether such new relationships would be on terms that we regard as satisfactory.
While we have initiatives in place to diversify certain of our manufacturing outside of China, because the establishment of new manufacturing relationships involves numerous uncertainties, including those relating to payment terms, costs of manufacturing, adequacy of manufacturing capacity, quality control and timeliness of delivery, we are unable to predict whether such new relationships would be on terms that we regard as satisfactory.
If an event of default (other than an event of default of the type described in the following sentence) occurs and is continuing with respect to the Senior Notes, the trustee may, and at the direction of the registered holders of at least 25% in aggregate principal amount of the outstanding Senior Notes shall, declare the principal of all Senior Notes, together with all accrued and unpaid interest, to be due and payable immediately.
If an event of default (other than an event of default of the type described in the following sentence) occurs and is continuing with respect to the Notes, the trustee may, and at the direction of the registered holders of at least 25% in aggregate principal amount of the outstanding Notes shall, declare the principal of all Notes, together with all accrued and unpaid interest, to be due and payable immediately.
The recent COVID-19 pandemic caused global uncertainty and disruption in the geographic regions in which we run our business and where our suppliers, third-party manufacturers, retail stores, wholesale customers and consumers are located, particularly in China. Future public health epidemics or outbreaks could also adversely impact our business.
The COVID-19 pandemic caused global uncertainty and disruption in the geographic regions in which we run our business and where our suppliers, third-party manufacturers, retail stores, wholesale customers and consumers are located, particularly in China. Future public health epidemics or outbreaks could also adversely impact our business.
Our management, including our CEO and Chief Financial Officer ("CFO"), does not expect that our internal controls and disclosure controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
Our management, including our CEO and Interim Chief Financial Officer ("Interim CFO"), does not expect that our internal controls and disclosure controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
We depend on information technology systems, the Internet and computer networks for a substantial portion of our retail and e-commerce businesses, including credit card transaction authorization and processing. We also receive and store personal information about our customers and employees, the protection of which is critical to us.
We depend on information technology systems, the Internet and cloud and computer networks for a substantial portion of our retail and e-commerce businesses, including credit card transaction authorization and processing. We also receive and store personal information about our customers and employees, the protection of which is critical to us.
If an event of default relating to certain events of bankruptcy, insolvency or reorganization of the Company occurs, the principal of all Senior Notes, together with all accrued and unpaid interest, will become due and payable immediately without further action or notice by the trustee or any holder of the Senior Notes.
If an event of default relating to certain events of bankruptcy, insolvency or reorganization of the Company occurs, the principal of all Notes, together with all accrued and unpaid interest, will become due and payable immediately without further action or notice by the trustee or any holder of the Notes.
The maturity date of the Company’s $150.0 million of Senior Notes is November 30, 2026. If the Senior Notes are not repaid or refinanced to a later maturity date in a manner that reduces the balance due on November 30, 2026 to $35.0 million or less, the maturity date of the Revolving Facility will be August 31, 2026.
The maturity date of the Company’s $150.0 million of Notes is November 30, 2026. If the Notes are not repaid or refinanced to a later maturity date in a manner that reduces the balance due on November 30, 2026 to $35.0 million or less, the maturity date of the Revolving Facility will be August 31, 2026.
We will need to generate and sustain increased net sales levels in future periods and reduce expenses in order to become profitable and generate positive cash flow, and even if we do, we may not be able to maintain or increase our level of profitability and cash flow.
We will need to generate and sustain increased net sales levels in future periods and reduce expenses in order to become profitable and generate consistent positive cash flow, and even if we do, we may not be able to maintain or increase our level of profitability and cash flow.
Our license agreements may require minimum royalty commitments regardless of the level of product sales under these agreements. Under our license agreements, we have in the past experienced, and could again in the future experience, instances where our minimum royalty commitments exceeded the royalties payable based upon our sales of the licensed products.
Our license agreements may require minimum royalty commitments regardless of the level of product sales under these agreements. Under our license agreements, we have experienced, and could again in the future experience, instances where our minimum royalty commitments exceeded the royalties payable based upon our sales of the licensed products.
The Senior Notes are effectively subordinated to all of our existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, and the Senior Notes are structurally subordinated to all existing and future indebtedness and other liabilities (including trade payables) of our subsidiaries (excluding any amounts owed by such subsidiaries to us).
The Notes are effectively subordinated to all of our existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, and the Notes are structurally subordinated to all existing and future indebtedness and other liabilities (including trade payables) of our subsidiaries (excluding any amounts owed by such subsidiaries to us).
Overall, there are various factors, many of which are beyond our control, that could negatively affect the market price of our common stock or result in fluctuations in the price or trading volume of our common stock, including: • the impact of any future pandemic; • actual or anticipated variations in our annual or quarterly results of operations, including our earnings estimates and whether we meet market expectations with regard to our earnings and liquidity; • our decision not to, or our current inability to, pay dividends or other distributions; • publication of research reports by analysts or others about us or the specialty retail industry, which may be unfavorable, inaccurate, inconsistent or not disseminated on a regular basis; • changes in market valuations of similar companies; • market reaction to any additional equity, debt or other securities that we may issue in the future, and which may or may not dilute the holdings of our existing stockholders; • additions or departures of key personnel; • actions by activist and institutional or significant stockholders; • short interest in our stock and the market response to such short interest; • a dramatic increase in the number of individual holders of our stock and their participation in social media platforms targeted at speculative investing; • speculation in the press or investment community about our company or industry; • financial results reported by certain of our significant public licensing partners; • strategic actions by us or our competitors, such as acquisitions or other investments; • legislative, administrative, regulatory or other actions affecting our business, our industry, including positions taken by the Internal Revenue Service ("IRS”); 29 Table of Contents • investigations, proceedings, or litigation that involve or affect us; • general market and economic conditions; • a downgrade in our debt ratings; and • the other risks identified herein.
Overall, there are various factors, many of which are beyond our control, that could negatively affect the market price of our common stock or result in fluctuations in the price or trading volume of our common stock, including: • the impact of any future pandemic; • actual or anticipated variations in our annual or quarterly results of operations, including our earnings estimates and whether we meet market expectations with regard to our earnings and liquidity; • our decision not to, or our current inability to, pay dividends or other distributions; • publication of research reports by analysts or others about us or the specialty retail industry, which may be unfavorable, inaccurate, inconsistent or not disseminated on a regular basis; • changes in market valuations of similar companies; • market reaction to any additional equity, debt or other securities that we may issue in the future, and which may or may not dilute the holdings of our existing stockholders; • additions or departures of key personnel; • actions by activist and institutional or significant stockholders; • short interest in our stock and the market response to such short interest; 29 Table of Contents • a dramatic increase in the number of individual holders of our stock and their participation in social media platforms targeted at speculative investing; • speculation in the press or investment community about our company or industry; • financial results reported or comments or releases by certain of our significant public licensing partners pertaining to the watch category; • strategic actions by us or our competitors, such as acquisitions or other investments; • legislative, administrative, regulatory or other actions affecting our business, our industry, including positions taken by the Internal Revenue Service ("IRS”); • investigations, proceedings, or litigation that involve or affect us; • general market and economic conditions; • a downgrade in our debt ratings; and • the other risks identified herein.
The Senior Notes bear interest at a fixed rate of 7.00% per annum. If interest rates decrease, the interest rate on the Senior Notes would not change, and we would not be able to obtain the benefit of reduced interest rates unless we refinanced the Senior Notes.
The Notes bear interest at a fixed rate of 7.00% per annum. If interest rates decrease, the interest rate on the Notes would not change, and we would not be able to obtain the benefit of reduced interest rates unless we refinanced the Notes.
Product mix: traditional watch and jewelry sales typically provide gross margins in excess of historical consolidated gross profit margins, while leather goods and private label products typically provide gross margins below our historical consolidated gross profit margins.
Product mix: watch and jewelry sales typically provide gross margins in excess of historical consolidated gross profit margins, while leather goods and private label products typically provide gross margins below our historical consolidated gross profit margins.
Although we believe we have sufficient sources of liquidity to meet our anticipated requirements for working capital, debt service and capital expenditures through at least the next twelve months, if our operating results do not meet our expectations or if we experience adverse financial, business and other factors that we do not currently anticipate, we could face liquidity constraints.
Although we believe we have sufficient sources of liquidity to meet our anticipated requirements for working capital, debt service and capital expenditures through the next twelve months, if our operating results do not meet our expectations or if we experience adverse financial, business and other factors that we do not currently anticipate, we could face liquidity constraints.
This could put us at a competitive disadvantage to other companies that have floating rate debt. We may not be able to refinance the Senior Notes on commercially reasonable terms, or at all. Any redemption of the Senior Notes prior to November 30, 2025 would trigger a redemption premium.
This could put us at a competitive disadvantage to other companies that have only floating rate debt. We may not be able to refinance the Notes on commercially reasonable terms, or at all. Any redemption of the Notes prior to November 30, 2025 would trigger a redemption premium.
If we complete an acquisition, our debt service requirements could increase. If we cannot service our indebtedness, we may have to take actions such as selling assets, seeking additional equity, reducing or delaying capital expenditures, strategic acquisitions, investments and alliances or restructuring or refinancing our indebtedness.
If we complete an acquisition, our debt service requirements could increase. If we cannot service our indebtedness, we may have to take actions such as selling assets, seeking additional equity, reducing or delaying inventory purchases or capital expenditures, strategic acquisitions, investments and alliances or restructuring or refinancing our indebtedness.
Our 14 Table of Contents inability or the inability of our partners, for technological or other reasons, some of which may be beyond our or our partners' control, to enhance, develop, manufacture, distribute and monetize products in a timely manner, or at all, in response to changing consumer preferences could have a material adverse effect on our business, results of operations and financial condition or could result in our products not achieving market acceptance or becoming obsolete.
Our inability or the inability of our partners, for technological or other reasons, some of which may be beyond our or our partners' control, to enhance, develop, manufacture, distribute and monetize products in a timely manner, or at all, in response to changing consumer preferences could have a material adverse effect on our business, results of operations and financial condition or could result in our products not achieving market acceptance or becoming obsolete.
For example, our license agreement with MICHAEL KORS provides the licensor with a right to terminate some or all of the licensing rights if we fail to meet certain net sales thresholds for two consecutive years. For fiscal year 2023, we met the net sales thresholds for MICHAEL KORS.
For example, our license agreement with MICHAEL KORS provides the licensor with a right to terminate some or all of the licensing rights if we fail to meet certain net sales thresholds for two consecutive years. For fiscal year 2024, we met the net sales thresholds for MICHAEL KORS.
While we have not experienced any material issues with foreign governmental regulations that would impact our arrangements with our foreign manufacturing sources, we believe that this issue is of particular concern with regard to China due to the less mature nature of the Chinese 30 Table of Contents market economy, the historical involvement of the Chinese government in the industry and recent trade tensions between China and the United States.
While we have not experienced any material issues with foreign governmental regulations that would impact our arrangements with our foreign manufacturing sources, we believe that this issue is of particular concern with regard to China due to the less mature nature of the Chinese market economy, the historical involvement of the Chinese government in the industry and recent trade tensions between China and the United States.
Any significant declines in general economic conditions, public safety concerns or uncertainties regarding future economic prospects that affect consumer spending habits could have a material adverse effect on consumer purchases of our products. Risks associated with foreign government regulations and U.S. trade policy may affect our foreign operations and sourcing.
Any significant declines in general economic 30 Table of Contents conditions, public safety concerns or uncertainties regarding future economic prospects that affect consumer spending habits could have a material adverse effect on consumer purchases of our products. Risks associated with foreign government regulations and U.S. trade policy may affect our foreign operations and sourcing.
In the normal course of our business, we collect, retain, and transmit certain sensitive and confidential customer information, including credit card information, over public networks. Our customers have a high expectation that we will adequately protect their personal information. In addition, 26 Table of Contents personal information is highly regulated at the international, federal and state level.
In the normal course of our business, we collect, retain, and transmit certain sensitive and confidential customer information, including credit card information, over public networks. Our customers have a high expectation that we will adequately protect their personal information. In addition, personal information is highly regulated at the international, federal and state level.
Our operations internationally are conducted from various administrative, distribution and assembly facilities outside of the U.S., particularly in China, Germany, Hong Kong, India and Switzerland. The complete or temporary loss of use of all or part of these facilities could have a material adverse effect on our business.
Our operations internationally are conducted from various administrative, distribution and assembly facilities outside of the U.S., particularly in mainland China, Germany, Hong Kong SAR and India. The complete or temporary loss of use of all or part of these facilities could have a material adverse effect on our business.
Any failure on our part, or on the part of our third-party digital partners, to provide attractive, reliable, secure and user-friendly e-commerce platforms could negatively impact our consumers’ shopping experience, resulting in reduced website traffic, diminished loyalty to our brands and lost sales.
Any failure on our part, or on the part of our third-party digital partners, to provide attractive, reliable, secure 14 Table of Contents and user-friendly e-commerce platforms could negatively impact our consumers’ shopping experience, resulting in reduced website traffic, diminished loyalty to our brands and lost sales.
We sell products under certain licensed brands, including, but not limited to, ARMANI EXCHANGE, DIESEL, DKNY, EMPORIO ARMANI, KATE SPADE NEW YORK, MICHAEL KORS, and TORY BURCH.
We sell products under certain licensed brands, including, but not limited to, ARMANI EXCHANGE, DIESEL, EMPORIO ARMANI, KATE SPADE NEW YORK, MICHAEL KORS, SKECHERS and TORY BURCH.
In addition, the amount of net sales and operating income generated during our fiscal first quarter depends in part upon the actual level of retail sales during the previous holiday season. The seasonality of our business may adversely affect our net sales, operating income and liquidity during the first and fourth quarters of our fiscal year.
In addition, the amount of net sales and operating income generated during our fiscal first quarter depends in part upon the actual level of retail sales 17 Table of Contents during the previous holiday season. The seasonality of our business may adversely affect our net sales, operating income and liquidity during the first and fourth quarters of our fiscal year.
The intense competition and greater size and resources of some of our competitors could have a material adverse effect on the amount of net sales we generate and on our results of operations. We face competition from traditional accessory competitors as well as competitors in the wearable technology category.
The intense competition and greater size and resources of some of our competitors could have a material adverse effect on the amount of net sales we generate and on our results of operations. We face competition from traditional accessory competitors as well as technology companies in the watch category.
We have not hedged our interest rate exposure with respect to our floating rate debt. During fiscal year 2023, our average interest rate on borrowings under the Revolving Facility was 6.5%. If interest rates increase, so will our interest costs, which may have a material adverse effect on our results of operations and financial condition.
We have not hedged our interest rate exposure with respect to our floating rate debt. During fiscal year 2024, our average interest rate on borrowings under the Revolving Facility was 6.4%. If interest rates increase, so will our interest costs, which may have a material adverse effect on our results of operations and financial condition.
For fiscal years 2023, 2022 and 2021, 63.6%, 63.1% and 63.5% of our consolidated net sales were generated outside of the U.S. In general, our overall financial results are affected positively by a weaker U.S. dollar and are affected negatively by a stronger U.S. dollar as compared to the foreign currencies in which we conduct our business.
For fiscal years 2024, 2023 and 2022, 65.1%, 63.6% and 63.1% of our consolidated net sales were generated outside of the U.S. In general, our overall financial results are affected positively by a weaker U.S. dollar and are affected negatively by a stronger U.S. dollar as compared to the foreign currencies in which we conduct our business.
International commerce and our international operations are subject to many risks, some of which are discussed in more detail, including: • recessions in foreign economies; • political instability or uncertainty, including as a result of elections, economic instability, geopolitical events and tensions, wars and military conflicts, such as the war in Ukraine, the Israel-Hamas war and tensions between China and Taiwan; • the adoption and expansion of trade restrictions or the occurrence of trade wars; • limitations on repatriation of earnings; • difficulties in protecting our intellectual property or enforcing our intellectual property rights under the laws of other countries; • longer receivables collection periods and greater difficulty in collecting accounts receivable; • difficulties in managing foreign operations; • social, political and economic instability; • restrictions on travel to and from international locations; • political tensions between the U.S. and foreign countries; • compliance with, changes in or adoption of current, new or expanded regulatory requirements; • our ability to finance foreign operations; • tariffs and other trade barriers; • U.S. government licensing requirements for exports; and • the impact of a pandemic.
International commerce and our international operations are subject to many risks, some of which are discussed in more detail, including: • recessions in foreign economies; • political instability or uncertainty, including as a result of elections, economic instability, geopolitical events and tensions, wars and military conflicts; • the adoption and expansion of trade restrictions or the occurrence of trade wars; 19 Table of Contents • limitations on repatriation of earnings; • difficulties in protecting our intellectual property or enforcing our intellectual property rights under the laws of other countries; • longer receivables collection periods and greater difficulty in collecting accounts receivable; • difficulties in managing foreign operations; • social, political and economic instability; • restrictions on travel to and from international locations; • political tensions between the U.S. and foreign countries; • compliance with, changes in or adoption of current, new or expanded regulatory requirements; • our ability to finance foreign operations; • tariffs and other trade barriers; • U.S. government licensing requirements for exports; and • the impact of a pandemic.
A significant portion of our net sales and operating income are generated 17 Table of Contents during the third and fourth quarters of our fiscal year, which includes the "back to school" and holiday seasons.
A significant portion of our net sales and operating income are generated during the third and fourth quarters of our fiscal year, which includes the "back to school" and holiday seasons.
While we and our third-party service providers have safeguards in place to defend our systems against intrusions and attacks and to protect our data, we cannot be certain that these measures are sufficient to counter all current and emerging technology threats.
While we and our 26 Table of Contents third-party service providers have safeguards in place to defend our systems against intrusions and attacks and to protect our data, we cannot be certain that these measures are sufficient to counter all current and emerging technology threats.
The success of our retail business depends, in part, on our ability to close low performing stores and renew our existing store leases on terms that meet our financial targets.
The success of our retail business depends, in part, on our ability to close low performing stores and to renew existing leases for better performing stores on terms that meet our financial targets.
Our ability to establish new manufacturing relationships 18 Table of Contents involves numerous uncertainties, including those relating to payment terms, costs of manufacturing, adequacy of manufacturing capacity, quality control and timeliness of delivery.
Our ability to establish new manufacturing relationships involves numerous uncertainties, including those relating to payment terms, costs of manufacturing, adequacy of manufacturing capacity, quality control and timeliness of delivery.
If we are unable to effectively execute our e-commerce business strategy and provide a reliable digital experience for our customers, our reputation and operating results may be harmed. E-commerce has increasingly comprised a larger portion of our net revenues and was particularly impacted by the COVID-19 pandemic, which drove an acceleration in the shift to online shopping.
If we are unable to effectively execute our e-commerce business strategy and provide a reliable digital experience for our customers, our reputation and operating results may be harmed. E-commerce is a significant portion of our net revenues and was particularly impacted by the COVID-19 pandemic, which drove an acceleration in the shift to online shopping.
There continues to be a decrease in traffic in many of the shopping malls and retail centers in which our stores are located, which was accelerated by the impact of COVID-19, and has resulted in a decrease in traffic to our stores.
There has been a decrease in traffic in many of the shopping malls and retail centers in which our stores are located, which was accelerated by the impact of the COVID-19 pandemic, and has resulted in a decrease in traffic to our stores.
Restructuring plans present significant potential risks that may impair our ability to achieve anticipated operating enhancements and/or cost reductions, or otherwise harm our business, including higher than anticipated costs in implementing TAG, management distraction and employee attrition in excess of headcount reductions.
Restructuring plans present significant potential risks that may impair our ability to achieve anticipated operating enhancements, cost reductions, balance sheet or liquidity improvements or otherwise harm our business, including higher than anticipated costs in implementing our Turnaround Plan, management distraction and employee attrition in excess of headcount reductions.
If we 20 Table of Contents are unable to attract, develop, motivate and retain talented employees with the necessary skills and experience, or if changes to our organizational structure, operating results, or business model adversely affect morale, hiring and/or retention, we may not achieve our objectives and our results of operations could be adversely impacted.
If we are unable to attract, develop, motivate and retain talented employees with the necessary skills and experience, or if changes to our organizational structure, operating results, or business model adversely affect morale, hiring and/or retention, we may not achieve our objectives and our results of operations could be adversely impacted. Risks Related to our Indebtedness We are highly leveraged.
However, assuming no further offsets from price increases, sourcing changes, or 27 Table of Contents other changes to trade policy and regulatory rulings, all of which are currently under review, the estimated gross profit exposure from the Section 301 tariffs is approximately $2.4 million in fiscal year 2024.
However, assuming no further offsets from price increases, sourcing changes, or other changes to trade policy and regulatory rulings, all of which are currently under review, the estimated gross profit exposure from the Section 301 and IEEPA tariffs is approximately $4.0 million in fiscal year 2025.
For example, due to a stronger U.S. dollar in fiscal year 2023, the translation of foreign-based net sales into U.S. dollars decreased our reported net sales by approximately $2.1 million compared to fiscal year 2022.
For example, due to a stronger U.S. dollar in fiscal year 2024, the translation of foreign-based net sales into U.S. dollars decreased our reported net sales by approximately $5.3 million compared to fiscal year 2023.
The violation of labor or other laws by one of our independent manufacturers, or by one of our license partners, or the divergence of an independent manufacturer’s or license partner’s labor practices from those generally accepted as ethical in the U.S. or other countries in which the violation or divergence occurred, could interrupt or otherwise disrupt the shipment of finished products to us or damage our reputation.
While we have a code of conduct for our manufacturing partners, any violation of labor or other laws by one of our independent manufacturers, or by one of our license partners, or the divergence of an independent manufacturer’s or license partner’s labor practices from those generally accepted as ethical in the U.S. or other countries in which the violation or divergence occurred, could interrupt or otherwise disrupt the shipment of finished products to us or damage our reputation.
Our failure to successfully respond to these risks and uncertainties could reduce e-commerce sales, increase costs and damage the reputation of our brands. 19 Table of Contents Factors affecting international commerce and our international operations may seriously harm our financial condition. During fiscal year 2023, we generated 63.6% of our net sales from outside of the U.S.
Our failure to successfully respond to these risks and uncertainties could reduce e-commerce sales, increase costs and damage the reputation of our brands. Factors affecting international commerce and our international operations may seriously harm our financial condition. During fiscal year 2024, we generated 65.1% of our net sales from outside of the U.S.
Our significant third-party fashion brand license agreements have various expiration dates between the years 2024 and 2028.
Our significant third-party fashion brand license agreements have various expiration dates between the years 2025 and 2029.
Our business is susceptible to risks associated with climate change, including through disruption to our supply chain, potentially impacting the production and distribution of our products and availability and cost of raw materials.
The risks associated with climate change and other environmental impacts could negatively affect our business and operations. Our business is susceptible to risks associated with climate change, including through disruption to our supply chain, potentially impacting the production and distribution of our products and availability and cost of raw materials.
The terms of the Revolving Facility contain restrictions on our ability to incur additional indebtedness. However, these restrictions are subject to a number of important qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial.
The terms of the Revolving Facility contain restrictions on our ability to incur additional indebtedness. However, this restriction is subject to a number of important qualifications and exceptions, and the indebtedness incurred in compliance with these exceptions could be substantial. The Notes do not limit our ability to incur additional indebtedness.
We also use tools provided by salesforce.com, inc. in our CRM initiatives. In fiscal year 2023, we began to implement a new global point of sale system beginning with our European retail stores. We may experience operational problems with our information systems as a result of system failures, viruses, ransomware, computer "hackers" or other causes.
We also use tools provided by salesforce.com, inc. in our CRM initiatives. We have implemented a new global point of sale system for our retail stores. We may experience operational problems with our information systems as a result of system failures, viruses, ransomware, computer "hackers" or other causes.
While our transit times and shipping costs have improved, any future disruption in the flow of our imported merchandise from China or a material increase in the cost of those goods or transportation without any offsetting price increases may significantly decrease our profits.
Any future disruption in the flow of our imported merchandise from China or a material increase in the cost of those goods or transportation without any offsetting price increases may significantly decrease our profits.
We also operate FOSSIL brand stores and other watch stores globally to further strengthen our brand image. As of December 30, 2023, we operated 302 stores worldwide.
We also operate FOSSIL brand stores and other watch stores globally to further strengthen our brand image. As of December 28, 2024, we operated 248 stores worldwide.
We are required, at least annually, or as facts and circumstances warrant, to test trade names to determine if impairment has occurred. We are also required to test property plant and equipment and other long lived assets for impairment as facts and circumstances warrant.
We have recorded impairment charges in the past and may record impairment charges in the future. We are required, at least annually, or as facts and circumstances warrant, to test trade names to determine if impairment has occurred. We are also required to test property plant and equipment and other long lived assets for impairment as facts and circumstances warrant.
As a result of these restrictions, we may be: • limited in how we conduct our business; • unable to raise additional debt or equity financing to operate during general economic or business downturns; or • unable to compete effectively or to take advantage of new business opportunities.
As a result of these restrictions, we may be: • limited in how we conduct our business; • unable to raise additional debt or equity financing; • unable to refinance our debt; • unable to sell underperforming assets; or • unable to compete effectively or to take advantage of new business opportunities.
If we are not successful in the expansion or development of our product offerings, our new products are not profitable or do not generate sales comparable to those of our existing businesses, we are unable to achieve our digital 15 Table of Contents transformation goals or our restructuring and savings initiative does not achieve our desired results, our results of operations could be negatively impacted.
If we are not successful in the expansion or development of our product offerings, our new products are not profitable or do not generate sales comparable to those of our existing businesses, we are unable to successfully execute our business strategy or our restructuring and savings program does not achieve our desired results, our results of operations could be negatively impacted.
Our ability to open new stores on schedule or at all, to close low performing stores and to renew existing store leases on favorable terms or to operate them on a profitable basis will depend on various factors, including our ability to: • identify suitable markets for new stores and available store locations; • negotiate acceptable lease terms for new locations or renewal terms for existing locations, particularly for those existing locations that have experienced a significant reduction in traffic; • hire and train qualified sales associates; • develop new merchandise and manage inventory effectively to meet the needs of new and existing stores on a timely basis; and • maintain favorable relationships with major developers and other landlords.
Our ability to close low performing stores and to renew leases for better performing stores on favorable terms and to operate them on a profitable basis will depend on various factors, including our ability to: • negotiate acceptable lease renewal terms for existing locations, particularly for those existing locations that have experienced reductions in traffic, but that we would like to continue to operate; • hire and train qualified sales associates; • develop new merchandise and manage inventory effectively to meet the needs of new and existing stores on a timely basis; and • maintain favorable relationships with major developers and other landlords.
Any failure by us to maintain long-term relationships with our current assembly factories and manufacturers or to develop relationships with other manufacturers could have a material adverse effect on our ability to manufacture and distribute our products. We do not maintain long-term contracts with our customers and are unable to control their purchasing decisions.
Any failure by us to maintain long-term relationships with our current assembly factories and manufacturers or to develop relationships with other manufacturers could have a material adverse effect on our ability to manufacture and distribute our products.
Sales of our licensed products accounted for 44.7% of our consolidated net sales for 16 Table of Contents fiscal year 2023, including MICHAEL KORS product sales, which accounted for 17.6% of our consolidated net sales, and ARMANI product sales, which accounted for 14.0% of our consolidated net sales.
Sales of our licensed products accounted for 44.5% of our consolidated 16 Table of Contents net sales for fiscal year 2024, including MICHAEL KORS product sales, which accounted for 17.4% of our consolidated net sales, and ARMANI product sales, which accounted for 11.5% of our consolidated net sales.
Any material disruption of our information systems could disrupt our business and reduce our sales. We are increasingly dependent on information systems to operate our websites, process transactions, manage inventory, monitor sales and purchase, sell and ship goods on a timely basis.
We are increasingly dependent on information systems to operate our websites, process transactions, store customer information, manage inventory, monitor sales and purchase, sell and ship goods on a timely basis.
We continue to monitor these developments for potential risks. We have also joined litigation before the U.S. Court of International Trade challenging the legality of the Section 301 List 3 and List 4A tariffs and seeking refunds of duties paid on imports that were subject to those tariffs. That litigation is ongoing in appeal stages.
Court of International Trade challenging the legality of the Section 301 List 3 and List 4A tariffs and seeking refunds of duties paid on imports that were subject to those tariffs. That litigation is ongoing in appeal stages.
Our Common Stock has recently closed below the $1.00 closing bid requirement for Nasdaq. Such a delisting would likely have a negative effect on the price of our securities and would impair stockholder’s ability to sell or purchase our securities.
While we did not receive any delisting notices in 2024, our Common Stock closed below the $1.00 closing bid requirement for Nasdaq on a number of trading dates in early 2024. Such a delisting would likely have a negative effect on the price of our securities and would impair stockholder’s ability to sell or purchase our securities.
The base indenture and first supplemental indenture that govern the Senior Notes contain customary events of default and cure provisions.
The base indenture and first supplemental indenture that govern the Notes contain limited covenants and events of default.
This will depend on the local effective tax rate calculation according to the specific rules set out in the Pillar Two implementation guidance. The 25 Table of Contents technical aspects of the calculation are still being developed.
This will depend on the local effective tax rate calculation according to the specific rules set out in the Pillar Two implementation guidance. Certain provisions of Pillar Two are effective for tax years beginning in January 2024 with other provisions effective for subsequent tax years. The technical aspects of the calculation are still being developed.
During fiscal years 2023 and 2022, we generated a net loss attributable to Fossil Group, Inc. of $157.1 million and $44.2 million, respectively, and we used $59.5 million and $110.9 million of cash flows in operating activities, respectively.
During fiscal years 2024 and 2023, we generated a net loss attributable to Fossil Group, Inc. of $102.7 million and $157.1 million, respectively. While our cash flow provided by operating activities was $46.7 million in fiscal year 2024, we used $59.5 million and $110.9 million of cash in operating activities during fiscal years 2023 and 2022, respectively.
We manage our business to maximize our growth and profitability and not to achieve financial or operating targets for any particular reporting period. Although we believe that public guidance may provide investors with a better understanding of our expectations for the future and is useful to our existing and potential stockholders, such guidance is subject to risks, uncertainties and assumptions.
Although we believe that public guidance may provide investors with a better understanding of our expectations for the future and is useful to our existing and potential stockholders, such guidance is subject to risks, uncertainties and assumptions.
We do not maintain long-term purchasing contracts with our customers and therefore have no contractual leverage over their purchasing decisions. A decision by a major department store or other significant customer to decrease the amount of merchandise purchased from us or to cease carrying our products could have a material adverse effect on our net sales and operating strategy.
A decision by a major department store or other significant customer to decrease the amount of merchandise purchased from us or to cease carrying our products could have a material adverse effect on our net sales and operating strategy.
These restrictions limit or prohibit our ability to, among other things: • incur additional indebtedness or issue certain types of stock; • pay dividends or make other distributions, repurchase or redeem our stock; • make certain investments; • prepay, redeem, or repurchase certain debt; • sell assets and issue capital stock of our restricted subsidiaries; • incur liens; • enter into agreements restricting our restricted subsidiaries’ ability to pay dividends, make loans to other related entities or restrict the ability to incur liens; • enter into transactions with affiliates; and 21 Table of Contents • consolidate or merge.
These restrictions limit or prohibit our ability to, among other things: • incur additional indebtedness or issue certain types of stock; • pay dividends or make other distributions, repurchase or redeem our stock; • make certain investments; • prepay, redeem, or repurchase certain debt; • sell assets and issue capital stock of our restricted subsidiaries; • incur liens; • enter into agreements restricting our restricted subsidiaries’ ability to pay dividends, make loans to other related entities or restrict the ability to incur liens; • enter into transactions with affiliates; and • consolidate or merge. 21 Table of Contents These restrictions on our ability to operate our business, along with restrictions that may be contained in agreements evidencing or governing future indebtedness, could seriously harm our business and our ability to grow in accordance with our growth strategy by, among other things, limiting our ability to take advantage of merger and acquisition and other corporate opportunities.
Risks Relating to our Common Stock Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our securities. 28 Table of Contents If we fail to satisfy the continued listing requirements of Nasdaq, such as the corporate governance requirements or the minimum closing bid price requirement, Nasdaq may take steps to delist our securities.
If we fail to satisfy the continued listing requirements of Nasdaq, such as the corporate governance requirements or the minimum closing bid price requirement, Nasdaq may take steps to delist our securities.
As a result, our access to credit under the Revolving Facility fluctuates depending on the value of the borrowing base eligible assets as of any measurement date.
The borrowing base is a function of, among other things, our eligible accounts receivable, inventory and certain intellectual property. As a result, our access to credit under the Revolving Facility fluctuates depending on the value of the borrowing base eligible assets as of any measurement date.
Prior to November 30, 2024, the redemption price would be $25.50 for each $25.00 of Senior Notes, and from November 30, 2024 until November 29, 2025, the redemption price would be $25.25 for each $25.00 of Senior Notes. In addition, any refinancing could be at higher interest rates and may require us to comply with more onerous covenants.
Prior to November 30, 2025, the redemption price would be $25.25 for each $25.00 of Notes. In addition, any refinancing could be at higher interest rates and may require us to comply with more onerous covenants. The restrictive covenants in the Revolving Facility are subject to a number of important qualifications, exceptions and limitations, and to amendment.
Any of these actions may not be sufficient to allow us to service our debt obligations or may have an adverse impact on our business. Our existing debt agreements limit our ability to take certain of these actions. Our failure to generate sufficient operating cash flow to pay our debt obligations could have a material adverse effect on us.
Our existing debt agreements limit our ability to take certain of these actions. Our failure to generate sufficient operating cash flow to pay our debt obligations could have a material adverse effect on us. Our debt agreements subject us to certain covenants, which may restrict our ability to operate our business and to pursue our business strategies.
Our competitors include distributors that import watches and accessories from abroad, U.S. companies that have established foreign manufacturing relationships and companies that produce accessories domestically. In addition, we face continuing competition from technology companies in the smartwatch category, such as Apple, Garmin and Samsung. Many of these technology competitors have significantly greater financial, distribution, advertising and marketing resources than us.
Our competitors include distributors that import watches and accessories from abroad, U.S. companies that have established foreign manufacturing relationships and companies that produce accessories domestically. In addition, we face strong competition in the watch category from technology companies that offer alternatives to our traditional watches, such as Apple, Garmin and Samsung.
Our ability to grow our sales is dependent upon the implementation of our business strategy, which we may not be able to achieve. Our ability to grow our sales is dependent on the successful implementation of our business strategy. This includes diversification and innovation of our product offerings, driving our core brands and improving our omni-channel and digital capabilities.
Our ability to grow our sales is dependent upon the implementation of our business strategy, which we may not be able to achieve. Our ability to grow our sales is dependent on the successful implementation of our business strategy. This includes prioritizing our core brands, markets and channels, rightsizing our organizational structure and improving our balance sheet.
If an independent manufacturer or license partner of ours fails to use acceptable labor practices or otherwise comply with laws or suffers reputation harm, our business could suffer. While we have a code of conduct for our manufacturing partners, we have no control over the ultimate actions or labor practices of our independent manufacturers.
If an independent manufacturer or license partner of ours fails to use acceptable labor practices or otherwise comply with laws or suffers reputation harm, our business could suffer.
We may be able to engage in some of the restricted activities, in limited amounts, or in certain circumstances, in unlimited amounts, notwithstanding the restrictive covenants. For example, subject to the satisfaction of certain tests specified in the Revolving Facility, we are permitted to make unlimited distributions to our equity holders.
For example, subject to the satisfaction of certain tests specified in the Revolving Facility, we are permitted to make unlimited distributions to our equity holders.
Strategic Risks Our restructuring program may not be successful or we may not fully realize the expected cost savings and/or operating efficiencies from our restructuring plans. In February 2023, we announced that we had implemented a restructuring plan entitled “Transform and Grow”.
Strategic Risks We may not fully realize the expected cost savings, operating efficiencies or balance sheet and liquidity improvements from our restructuring plans. In March 2025, we announced that we had implemented our Turnaround Plan.
As of December 30, 2023, $104.4 million, or approximately 89% of our cash and cash equivalents were held by our foreign subsidiaries.
As of December 28, 2024, $92.5 million, or approximately 75% of our cash and cash equivalents were held by our foreign subsidiaries.
Tariffs or other restrictions placed on imports from China and any retaliatory trade measures taken by China could materially harm our revenue and results of operations. Beginning in July 2018, certain of our products have been subject to additional ad valorem duties imposed by the U.S. government on products of China under Section 301 of the Trade Act of 1974.
Beginning in July 2018, certain of our products have been subject to additional ad valorem duties imposed by the U.S. government on products of China under Section 301 of the Trade Act of 1974 and the International Emergency Economic Powers Act ("IEEPA").
Any increase in corporate tax rates or rules regarding the calculation of taxable income for the top-up tax could adversely affect our business, results of operations, financial condition and cash flow. We have recorded impairment charges in the past and may record impairment charges in the future.
While the Company does not expect and material 25 Table of Contents impact for fiscal year 2025, any increase in corporate tax rates or rules regarding the calculation of taxable income for the top-up tax could adversely affect our business, results of operations, financial condition and cash flow for future tax years.
The Revolving Facility also requires us to maintain a specified financial ratio in certain circumstances. The Revolving Facility contains a fixed charge coverage ratio covenant if our Availability (as defined in the Revolving Facility) falls below a certain threshold. See Item 7.
The Revolving Facility also requires us to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 if our Availability (as defined in the Revolving Facility) falls below a certain threshold. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Sources of Liquidity” for an additional discussion of this financial covenant.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeFurther, we conduct regular external penetration tests, red team testing and maturity testing to assess our processes and procedures and the threat landscape. We conduct security assessments on additions and changes to our systems and applications including third-party service providers. In addition, our Audit Services group conducts periodic reviews of cyber security controls, procedures, and applications and monitors remediation activities.
Biggest changeWe conduct security assessments on additions and changes to our systems and applications including third-party service providers. In addition, our Audit Services group conducts periodic reviews of cyber security controls, procedures, and applications and monitors remediation activities. Our assessment of risks associated with use of third-party providers is part of our overall cybersecurity risk management framework.
As part of our cybersecurity program, we regularly test our cyber defenses by performing simulations and drills at a technical level with third-party experts, internal user susceptibility testing and reviewing our operational policies and procedures. Our cyber security team monitors alerts and meets to discuss threat levels, risk ranking, trends and remediation.
As part of our cybersecurity program, we regularly test our cyber defenses by performing simulations and drills at a technical level, internal user susceptibility testing and reviewing our operational policies and procedures. Our cyber security team monitors alerts and meets to discuss threat levels, risk ranking, trends and remediation.
In addition, our incident response process includes reporting to the Audit Committee for certain cybersecurity incidents. The Audit Committee receives reports quarterly from our CISO concerning our significant cybersecurity threats and risk and the processes we have implemented to address them.
In addition, our incident response process includes reporting to the Audit Committee for certain cybersecurity incidents. 32 Table of Contents The Audit Committee receives reports quarterly from our CISO concerning our significant cybersecurity threats and risk and the processes we have implemented to address them.
Our Board of Directors also receives periodic reports from our CISO or Audit Committee regarding our overall cybersecurity program. 32 Table of Contents
Our Board of Directors also receives periodic reports from our CISO or Audit Committee regarding our overall cybersecurity program.
Although such risks have not materially affected us, including our business strategy, results of operations or financial condition, to date, we have, from time to time, experienced threats to and breaches of our data and systems, including malware and computer virus attacks.
We face a number of cybersecurity risks in connection with our business. Although such risks have not materially affected us, including our business strategy, results of operations or financial condition, we have experienced threats to our data and systems, including malware and computer virus attacks.
We also require employees in certain roles to complete additional role-based, specialized cybersecurity training. Our cybersecurity incident response process is designed to escalate certain cybersecurity incidents to members of management depending on the circumstances including our CISO, our Chief Financial Officer and our General Counsel.
Our cybersecurity incident response process is designed to escalate certain cybersecurity incidents to members of management depending on the circumstances including our CISO, our Interim Chief Financial Officer and our Chief Legal Officer.
Members of the security team have cybersecurity experience and certifications, such as the Certified Information Systems Security Professional certification. We regularly conduct training and/or simulations to ensure employees are aware of current cyber threats. Additionally, tabletop exercises at a management level incorporate external advisors. All employees are required to complete cybersecurity training annually.
We regularly conduct training and/or simulations to ensure employees are aware of current cyber threats. Additionally, periodic tabletop exercises at a management level incorporate external advisors. All employees are required to complete cybersecurity training annually. We also require employees in certain roles to complete additional role-based, specialized cybersecurity training.
The CISO is responsible for developing and implementing our information security program and reporting on cybersecurity matters to the Audit Committee of the Board. Our CISO has two decades of experience leading cyber security oversight with ten years in a multinational company environment.
The CISO is responsible for developing and implementing our information security program and reporting on cybersecurity matters to the Audit Committee. Our CISO has a decade of experience leading cyber security oversight. Members of the security team have cybersecurity experience and certifications, such as the Certified Information Systems Security Professional certification.
Removed
Our assessment of risks associated with use of third-party providers is part of our overall cybersecurity risk management framework. We face a number of cybersecurity risks in connection with our business.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeProperties Company Facilities As of the end of fiscal year 2023, we owned or leased the following material facilities in connection with our U.S. and international operations: Location Use Approximate Square Footage Owned / Leased Eggstätt, Germany Office, warehouse and distribution 383,000 Owned Richardson, Texas Corporate headquarters 383,000 Lease expiring in 2036 Dallas, Texas Office, warehouse and distribution 518,000 Lease expiring in 2026 Hong Kong Warehouse and distribution 171,000 Lease expiring in 2027 Basel, Switzerland Europe headquarters 115,000 Lease expiring in 2036 Bangalore, India Office 58,000 Lease expiring in 2025 Nalagarh, India Factory 40,000 Lease expiring in 2025 Hong Kong Asia headquarters 40,000 Lease expiring in 2026 Retail Store Facilities As of the end of fiscal year 2023, we had 299 lease agreements for retail space for the sale of our products.
Biggest changeProperties Company Facilities As of the end of fiscal year 2024, we owned or leased the following material facilities in connection with our U.S. and international operations: Location Use Approximate Square Footage Owned / Leased Eggstätt, Germany Office, warehouse and distribution 383,000 Owned Richardson, Texas Corporate headquarters 383,000 Lease expiring in 2036 Dallas, Texas Office, warehouse and distribution 518,000 Lease expiring in 2026 Hong Kong SAR Warehouse and distribution 171,000 Lease expiring in 2027 Hong Kong SAR Asia headquarters 40,000 Lease expiring in 2026 Basel, Switzerland Europe headquarters 115,000 Lease expiring in 2036 Bangalore, India Office 58,000 Lease expiring in 2025 Nalagarh, India Factory 40,000 Lease expiring in 2025 Retail Store Facilities As of the end of fiscal year 2024, we had 246 lease agreements for retail space for the sale of our products.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThere were no repurchases of common stock during fiscal years 2023 and 2021. Item 6. [Reserved] 34 Table of Contents
Biggest changeAs of December 28, 2024, the Company had $20.0 million of repurchase authorizations remaining under its repurchase program. During fiscal 2022, 1.0 million shares of our common stock were repurchased at a cost of $10.0 million. There were no repurchases of common stock during fiscal years 2024 and 2023. Item 6. [Reserved] 34 Table of Contents
Purchases of Equity Securities by the Issuer and Affiliated Purchasers In August 2010, our Board of Directors approved a common stock repurchase program pursuant to which up to $30 million could be used to repurchase outstanding shares of our common stock. The $30 million repurchase program has no termination date.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers In August 2010, our Board approved a common stock repurchase program pursuant to which up to $30 million could be used to repurchase outstanding shares of our common stock. The $30 million repurchase program has no termination date.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities General Our common stock is listed on the Nasdaq Global Select Market under the symbol "FOSL." As of March 1, 2024, there were 62 holders of record of our shares of common stock (including nominee holders such as banks and brokerage firms who hold shares for beneficial owners), although we believe that the number of beneficial owners is much higher.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities General Our common stock is listed on the Nasdaq Global Select Market under the symbol "FOSL." As of March 3, 2025, there were 58 holders of record of our shares of common stock (including nominee holders such as banks and brokerage firms who hold shares for beneficial owners), although we believe that the number of beneficial owners is much higher.
Removed
As of December 30, 2023, the Company had $20.0 million of repurchase authorizations remaining under its repurchase program.
Removed
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publically Announced Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program February 27, 2022 - April 2, 2022……… 989,186 $ 10.11 989,186 $ 19,999,982 Total……………………………….......... 989,186 989,186 During fiscal 2022, 1.0 million shares of our common stock were repurchased at a cost of $10.0 million.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

85 edited+28 added−17 removed51 unchanged
Biggest changeThe following table sets forth consolidated net sales by segment and the changes in net sales by segment on both a reported and constant currency basis from period to period (dollars in millions): Fiscal Year 2023 2022 Growth (Decline) Percentage of Total Percentage of Total Percentage as Reported Percentage Constant Currency Amounts Amounts Dollars Americas $ 640.8 45.4 % $ 744.0 44.2 % $ (103.2) (13.9) % (14.2) % Europe 437.4 31.0 541.3 32.2 (103.9) (19.2) (20.8) Asia 328.2 23.2 377.6 22.4 (49.4) (13.1) (9.6) Corporate 6.0 0.4 19.5 1.2 (13.5) (69.2) (69.2) Total net sales $ 1,412.4 100.0 % $ 1,682.4 100.0 % $ (270.0) (16.0) % (15.9) % 40 Table of Contents The following table sets forth product net sales and the changes in product net sales on both a reported and constant currency basis from period to period (dollars in millions): Fiscal Year 2023 2022 Growth (Decline) Percentage of Total Percentage of Total Percentage as Reported Percentage Constant Currency Amounts Amounts Dollars Watches: Traditional watches $ 1,015.1 71.9 % $ 1,158.9 68.9 % $ (143.8) (12.4) % (12.2) % Smartwatches 80.9 5.7 151.6 9.0 (70.7) (46.6) (46.5) Total watches $ 1,096.0 77.6 % $ 1,310.5 77.9 % $ (214.5) (16.4) % (16.2) % Leathers 158.4 11.2 178.5 10.6 (20.1) (11.3) (10.7) Jewelry 131.4 9.3 154.1 9.2 (22.7) (14.7) (15.4) Other 26.6 1.9 39.3 2.3 (12.7) (32.3) (32.6) Total net sales $ 1,412.4 100.0 % $ 1,682.4 100.0 % $ (270.0) (16.0) % (15.9) % The following table sets forth the number of stores on the dates indicated below: December 31, 2022 Opened Closed December 30, 2023 Americas 151 2 10 143 Europe 111 2 27 86 Asia 80 1 8 73 Total stores 342 5 45 302 Americas Net Sales.
Biggest changeThe following table sets forth consolidated net sales by segment and the changes in net sales by segment on both a reported and constant currency basis from period to period (dollars in millions): Fiscal Year 2024 2023 Growth (Decline) Percentage of Total Percentage of Total Percentage as Reported Percentage Constant Currency Amounts Amounts Dollars Americas $ 515.2 45.0 % $ 640.8 45.4 % $ (125.6) (19.6) % (19.1) % Europe 357.6 31.2 437.4 31.0 (79.8) (18.2) (18.7) Asia 270.1 23.6 328.2 23.2 (58.1) (17.7) (16.4) Corporate 2.1 0.2 6.0 0.4 (3.9) (65.0) (65.0) Total net sales $ 1,145.0 100.0 % $ 1,412.4 100.0 % $ (267.4) (18.9) % (18.6) % 40 Table of Contents The following table sets forth product net sales and the changes in product net sales on both a reported and constant currency basis from period to period (dollars in millions): Fiscal Year 2024 2023 Growth (Decline) Percentage of Total Percentage of Total Percentage as Reported Percentage Constant Currency Amounts Amounts Dollars Watches: Traditional watches $ 872.6 76.2 % $ 1,015.1 71.9 % $ (142.5) (14.0) % (13.6) % Smartwatches 24.9 2.2 80.9 5.7 (56.0) (69.2) (69.2) Total watches $ 897.5 78.4 % $ 1,096.0 77.6 % $ (198.5) (18.1) % (17.7) % Leathers 111.1 9.7 158.4 11.2 (47.3) (29.9) (29.6) Jewelry 114.5 10.0 131.4 9.3 (16.9) (12.9) (12.4) Other 21.9 1.9 26.6 1.9 (4.7) (17.7) (17.3) Total net sales $ 1,145.0 100.0 % $ 1,412.4 100.0 % $ (267.4) (18.9) % (18.6) % The following table sets forth the number of stores on the dates indicated below: December 30, 2023 Opened Closed December 28, 2024 Americas 143 0 29 114 Europe 86 0 21 65 Asia 73 5 9 69 Total stores 302 5 59 248 Americas Net Sales.
Reconciliations between constant currency financial information and the most directly comparable GAAP measure are included where applicable. Adjusted EBITDA, Adjusted Operating Income (Loss), Adjusted Net Income (Loss) and Adjusted Earnings per Share: Adjusted EBITDA, Adjusted operating income (loss), Adjusted net income (loss) and Adjusted earnings (loss) per share are non-GAAP financial measures.
Reconciliations between constant currency financial information and the most directly comparable GAAP measure are included where applicable. Adjusted EBITDA, Adjusted Operating Income (Loss), Adjusted Net Income (Loss) and Adjusted Earnings (Loss) per Share: Adjusted EBITDA, Adjusted operating income (loss), Adjusted net income (loss) and Adjusted earnings (loss) per share are non-GAAP financial measures.
The Revolving Facility provides that the ABL Lenders may extend revolving loans in an aggregate principal amount not to exceed $225.0 million at any time outstanding (the “Revolving Credit Commitment”), of which up to $125.0 million is available under a U.S. facility, an aggregate of $80.0 million is available under a European facility, $10.0 million is available under a Hong Kong facility, $5.0 million is available under a French facility, and $5.0 million is available under a Canadian facility, in each case, subject to the borrowing base availability limitations described below.
The Revolving Facility provides that the ABL Lenders may extend revolving loans in an aggregate principal amount not to exceed $225.0 million at any time outstanding (the “Revolving Credit Commitment”), of which up to $125.0 million is available under a U.S. facility, an aggregate of $80.0 million is available under a European facility, $10.0 million is available under a Hong Kong SAR facility, $5.0 million is available under a French facility, and $5.0 million is available under a Canadian facility, in each case, subject to the borrowing base availability limitations described below.
In addition, in most product categories that we offer, brands with higher retail price points generally produce higher gross profit margins compared to those of lower retail priced brands. However, smartwatches carry relatively lower margins than our other major product categories.
In addition, in most product categories that we offer, brands with higher retail price points generally produce higher gross profit margins compared to those of lower retail priced brands. However, smartwatches carry relatively lower margins than our major product categories.
The Revolving Facility is subject to a line cap equal to the lesser of the total Revolving Credit Commitment and the aggregate borrowing bases under the U.S. facility, the European facility, the Hong Kong facility, the French facility and the Canadian facility.
The Revolving Facility is subject to a line cap equal to the lesser of the total Revolving Credit Commitment and the aggregate borrowing bases under the U.S. facility, the European facility, the Hong Kong SAR facility, the French facility and the Canadian facility.
The Revolving Facility is an asset-based facility, in which borrowing availability is subject to a borrowing base equal to: (a) with respect to us, the sum of (i) the lesser of (x) 90% of the appraised net orderly liquidation value of eligible U.S. finished goods inventory and (y) 65% of the lower of cost or market value of eligible U.S. finished goods inventory, plus (ii) 85% of the eligible U.S. accounts receivable, plus (iii) 90% of eligible U.S. credit card accounts receivable, plus (iv) the lesser of (x) 40% of the appraised net orderly liquidation value of eligible U.S. intellectual property and (y) $20.0 million, minus (y) the aggregate amount of reserves, if any, established by the ABL Agent; (b) with respect to each non-U.S. borrower (except for the French Borrower), the sum of (i) the lesser of (x) 90% of the appraised net orderly liquidation value of eligible foreign finished goods inventory of such non-U.S. borrower and (y) 65% of the lower of cost or market value of eligible foreign finished goods inventory of such non-U.S. borrower, plus (ii) 85% of the eligible foreign accounts receivable of such non-U.S. borrower, minus (iii) the aggregate amount of reserves, if any, established by the ABL Agent; and (c) with respect to the French Borrower, (i) 85% of eligible French accounts receivable minus (ii) the aggregate amount of reserves, if any, established by the ABL Agent.
The Revolving Facility is an asset-based facility, in which borrowing availability is subject to a borrowing base equal to: (a) with respect to us, the sum of (i) the lesser of (x) 90% of the appraised net orderly liquidation value of eligible U.S. finished goods inventory and (y) 65% of the lower of cost or market value of eligible U.S. finished goods inventory, plus (ii) 85% of the eligible U.S. accounts receivable, plus (iii) 90% of eligible U.S. credit card accounts receivable, plus (iv) the lesser of (x) 40% of the appraised net orderly liquidation value of eligible U.S. intellectual property and (y) $20.0 million, minus (y) the aggregate amount of reserves, if any, established by the ABL Agent; (b) with respect to each non-U.S. borrower (except for the French Borrower), the sum of (i) the lesser of (x) 90% of the appraised net orderly liquidation value of eligible foreign finished goods inventory of such non-U.S. borrower and (y) 65% of the lower of cost or market value of eligible foreign finished goods inventory of such non-U.S. borrower, plus (ii) 85% of the eligible foreign accounts receivable of such non-U.S. borrower, 46 Table of Contents minus (iii) the aggregate amount of reserves, if any, established by the ABL Agent; and (c) with respect to the French Borrower, (i) 85% of eligible French accounts receivable minus (ii) the aggregate amount of reserves, if any, established by the ABL Agent.
The 2023 effective rate was favorably impacted by reduced foreign income taxes, release of reserves for uncertain tax positions and the accrual of interest income on tax receivables, whereas the 2022 effective rate was unfavorably impacted by the low level of pre-tax earnings and valuation allowances on deferred tax assets. Net Income (Loss) Attributable to Fossil Group, Inc.
The 2024 effective rate was favorably impacted by reduced foreign income taxes, release of reserves for uncertain tax positions and the accrual of interest income on tax receivables, whereas the 2023 effective rate was unfavorably impacted by the low level of pre-tax earnings and valuation allowances on deferred tax assets. Net Income (Loss) Attributable to Fossil Group, Inc.
Generally, starting in the third quarter, our cash needs begin to increase, typically reaching a peak in the September-November time frame as we increase inventory levels in advance of the holiday season. Our quarterly cash requirements are also impacted by debt repayments, restructuring charges and capital expenditures.
Generally, starting in the third quarter, our cash needs begin to increase, typically reaching a peak in the September-November time frame as we increase inventory levels in advance of the holiday season. Our quarterly cash requirements are also impacted by debt repayments, royalty payments, restructuring charges and capital expenditures.
We recorded impairment losses in restructuring charges of $0.1 million and $0.2 million in fiscal years 2022 and 2021, respectively, related to property, plant and equipment. In fiscal year 2023, an increase of 100 basis points to the discount rate would not have resulted in an increase to property, plant and equipment and lease impairment expense.
We recorded impairment losses in restructuring charges of $1.2 million, $0.0 million, $0.1 million in fiscal years 2024, 2023 and 2022, respectively, related to property, plant and equipment. In fiscal year 2024, an increase of 100 basis points to the discount rate would not have resulted in an increase to property, plant and equipment and lease impairment expense.
Stores that experience a gross square footage increase of 10% or more due to an expansion and/or relocation are removed from the comparable store sales base, but are included in total sales. These stores are returned to the comparable store sales base in the thirteenth month following the expansion and/or relocation.
Stores that experience a gross square footage change of 10% or more due to an expansion and/or relocation are removed from the comparable store sales base, but are included in total sales. These stores are returned to the comparable store sales base in the thirteenth month following the expansion and/or relocation.
In the event our liquidity becomes insufficient, we may be required to limit our spending or sell assets.
In the event our liquidity becomes insufficient, we may be required to limit our spending or sell additional assets.
Comparable retail sales exclude the effects of foreign currency fluctuations. Store Counts: While macro-economic factors have shifted sales away from traditional brick and mortar stores towards digital channels, store counts continue to provide a key metric for management. Both the size and quality of our store fleet have 38 Table of Contents a direct impact on our sales and profitability.
Comparable retail sales exclude the effects of foreign currency fluctuations. Store Counts: While macro-economic factors have shifted sales away from traditional brick and mortar stores towards digital channels, store counts continue to provide a key metric for management. Both the size and quality of our store fleet have a direct impact on our sales and profitability.
A 10% decrease in future expected cash flows would have increased impairment expense by $1.1 million. I ncome Taxes. We record valuation allowances against our deferred tax assets, when necessary, in accordance with ASC 740, Income Taxes ("ASC 740"). Realization of deferred tax assets is dependent on future taxable earnings and is therefore uncertain.
A 10% decrease in future expected cash flows would have increased impairment expense by $0.3 million. I ncome Taxes. We record valuation allowances against our deferred tax assets, when necessary, in accordance with ASC 740, Income Taxes ("ASC 740"). Realization of deferred tax assets is dependent on future taxable earnings and is therefore uncertain.
Sales are generated through diversified distribution channels that include wholesalers, distributors, and direct to consumer. Within each channel, we sell our products through a variety of physical point of sale, distributors and e-commerce channels.
Sales are generated through diversified distribution channels that include wholesalers, distributors and direct to consumer. Within each channel, we sell our products through a variety of physical points of sale, distributors, and e-commerce channels.
For every 1% of additional inventory valuation reductions as of fiscal year end 2023, we would have recorded an additional cost of sales of approximately $0.2 million. Property, Plant and Equipment and Lease Impairment.
For every 1% of additional inventory valuation reductions as of fiscal year end 2024, we would have recorded an additional cost of sales of approximately $0.2 million. Property, Plant and Equipment and Lease Impairment.
The above advance rates (other than the advance rate with respect to intellectual property) are seasonally increased by 5% 46 Table of Contents (e.g. from 90% to 95%) during the period commencing on the date of delivery of the borrowing base certificate with respect to the second fiscal month of the Company and ending on the last day of the period covered by the borrowing base certificate delivered with respect to the fifth fiscal month of the Company.
The above advance rates (other than the advance rate with respect to intellectual property) are seasonally increased by 5% (e.g. from 90% to 95%) during the period commencing on the date of delivery of the borrowing base certificate with respect to the second fiscal month of the Company and ending on the last day of the period covered by the borrowing base certificate delivered with respect to the fifth fiscal month of the Company.
Despite the security measures we currently have in place, our facilities and systems and 35 Table of Contents those of our third party service providers have been, and will continue to be, vulnerable to theft of physical information, security breaches, hacking attempts, computer viruses and malware, ransomware, phishing, lost data and programming and/or human errors.
Despite the security measures we currently have in place, our facilities and systems and those of our third party service providers have been, and will continue to be, vulnerable to theft of physical information, security breaches, hacking attempts, computer viruses and malware, ransomware, phishing, lost data and programming and/or human errors.
When undiscounted cash flows estimated to be generated through the operations of our Company-owned retail stores are less than the carrying value of the underlying assets, the assets are impaired. If it is determined that assets are impaired, an impairment loss is recognized for the amount that the asset's book value exceeds its fair value.
When 37 Table of Contents undiscounted cash flows estimated to be generated through the operations of our Company-owned retail stores are less than the carrying value of the underlying assets, the assets are impaired. If it is determined that assets are impaired, an impairment loss is recognized for the amount that the asset's book value exceeds its fair value.
In addition, we may seek additional deleveraging or refinancing transactions, including entering into transactions to exchange debt for other debt securities (including additional secured debt), issuance of equity (including preferred stock and convertible securities), repurchase or redemption of outstanding indebtedness, or may 45 Table of Contents otherwise seek transactions to reduce interest expense, extend debt maturities and improve our capital structure.
In addition, we may seek additional deleveraging or refinancing transactions, including entering into transactions to exchange debt for other debt securities (including additional secured debt), issuance of equity (including preferred stock and convertible securities), repurchase or redemption of outstanding indebtedness, or may otherwise seek transactions to reduce interest expense, extend debt maturities and improve our capital structure.
The Amendment, among other things, (i) extends the maturity date of the credit facility to November 8, 2027 (provided, that if we have any indebtedness in an amount in excess of $35 million that matures prior to November 8, 2027, the maturity date of the credit facility shall be the 91st day prior to the maturity date of such other indebtedness) and (ii) changes the calculation methodology of the borrowing base to include the value of certain of our intellectual property in such methodology and to provide for seasonal increases to certain advance rates.
The Amendment, among other things, (i) extended the maturity date of the credit facility to November 8, 2027 (provided, that if we have any indebtedness in an amount in excess of $35 million that matures prior to November 8, 2027, the maturity date of the credit facility shall be the 91st day prior to the maturity date of such other indebtedness) and (ii) changed the calculation methodology of the borrowing base to include the value of certain of our intellectual property in such methodology and to provide for seasonal increases to certain advance rates.
If our allowance for product returns were to change by 10%, the impact, excluding taxes, would have been an approximate $1.6 million change to net income (loss). Inventory.
If our allowance for product returns were to change by 10%, the impact, excluding taxes, would have been an approximate $1.5 million change to net income (loss). Inventory.
We may redeem the Notes for cash in whole or in part at any time at our option at the following prices: (i) after November 30, 2023 and prior to November 30, 2024, at a price equal to $25.50 per $25.00 principal amount of Notes, (ii) on or after November 30, 2024 and prior to November 30, 2025, at a price equal to $25.25 per $25.00 principal amount of Notes and (iii) on or after November 30, 2025, at a price equal to $25.00 per $25.00 principal amount of Notes, plus (in each case noted above) accrued and unpaid interest, if any, to, but excluding, the date of redemption.
We may redeem the Notes for cash in whole or in part at any time at our option at the following prices: (i) prior to November 30, 2025, at a price equal to $25.25 per $25.00 principal amount of Notes and (ii) on or after November 30, 2025, at a price equal to $25.00 per $25.00 principal amount of Notes, plus (in each case noted above) accrued and unpaid interest, if any, to, but excluding, the date of redemption.
We define Adjusted EBITDA as our income (loss) before income taxes, plus interest expense, amortization and depreciation, impairment expense, other non-cash charges, stock-based compensation expense, restructuring cost of sales and expense and unamortized debt issuance costs included in loss on extinguishment of debt minus interest income.
We define Adjusted EBITDA as our income (loss) before income taxes, plus interest 38 Table of Contents expense, amortization and depreciation, impairment expense, other non-cash charges, stock-based compensation expense, restructuring cost of sales and expense and unamortized debt issuance costs included in loss on extinguishment of debt minus interest income.
We have no other operations, including supply chain, in Israel, Palestine, Russia or Ukraine. However, the continuation of the current military conflicts and/or an escalation of the conflicts beyond their current scope may continue to weaken the global economy and could result in additional inflationary pressures and supply chain constraints.
We have no other operations, including supply chain, in Israel, Palestine, Russia or Ukraine. However, the continuation of the current military conflicts or an escalation of the conflicts beyond their current scope may continue to weaken the global economy, negatively impact consumer confidence, and could result in additional inflationary pressures and supply chain constraints.
Should actual results or market conditions differ from those anticipated, additional losses may be recorded. We recorded impairment losses in long-lived asset impairments of $1.7 million, $2.1 million and $7.5 million in fiscal years 2023, 2022 and 2021, respectively, related to lease assets.
Should actual results or market conditions differ from those anticipated, additional losses may be recorded. We recorded impairment losses in long-lived asset impairments of $1.8 million, $1.7 million and $2.1 million in fiscal years 2024, 2023 and 2022, respectively, related to lease assets.
Cash used in operating activities is net income (loss) adjusted for certain non-cash items and changes in assets and liabilities.
Cash provided by (used in) operating activities is net income (loss) adjusted for certain non-cash items and changes in assets and liabilities.
World Conflicts: We continuously monitor the direct and indirect impacts from the military conflicts between Russia and Ukraine and in the Middle East. Our operations in Russia and Israel consist of sales through third-party distributors, and sales to these distributors are currently on hold. Our sales in Russia and Israel are not material to our financial results.
World Conflicts : We continuously monitor the direct and indirect impacts from the military conflicts between Russia and Ukraine and in the Middle East. Our operations in Russia and Israel consist of sales through third-party distributors, and our sales in Russia and Israel are not material to our financial results.
This initial phase of TAG was designed to deliver $100 million in annualized cost savings by the end of fiscal year 2024. In August 2023, as a result of a more comprehensive review of our business operations, we expanded the scope of TAG.
The initial phase of TAG was designed to deliver $100 million in annualized cost savings by the end of fiscal year 2024. In August 2023, as a result of a more comprehensive review of our business operations, we expanded the scope of TAG to encompass multiple workstreams.
We believe cash flows from operations, combined with existing cash on hand and amounts available under our credit facilities will be sufficient to fund our cash needs for at least the next twelve months.
We believe cash flows from operations and proceeds from non-core asset sales, combined with existing cash on hand and amounts available under our credit facilities will be sufficient to fund our cash needs for at least the next twelve months.
The Organization for Economic Cooperation and Development ("OECD") and over 140 countries have agreed to enact a two-pillar solution to reform the international tax rules to address the challenges arising from the globalization and digitalization of the economy.
The OECD and over 140 countries have agreed to enact a two-pillar solution to reform the international tax rules to address the challenges arising from the globalization and digitalization of the economy.
Within each channel, we sell our products through a variety of physical points of sale, distributors, and e-commerce channels. In the direct to consumer channel, 36 Table of Contents we had 73 Company-owned stores as of the end of fiscal 2023 and an extensive collection of products available through our owned websites.
Within each channel, we sell our products through a variety of physical points of sale, distributors and e-commerce channels. In the direct to consumer channel, we had 114 Company-owned stores as of the end of fiscal 2024 and an extensive collection of products available through our owned websites.
We recorded impairment losses in long-lived asset impairments of $0.4 million, $0.2 million and $1.7 million in fiscal years 2023, 2022 and 2021, respectively, related to property, plant and equipment. We recorded impairment losses in restructuring charges of $0.7 million in fiscal year 2021 related to lease assets.
We recorded impairment losses in long-lived asset impairments of $0.4 million, $0.4 million and $0.2 million in fiscal years 2024, 2023 and 2022, respectively, related to property, plant and equipment. We recorded impairment losses in restructuring charges of $5.4 million in fiscal year 2024, and no charges in fiscal years 2023 and 2022 related to lease assets.
The valuation allowance for fiscal years 2023, 2022 and 2021 was $192.6 million, $143.3 million and $123.0 million, respectively. Our continuing practice is to recognize interest and penalties related to income tax matters in income tax expense.
The valuation allowance for fiscal years 2024, 2023 and 2022 was $226.5 million, $192.6 million and $143.3 million, respectively. Our continuing practice is to recognize interest and penalties related to income tax matters in income tax expense.
Amounts available under the Revolving Facility are reduced by any amounts outstanding under standby letters of credit. As of December 30, 2023, we had $64.0 million available for borrowing under the Revolving Facility. At December 30, 2023, we were in compliance with all debt covenants related to our debt agreement.
Amounts available under the Revolving Facility are reduced by any amounts outstanding under standby letters of credit. As of December 28, 2024, we had $53.4 million available for borrowing under the Revolving Facility. At December 28, 2024, we were in compliance with all debt covenants related to our debt agreement.
Fiscal Year 2023 ($ in millions, except per share data): As Reported Restructuring Cost of Sales Long-lived Asset Impairment Restructuring Expenses As Adjusted Operating income (loss) $ (143.0) $ 5.5 $ 2.2 $ 43.3 $ (92.0) Operating margin (% of net sales) (10.1) % (6.5) % Interest expense 21.8 — — — 21.8 Other income (expense) - net 8.7 — — — 8.7 Income (loss) before income taxes (156.1) 5.5 2.2 43.3 (105.1) Provision for income taxes 0.5 1.2 0.5 9.1 11.3 Less: net income attributable to noncontrolling interest 0.4 — — — 0.4 Net income (loss) attributable to Fossil Group, Inc. $ (157.1) $ 4.3 $ 1.7 $ 34.2 $ (116.9) Diluted earnings (loss) per share $ (3.00) $ 0.08 $ 0.03 $ 0.65 $ (2.24) Fiscal Year 2022 ($ in millions, except per share data): As Reported Long-lived Asset Impairment Restructuring Expenses Unamortized Debt Issuance Costs Included in Loss on Extinguishment of Debt As Adjusted Operating income (loss) $ (1.5) $ 2.4 $ 6.1 $ — $ 7.0 Operating margin (% of net sales) (0.1) % 0.4 % Interest expense 19.2 — — — 19.2 Other income (expense) - net (1.4) — — 1.1 (0.3) Income (loss) before income taxes (22.1) 2.4 6.1 1.1 (12.5) Provision for income taxes 21.4 0.5 1.3 0.2 23.4 Less: net income attributable to noncontrolling interest 0.6 — — — 0.6 Net income (loss) attributable to Fossil Group, Inc. $ (44.2) $ 1.9 $ 4.8 $ 0.9 $ (36.6) Diluted earnings (loss) per share $ (0.85) $ 0.04 $ 0.09 $ 0.01 $ (0.71) Fiscal Year 2022 Compared to Fiscal Year 2021 For a discussion of our results of operations in fiscal year 2022 compared to fiscal year 2021, please see Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC, which is incorporated herein by reference. 44 Table of Contents Liquidity and Capital Resources Our cash and cash equivalents balance at the end of fiscal year 2023 was $117.2 million, including $104.4 million held by foreign subsidiaries outside the U.S., in comparison to $198.7 million at the end of fiscal year 2022, including $195.8 million held by foreign subsidiaries outside the U.S.
Fiscal Year 2024 ($ in millions, except per share data): As Reported Restructuring Cost of Sales Long-lived Asset Impairment Restructuring Expenses As Adjusted Operating income (loss) $ (103.9) $ 7.3 $ 2.5 $ 59.8 $ (34.3) Operating margin (% of net sales) (9.1) % (3.0) % Interest expense 19.0 — — — 19.0 Other income (expense) - net 4.9 — — — 4.9 Income (loss) before income taxes (118.1) 7.3 2.5 59.8 (48.5) Provision for income taxes (11.8) 1.5 0.5 12.6 2.8 Less: net income attributable to noncontrolling interest (3.6) — — — (3.6) Net income (loss) attributable to Fossil Group, Inc. $ (102.7) $ 5.8 $ 2.0 $ 47.2 $ (47.7) Diluted earnings (loss) per share $ (1.94) $ 0.11 $ 0.04 $ 0.89 $ (0.90) Fiscal Year 2023 ($ in millions, except per share data): As Reported Restructuring Cost of Sales Long-lived Asset Impairment Restructuring Expenses As Adjusted Operating income (loss) $ (143.0) $ 5.5 $ 2.2 $ 43.3 $ (92.0) Operating margin (% of net sales) (10.1) % (6.5) % Interest expense 21.8 — — — 21.8 Other income (expense) - net 8.7 — — — 8.7 Income (loss) before income taxes (156.1) 5.5 2.2 43.3 (105.1) Provision for income taxes 0.5 1.2 0.5 9.1 11.3 Less: net income attributable to noncontrolling interest 0.4 — — — 0.4 Net income (loss) attributable to Fossil Group, Inc. $ (157.1) $ 4.3 $ 1.7 $ 34.2 $ (116.9) Diluted earnings (loss) per share $ (3.00) $ 0.08 $ 0.03 $ 0.65 $ (2.24) Fiscal Year 2023 Compared to Fiscal Year 2022 For a discussion of our results of operations in fiscal year 2023 compared to fiscal year 2022, please see Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 30, 2023 filed with the SEC, which is incorporated herein by reference. 44 Table of Contents Liquidity and Capital Resources Our cash and cash equivalents balance at the end of fiscal year 2024 was $123.6 million, including $92.5 million held by foreign subsidiaries outside the U.S., in comparison to $117.2 million at the end of fiscal year 2023, including $104.4 million held by foreign subsidiaries outside the U.S.
With the challenging global macro environment, we expect many customers to continue to manage to leaner inventory levels than the prior year across our key categories. We will also continue to proactively manage our inventory purchases to mitigate our cash flow and inventory risks.
With the challenging global macro environment, we expect many customers to continue to manage to leaner inventory levels than historically across our key categories to reduce inventory carrying risk. We will continue to proactively manage our inventory purchases to mitigate our cash flow and inventory risks.
As of December 30, 2023, we had unamortized debt issuance costs of $5.1 million recorded in long-term debt and $2.5 million recorded in intangible and other assets-net on our consolidated balance sheets. In addition, we had $4.5 million of outstanding standby letters of credit at December 30, 2023.
As of December 28, 2024, we had unamortized debt issuance costs of $3.3 million recorded in long-term debt and $1.9 million recorded in intangible and other assets-net on our consolidated balance sheets. In addition, we had $5.3 million of outstanding standby letters of credit at December 28, 2024.
Gross profit margins related to sales in our Europe and Asia businesses are historically higher than our Americas business, primarily due to the following factors: (i) premiums charged in comparison to retail prices on products sold in the U.S.; (ii) the product sales mix in our international businesses, in comparison to our Americas business, is comprised more predominantly of watches and jewelry that generally produce higher gross profit margins than leather goods; and (iii) the watch sales mix in our Europe and Asia businesses, in comparison to our Americas business, are comprised more predominantly of higher priced licensed brands.
Gross profit margins related to sales in our Europe and Asia businesses are historically higher than our Americas business, primarily due to the following factors: (i) premiums charged in comparison to retail prices on products sold in the U.S.; (ii) the product sales mix in our international businesses, in comparison to our Americas business, is comprised more predominantly of watches and jewelry that generally produce higher gross profit margins than leather goods; and (iii) the watch sales mix in our Europe and Asia businesses, in comparison to our Americas business, are comprised more predominantly of higher priced licensed brands. 39 Table of Contents Operating Expenses include SG&A, long-lived asset impairments and restructuring charges.
In addition, we cannot be certain that such insurance policies will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. Business Strategies and Outlook : Our goal is to drive shareholder value and make a positive impact on our people, planet and communities.
In addition, we cannot 35 Table of Contents be certain that such insurance policies will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. Business Strategies and Outlook : Our goal is to drive shareholder value.
At the end of fiscal year 2023, we had $0.5 million of outstanding short-term borrowings and $207.0 million in long-term debt including unamortized issuance costs compared to $0.3 million of short-term borrowings and $216.1 million in long-term debt including unamortized issuance costs at the end of fiscal year 2022. Operating Activities.
At the end of fiscal year 2024, we had $2.2 million of outstanding short-term borrowings and $162.7 million in long-term debt including unamortized issuance costs compared to $0.5 million of short-term borrowings and $207.0 million in long-term debt including unamortized issuance costs at the end of fiscal year 2023. Operating Activities.
Fiscal year 2023, net income (loss) attributable to Fossil Group, Inc. was a net loss of $157.1 million, or $3.00 per diluted share, in comparison to a net loss of $44.2 million, or $0.85 per diluted share, in the prior fiscal year. During fiscal year 2023, currency fluctuations unfavorably impacted diluted earnings (loss) per share by $0.10. Adjusted EBITDA.
In fiscal year 2024, net income (loss) attributable to Fossil Group, Inc. was a net loss of $102.7 million, or $1.94 per diluted share, in comparison to a net loss of $157.1 million, or $3.00 per diluted share, in the prior fiscal year. During fiscal year 2024, currency fluctuations unfavorably impacted diluted earnings (loss) per share by $0.04. Adjusted EBITDA.
In the direct to consumer channel, we had 143 Company-owned stores as of the end of fiscal 2023 and an extensive collection of products available through our owned websites. As of the end of fiscal 2023, net sales in the Americas segment accounted for 45.4% of our consolidated revenue.
In the direct to consumer channel, we had 69 Company-owned stores as of the end of fiscal 2024 and an extensive collection of products available through our owned websites. As of the end of fiscal 2024, net sales in the Asia segment accounted for 24% of our consolidated revenue.
For the fiscal year ending December 28, 2024, we expect total capital expenditures to be approximately $10 million. Our capital expenditure budget is an estimate and is subject to change. Sources of Liquidity.
For the fiscal year ending January 2, 2026, we expect total capital expenditures to be approximately $5 million. Our capital expenditure budget is an estimate and is subject to change. Sources of Liquidity.
During fiscal year 2023, Europe net sales decreased $103.9 million or 19.2% (20.8% in constant currency) in comparison to fiscal year 2022. The greatest sales decreases were in the MICHAEL KORS and FOSSIL brands. Sales declined in our wholesale and stores channels, while owned e-commerce sales increased.
During fiscal year 2024, Europe net sales decreased $79.8 million or 18.2% (18.7% in constant currency) in comparison to fiscal year 2023. The greatest sales decreases were in the FOSSIL and MICHAEL KORS brands. Sales declined in our wholesale, stores and owned e-commerce channels.
Fiscal Year 2023 2022 Dollars % of Net Sales Dollars % of Net Sales Income (loss) before income taxes $ (156.1) (11.1) % $ (22.1) (1.3) % Plus: Interest expense 21.8 19.2 Amortization and depreciation 19.1 23.3 Impairment expense 2.2 2.4 Other non-cash charges (0.9) (1.1) Stock-based compensation 5.7 8.0 Restructuring expense 43.3 6.1 Restructuring cost of sales 5.5 — Unamortized debt issuance costs included in loss on extinguishment of debt — 1.1 Less: Interest income 3.2 0.8 Adjusted EBITDA $ (62.6) (4.4) % $ 36.1 2.1 % 43 Table of Contents Adjusted Operating Income (Loss), Adjusted Net Income (Loss) and Adjusted Earnings (Loss) per Share.
Fiscal Year 2024 2023 Dollars % of Net Sales Dollars % of Net Sales Income (loss) before income taxes $ (118.1) (10.3) % $ (156.1) (11.1) % Plus: Interest expense 19.0 21.8 Amortization and depreciation 16.0 19.1 Impairment expense 2.5 2.2 Other non-cash charges 3.3 (0.9) Stock-based compensation 2.9 5.7 Restructuring expense 59.8 43.3 Restructuring cost of sales 7.3 5.5 Less: Interest income 4.3 3.2 Adjusted EBITDA $ (11.6) (1.0) % $ (62.6) (4.4) % 43 Table of Contents Adjusted Operating Income (Loss), Adjusted Net Income (Loss) and Adjusted Earnings (Loss) per Share.
Fiscal Year 2023 Activity: We had payments net of borrowings of $10.9 million under the Revolving Facility during fiscal year 2023 at an average interest rate of 6.5%. As of December 30, 2023, we had $150.0 million outstanding under the Notes and $62.1 million outstanding under the Revolving Facility.
Fiscal Year 2024 Activity: We had payments net of borrowings of $46.1 million under the Revolving Facility during fiscal year 2024 at an average interest rate of 6.4%. As of December 28, 2024, we had $150.0 million outstanding under the Notes and $15.9 million outstanding under the Revolving Facility.
The following table sets forth product net sales and the changes in product net sales on both a reported and constant currency basis from period to period for the Asia segment (dollars in millions): Net Sales Fiscal Year Growth (Decline) Percentage as Reported Percentage Constant Currency 2023 2022 Dollars Watches: Traditional watches $ 260.3 $ 281.6 $ (21.3) (7.6) % (4.0) % Smartwatches 17.0 32.7 (15.7) (48.0) (45.0) Total watches $ 277.3 $ 314.3 $ (37.0) (11.8) % (8.2) % Leathers 27.8 33.8 (6.0) (17.8) (15.4) Jewelry 19.1 24.8 (5.7) (23.0) (19.0) Other 4.0 4.7 (0.7) (14.9) (10.6) Total $ 328.2 $ 377.6 $ (49.4) (13.1) % (9.6) % Gross Profit.
The following table sets forth product net sales and the changes in product net sales on both a reported and constant currency basis from period to period for the Asia segment (dollars in millions): Net Sales Fiscal Year Growth (Decline) Percentage as Reported Percentage Constant Currency 2024 2023 Dollars Watches: Traditional watches $ 214.6 $ 260.3 $ (45.7) (17.5) % (16.3) % Smartwatches 4.5 17.0 (12.5) (73.5) (72.9) Total watches $ 219.1 $ 277.3 $ (58.2) (21.0) % (19.8) % Leathers 23.5 27.8 (4.3) (15.5) (14.7) Jewelry 24.7 19.1 5.6 29.3 33.5 Other 2.8 4.0 (1.2) (30.0) (29.3) Total $ 270.1 $ 328.2 $ (58.1) (17.7) % (16.4) % Gross Profit.
We account for estimated obsolescence or unmarketable inventory equal to the difference between the average cost of inventory and the estimated net realizable value based upon assumptions about forecasted sales demand, market conditions and available liquidation channels. Valuation of existing smartwatch inventory can be negatively impacted by the emergence of newer generation product.
We account for estimated obsolescence or unmarketable inventory equal to the difference between the average cost of inventory and the estimated net realizable value based upon assumptions about forecasted sales demand, market conditions and available liquidation channels.
At the end of fiscal year 2023, we had working capital of $368.2 million compared to working capital of $519.4 million at the end of the prior fiscal year.
At the end of fiscal year 2024, we had working capital of $227.9 million compared to working capital of $368.2 million at the end of the prior fiscal year.
"The Pillar Two Global Anti-Base Erosion (GloBE) Rules" provide a coordinated system to ensure that multinational enterprises with revenues above 750 million euro pay a minimum effective tax rate of 15% tax on the income arising in each of the jurisdictions in which they operate. The technical aspects of the calculation are still being developed.
The GloBE Rules provide a coordinated system to ensure that multinational enterprises with revenues above 750 million euro pay a minimum effective tax rate of 15% tax on the income arising in each of the jurisdictions in which they operate.
Comparable retail sales declined slightly during fiscal year 2023, with growth in e-commerce more than offset by declines in stores.
Comparable retail sales decreased moderately during fiscal year 2024, with growth in owned e-commerce more than offset by declines in stores sales.
The GILTI impact will be accounted for as incurred under the period cost method. In addition, our valuation allowance analysis is affected by various aspects of the TCJ Act, including the limitation on the deductibility of interest expense and the impact of the GILTI.
In addition, our valuation allowance analysis is affected by various aspects of the TCJ Act, including the limitation on the deductibility of interest expense and the impact of the GILTI.
As a percentage of net sales, operating margin was (10.1)% in fiscal year 2023 as compared to (0.1)% in fiscal year 2022 and was negatively impacted by 70 basis points due to changes in foreign currencies. 42 Table of Contents Operating income (loss) by operating segment is summarized as follows (dollars in millions): Fiscal Year Growth (Decline) Operating Margin % 2023 2022 Dollars Percentage 2023 2022 Americas $ 82.7 $ 116.4 $ (33.7) (29.0) % 12.9 % 15.6 % Europe 41.0 91.1 (50.1) (55.0) 9.4 16.8 Asia 38.2 52.1 (13.9) (26.7) 11.6 13.8 Corporate (304.9) (261.1) (43.8) (16.8) Total operating income (loss) $ (143.0) $ (1.5) $ (141.5) (9,433.3) % (10.1) % (0.1) % Interest Expense.
As a percentage of net sales, operating margin was (9.1)% in fiscal year 2024 as compared to (10.1)% in fiscal year 2023 and was negatively impacted by 10 basis points due to changes in foreign currencies. 42 Table of Contents Operating income (loss) by operating segment is summarized as follows (dollars in millions): Fiscal Year Growth (Decline) Operating Margin % 2024 2023 Dollars Percentage 2024 2023 Americas $ 77.0 $ 82.7 $ (5.7) (6.9) % 15.0 % 12.9 % Europe 64.7 41.0 23.7 57.8 18.1 9.4 Asia 40.0 38.2 1.8 4.7 14.8 11.6 Corporate (285.6) (304.9) 19.3 6.3 Total operating income (loss) $ (103.9) $ (143.0) $ 39.1 27.3 % (9.1) % (10.1) % Interest Expense.
From a brand perspective, sales decreased throughout most of our brand portfolio, with the most predominant declines in MICHAEL KORS, FOSSIL and EMPORIO ARMANI.
Leathers declined 29.9% (29.6% in constant currency) and jewelry declined 12.9% (12.4% in constant currency). From a brand perspective, sales decreased throughout most of our brand portfolio, with the most predominant declines in FOSSIL, EMPORIO ARMANI and MICHAEL KORS.
Gross profit of $679.6 million in fiscal year 2023 decreased $151.1 million, or 18.2%, in comparison to $830.7 million in fiscal year 2022, driven mainly by the decrease in sales.
Gross profit of $597.2 million in fiscal year 2024 decreased $82.4 million, or 12.1%, in comparison to $679.6 million in fiscal year 2023, driven mainly by the decrease in sales.
We review and update the estimates used in the accrual 37 Table of Contents for uncertain tax positions as more definitive information becomes available from taxing authorities upon completion of tax audits, expiration of statutes of limitation, or occurrence of other events.
We review and update the estimates used in the accrual for uncertain tax positions as more definitive information becomes available from taxing authorities upon completion of tax audits, expiration of statutes of limitation, or occurrence of other events. The results of operations and financial position for future periods could be impacted by changes in assumptions or resolutions of tax audits.
While the impact of these macroeconomic factors are difficult to quantify, we expect continued negative impacts on consumer confidence and consumer demand in fiscal year 2024 in many of our major markets.
While the impact of these macroeconomic factors are difficult to quantify, we expect these conditions to continue to have a negative impact on consumer confidence and consumer demand for discretionary goods in many of our major markets.
The following table sets forth product net sales and the changes in product net sales on both a reported and constant currency basis from period to period for the Americas segment (dollars in millions): Net Sales Fiscal Year Growth (Decline) Percentage as Reported Percentage Constant Currency 2023 2022 Dollars Watches: Traditional watches $ 456.7 $ 519.0 $(62.3) (12.0) % (12.5) % Smartwatches 37.7 65.6 (27.9) (42.5) (42.8) Total watches $ 494.4 $ 584.6 $(90.2) (15.4) % (15.9) % Leathers 104.8 115.3 (10.5) (9.1) (8.7) Jewelry 33.4 35.7 (2.3) (6.4) (6.2) Other 8.2 8.4 (0.2) (2.4) (1.2) Total $ 640.8 $ 744.0 $(103.2) (13.9) % (14.2) % Europe Net Sales.
The following table sets forth product net sales and the changes in product net sales on both a reported and constant currency basis from period to period for the Americas segment (dollars in millions): Net Sales Fiscal Year Growth (Decline) Percentage as Reported Percentage Constant Currency 2024 2023 Dollars Watches: Traditional watches $ 388.8 $ 456.7 $ (67.9) (14.9) % (14.3) % Smartwatches 18.7 37.7 (19.0) (50.4) (50.7) Total watches $ 407.5 $ 494.4 $ (86.9) (17.6) % (17.1) % Leathers 70.7 104.8 (34.1) (32.5) (32.3) Jewelry 28.8 33.4 (4.6) (13.8) (14.1) Other 8.2 8.2 — — — Total $ 515.2 $ 640.8 $ (125.6) (19.6) % (19.1) % Europe Net Sales.
Comparable retail sales increased slightly during fiscal year 2023, with growth in store and owned e-commerce sales. 41 Table of Contents The following table sets forth product net sales and the changes in product net sales on both a reported and constant currency basis from period to period for the Europe segment (dollars in millions): Net Sales Fiscal Year Growth (Decline) Percentage as Reported Percentage Constant Currency 2023 2022 Dollars Watches: Traditional watches $ 296.1 $ 354.8 $ (58.7) (16.5) % (18.0) % Smartwatches 26.3 53.2 (26.9) (50.6) (51.9) Total watches $ 322.4 $ 408.0 $ (85.6) (21.0) % (22.5) % Leathers 25.9 29.4 (3.5) (11.9) (13.6) Jewelry 78.9 93.6 (14.7) (15.7) (17.8) Other 10.2 10.3 (0.1) (1.0) (2.9) Total $ 437.4 $ 541.3 $ (103.9) (19.2) % (20.8) % Asia Net Sales.
The following table sets forth product net sales and the changes in product net sales on both a reported and constant currency basis from period to period for the Europe segment (dollars in millions): 41 Table of Contents Net Sales Fiscal Year Growth (Decline) Percentage as Reported Percentage Constant Currency 2024 2023 Dollars Watches: Traditional watches $ 269.2 $ 296.1 $ (26.9) (9.1) % (9.6) % Smartwatches 1.7 26.3 (24.6) (93.5) (93.5) Total watches $ 270.9 $ 322.4 $ (51.5) (16.0) % (16.4) % Leathers 17.0 25.9 (8.9) (34.4) (34.7) Jewelry 60.9 78.9 (18.0) (22.8) (23.1) Other 8.8 10.2 (1.4) (13.7) (13.9) Total $ 357.6 $ 437.4 $ (79.8) (18.2) % (18.7) % Asia Net Sales.
Americas net sales decreased $103.2 million or 13.9% (14.2% in constant currency) for fiscal year 2023 as compared to fiscal year 2022. Sales decreased in almost all brands with the biggest decreases in MICHAEL KORS and FOSSIL. Sales decreases in our wholesale and stores channel were partially offset by growth in our owned e-commerce sales.
Americas net sales decreased $125.6 million or 19.6% (19.1% in constant currency) for fiscal year 2024 as compared to fiscal year 2023. Sales decreased in almost all brands with the biggest decreases in FOSSIL and MICHAEL KORS. Sales decreased in our wholesale, stores and owned e-commerce channels.
The Notes are our general unsecured obligations. The Notes bear interest at the rate of 7.00% per annum. Interest on the Notes is payable quarterly in arrears on February 28, May 31, August 31 and November 30 of each year. The Notes mature on November 30, 2026.
Interest on the Notes is payable quarterly in arrears on February 28, May 31, August 31 and November 30 of each year. The Notes mature on November 30, 2026.
SG&A also includes general and administrative expenses primarily consisting of administrative support labor and support costs such as treasury, legal, information services, accounting, internal audit, human resources, executive management costs and costs associated with stock-based compensation.
SG&A also includes general and administrative expenses primarily consisting of administrative support labor and support costs such as treasury, legal, information services, accounting, internal audit, human resources, executive management costs and costs associated with stock-based compensation. Restructuring charges include costs to reorganize, refine and optimize our Company’s infrastructure and store closures under our Turnaround, TAG and New World Fossil initiatives.
Our goal in expanding TAG is to put additional emphasis on a broader set of initiatives aimed at restructuring or optimizing our operations, exit or minimize certain product offerings, brands and distribution, strengthen gross margins and improve our working capital efficiency.
Our goal in expanding TAG was to put additional emphasis on initiatives aimed at restructuring or optimizing our operations, exiting or minimizing certain product offerings, brands and distribution channels, strengthening gross margins through improvements in our sourcing and improving our working capital efficiency.
The results of operations and financial position for future periods could be impacted by changes in assumptions or resolutions of tax audits. The GILTI provisions of the Tax Cuts and Jobs Act of 2017 (the "TCJ Act”) requiring the inclusion of certain foreign earnings in U.S. taxable income will continue to have an adverse impact on our effective tax rate.
The GILTI provisions of the Tax Cuts and Jobs Act of 2017 (the "TCJ Act") requiring the inclusion of certain foreign earnings in U.S. taxable income will continue to have an adverse impact on our effective tax rate. The GILTI impact will be accounted for as incurred under the period cost method.
Operating Segments We operate our business in three segments which are divided into geographies. Net sales for each geographic segment are based on the location of the selling entity and each reportable segment provides similar products and services. Americas : The Americas segment is comprised of sales from our operations in the United States, Canada and Latin America.
Net sales for each geographic segment are based on the location of the selling entity and each reportable segment provides similar products and services. Americas : The Americas segment is comprised of sales from our operations in the United States, Canada and Latin America. Sales are generated through diversified distribution channels that include wholesalers, distributors, and direct to consumer.
Europe : The Europe segment is comprised of sales to customers based in European countries, the Middle East and Africa. Sales are generated through diversified distribution channels that include wholesalers, distributors and direct to consumer. Within each channel, we sell our products through a variety of physical points of sale, distributors, and e-commerce channels.
As of the end of fiscal 2024, net sales in the Americas segment accounted for 45% of our consolidated revenue. Europe : The Europe segment is comprised of sales to customers based in European countries, the Middle East and Africa. Sales are generated through diversified distribution channels that include wholesalers, distributors and direct to consumer.
In fiscal year 2023, Asia net sales decreased $49.4 million or 13.1% (9.6% in constant currency) in comparison to fiscal 2022. Sales decreased across the majority of regions, most notably in greater China, while sales in India increased in constant currency. Sales declines were primarily in the EMPORIO ARMANI and FOSSIL brands.
In fiscal year 2024, Asia net sales decreased $58.1 million or 17.7% (16.4% in constant currency) in comparison to fiscal 2023. Sales decreased across the majority of the region, most notably in greater China, and were partially offset by sales growth in India and Australia. The greatest sales declines were in the EMPORIO ARMANI brand.
Interest expense increased by $2.6 million in fiscal year 2023, primarily driven by increased interest rates compared to fiscal year 2022. Other Income (Expense)—Net. During fiscal year 2023, other income (expense) - net was income of $8.7 million compared to expense of $1.4 million in the prior fiscal year.
During fiscal year 2024, other income (expense) - net was income of $4.9 million compared to income of $8.7 million in the prior fiscal year. The change in other income (expense)-net was primarily due to net currency losses in fiscal year 2024 as compared to net currency gains in fiscal year 2023.
Asia : The Asia segment is comprised of sales to customers based in Australia, China (including Hong Kong, Macau, and Taiwan), India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea and Thailand. Sales are generated through diversified distribution channels that include wholesalers, distributors and direct to consumer.
As of the end of fiscal 2024, net sales in the Europe segment accounted for 31% of our consolidated revenue. Asia : The Asia segment is comprised of sales to customers based in Australia, China (including Hong Kong SAR, Macau SAR, and Taiwan), India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea and Thailand.
Direct to consumer sales decreased 7.5% (6.9% in constant currency), mainly due to a smaller store base. We have reduced our store footprint by 40 stores (12%), since the end of the fiscal year 2022. Comparable retail sales decreased 2% during fiscal year 2023, compared to fiscal year 2022 with growth in e-commerce more than offset by declines in stores.
Direct to consumer sales decreased 24.4% (24.1% in constant currency), partially due to a smaller store base. We have reduced our store footprint by 54 stores (17.9%), since the end of fiscal year 2023.
For fiscal year 2023, total operating expenses decreased to $822.6 million or 58.2% of net sales, compared to $832.2 million or 49.5% of net sales in fiscal year 2022. SG&A expenses were $777.2 million in fiscal year 2023 compared to $823.7 million in fiscal year 2022.
These benefits were partially offset by a $7.6 million restructuring charge related to closure of our Swiss manufacturing operations. Operating Expenses. For fiscal year 2024, total operating expenses decreased to $701.1 million or 61.2% of net sales, compared to $822.6 million or 58.2% of net sales in fiscal year 2023.
Investing cash flows primarily consist of capital expenditures and are offset by proceeds from the sale of property, plant and equipment. Financing Activities. Financing cash flows primarily consist of borrowings and repayments of debt.
Investing Activities. Investing cash flows primarily consist of capital expenditures and are offset by proceeds from the sale of property, plant and equipment. Investing cash flows increased in fiscal year 2024 compared to fiscal year 2023 due to the sale of our building in France in fiscal year 2024, which generated approximately $7.8 million of net proceeds. Financing Activities.
In the direct to consumer channel, we had 86 Company-owned stores as of the end of fiscal 2023 and an extensive collection of products available through our owned websites. As of the end of fiscal 2023, net sales in the Europe segment accounted for 31.0% of our consolidated revenue.
Within each channel, we sell our products through a variety of physical points of sale, distributors, and e-commerce channels. In the direct to consumer channel, we had 65 Company-owned stores as of the end of fiscal 2024 and an extensive collection of products available through our owned websites.
Implementation of these rules is scheduled for 2024, at which point we can determine the impact on our income tax expense and effective tax rate. Key Measures of Financial Performance and Key Non-GAAP Financial Measures Constant Currency Financial Information: As a multinational enterprise, we are exposed to changes in foreign currency exchange rates.
Pillar Two did not have a material impact on the Company's financial results, including its annual estimated effective tax rate or liquidity in 2024, but will continue to monitor future developments. Key Measures of Financial Performance and Key Non-GAAP Financial Measures Constant Currency Financial Information: As a multinational enterprise, we are exposed to changes in foreign currency exchange rates.
As a percentage of net sales, SG&A expenses increased to 55.0% in fiscal year 2023 as compared to 49.0% in fiscal year 2022, mainly driven by decreased sales. During fiscal year 2023, we incurred $43.3 million in restructuring charges as compared to $6.1 million in fiscal year 2022. Operating Income (Loss).
SG&A expenses were $638.8 million in fiscal year 2024 compared to $777.2 million in fiscal year 2023. As a percentage of net sales, SG&A expenses increased to 55.8% in fiscal year 2024 as compared to 55.0% in fiscal year 2023, mainly driven by deleveraging on lower sales.
During fiscal year 2023, there was an income tax expense of $0.5 million, resulting in an effective tax rate of (0.3)%, compared to (96.7)% in fiscal year 2022.
Net currency losses in fiscal 2024 were more than offset by interest income in fiscal 2024. Provision for Income Taxes. During fiscal year 2024, there was an income tax benefit of $11.8 million, resulting in an effective tax rate of 10.0%, compared to (0.3)% in fiscal year 2023.
We continue to operate in a very challenging business environment for our product offerings. In early 2023, we initiated Our Transform and Grow plan (“TAG”), which was designed to reduce operating expenses, improve operating margins and advance our path to profitable growth.
We are also continuing to work with strategic advisors to address our upcoming debt maturities in the third and fourth quarters of 2026. In early 2023, we initiated our Transform and Grow plan (“TAG”), which was designed primarily to reduce operating expenses in order to improve operating margins and advance our path to profitable growth.
Operating income (loss) was a loss of $143.0 million in fiscal year 2023, as compared to a loss of $1.5 million in the prior fiscal year. The operating loss in fiscal year 2023 was primarily due to deleveraging of expenses with the decline in net sales.
During fiscal year 2024, we incurred $59.8 million in restructuring charges as compared to $43.3 million in fiscal year 2023. Operating Income (Loss). Operating income (loss) was a loss of $103.9 million in fiscal year 2024, as compared to a loss of $143.0 million in the prior fiscal year.
Additionally, we currently have a $56.5 million (including interest) U.S. tax refund that is expected to be received in fiscal year 2024, however the timing of the refund is uncertain. Notes: In November 2021, we sold $150.0 million aggregate principal amount of our 7.00% senior notes due 2026 (the "Notes"), generating net proceeds of approximately $141.7 million.
Notes: In November 2021, we sold $150.0 million aggregate principal amount of our 7.00% senior notes due 2026 (the "Notes"), generating net proceeds of approximately $141.7 million. The Notes are our general unsecured obligations. The Notes bear interest at the rate of 7.00% per annum.
This includes efforts to optimize its business model with additional changes to its operations as well as further structural cost reductions under consideration. The Company expects this effort will further expand on TAG and could include additional debt and equity financing options, including monetization of various assets.
This includes a broader set of efforts to optimize our business model and further reduce structural costs, monetize various assets, and could include additional debt and equity financing options.

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