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What changed in Fossil Group, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Fossil Group, Inc.'s 2022 and 2023 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 2023 report.

+407 added−420 removedSource: 10-K (2024-03-13) vs 10-K (2022-03-10)

Top changes in Fossil Group, Inc.'s 2023 10-K

407 paragraphs added · 420 removed · 247 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

53 edited+45 added−64 removed22 unchanged
Biggest changeThe 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).
Biggest changeThe 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.
Information Systems Enterprise Resource Planning 10 Table of Contents 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.
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.
Intellectual Property We use our FOSSIL, MICHELE, RELIC, SKAGEN and ZODIAC trademarks, as well as other trademarks, on watches, our FOSSIL and SKAGEN trademarks on smartwatches and jewelry, and our FOSSIL trademark on leather goods and other fashion accessories in the U.S. and in a significant number of foreign countries.
Intellectual Property We use our FOSSIL, MICHELE, RELIC, SKAGEN and ZODIAC trademarks, as well as other trademarks, on watches, our FOSSIL and SKAGEN trademarks on jewelry, and our FOSSIL trademark on leather goods and other fashion accessories in the U.S. and in a significant number of foreign countries.
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, PUMA, 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, DKNY, EMPORIO ARMANI, KATE SPADE NEW YORK, MICHAEL KORS, and TORY BURCH.
The following table sets forth information about our fashion accessories: Brand Accessory Category DIESEL Jewelry EMPORIO ARMANI Jewelry FOSSIL Handbags, small leather goods, belts, eyewear, jewelry MICHAEL KORS Jewelry SKAGEN Jewelry Licensed Eyewear We have a license agreement with the Safilo Group for both FOSSIL branded sunglasses and optical frames worldwide, which expires on December 31, 2023.
The following table sets forth information about our fashion accessories: Brand Accessory Category DIESEL Jewelry EMPORIO ARMANI Jewelry FOSSIL Handbags, small leather goods, belts, eyewear, jewelry MICHAEL KORS Jewelry SKAGEN Jewelry Licensed Eyewear We have a license agreement with the Safilo Group for both FOSSIL branded sunglasses and optical frames worldwide, which expires on December 31, 2028.
We also use FOSSIL, SKAGEN, WATCH STATION INTERNATIONAL, and WSI as trademarks on retail stores and FOSSIL, SKAGEN, WATCH STATION INTERNATIONAL, WSI, MISFIT, ZODIAC and MICHELE as trademarks on online e-commerce sites.
We also use FOSSIL, WATCH STATION INTERNATIONAL, and WSI as trademarks on retail stores and FOSSIL, SKAGEN, WATCH STATION INTERNATIONAL, WSI, ZODIAC and MICHELE as trademarks on online e-commerce sites.
In the U.S. and certain international markets, we generally market our fashion accessory lines through the same distribution channels as our watches using similar marketing approaches. Our fashion accessories are typically sold in locations adjacent to watch departments, which may lead to purchases by persons who are familiar with our watch brands.
In the U.S. and certain international markets, we generally market our fashion accessory lines through the same distribution channels as our watches using similar marketing approaches. Our fashion accessories are typically sold in locations adjacent to watch departments, in store or online, which may lead to purchases by persons who are familiar with our watch brands.
Item 1. Business Company We are a design, innovation and distribution company specializing in consumer fashion accessories. Our products include traditional watches, smartwatches, jewelry, handbags, small leather goods, belts and sunglasses.
Item 1. Business Company We are a design, innovation and distribution company specializing in consumer fashion accessories. Our products include watches, jewelry, handbags, small leather goods, belts and sunglasses.
Our traditional watch business generally competes in these tiers with a number of established manufacturers, importers and distributors, including Armitron, Citizen, Gucci, Guess?, Kenneth Cole, LVMH Group, Movado, Raymond Weil, Seiko, Swatch, Swiss Army, TAG Heuer and Timex.
Our traditional watch business generally competes with a number of established manufacturers, importers and distributors, including Armitron, Citizen, Gucci, Guess?, Kenneth Cole, LVMH Group, Movado, Raymond Weil, Seiko, Swatch, Swiss Army, TAG Heuer and Timex.
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.
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.
We also have rights in certain copyrights and designs both in the United States and in other countries where are products are principally sold. We continue to explore innovations in the design and assembly of our watch, smartwatch and related products.
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.
The following table sets forth information with respect to our primary watch licenses: 6 Table of Contents Brand Expiration Date 1 ARMANI EXCHANGE 12/31/2023 DIESEL 12/31/2025 DKNY 12/31/2024 EMPORIO ARMANI 12/31/2023 KATE SPADE NEW YORK 12/31/2025 MICHAEL KORS 12/31/2024 PUMA 12/31/2028 TORY BURCH 12/31/2023 ___________________________________________________________________ (1) Subject to early termination in certain circumstances We also license certain internationally known brand names, such as Skechers and BMW, 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 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.
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 by increasing earnings and making 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 and make a positive impact on our people, planet and communities.
The Compensation Committee reviews and approves matters associated with compensation, benefits and related equity awards for qualifying employees. This work includes proper oversight of executive compensation and Company goals that are part of executives’ performance review. These same goals serve as the foundation for the Company’s employee annual cash bonus plan.
The Compensation and Talent Management Committee reviews and approves matters associated with compensation, benefits, and equity awards for qualifying employees. This work includes oversight of executive compensation and company goals that are part of executives’ annual performance reviews. These same goals serve as the foundation for the Company’s employee annual cash bonus plan.
We also use tools provided by salesforce.com, inc. to support our brand websites globally as well as in our CRM initiatives. Enterprise Performance Management Systems We have implemented customized Hyperion financial reporting software from Oracle Corporation. The software increases the efficiency of our consolidation and reporting process and provides a more dynamic way to view and analyze data.
We also use tools provided by salesforce.com, inc. to globally support our brand websites, marketing and customer initiatives. Enterprise Performance Management Systems We have implemented customized Hyperion financial reporting software from Oracle Corporation. The software increases the efficiency of our consolidation and reporting process and provides a more dynamic way to view and analyze data.
Central Expressway, Richardson, Texas 75080, and our telephone number at that address is (972) 234-2525. Our common stock is traded on the NASDAQ Global Select Market under the trading symbol FOSL.
Central Expressway, Richardson, Texas 75080, and our telephone number at that address is (972) 234-2525. Our common stock is traded on the NASDAQ Global Select Market under the trading symbol FOSL. 13 Table of Contents
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 0.4%, 0.4% and 0.5% of our consolidated net sales for fiscal years 2021, 2020 and 2019, respectively.
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.
Significant Customer No customer accounted for 10% or more of our consolidated net sales in fiscal years 2021, 2020 or 2019. 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 2023, 2022 or 2021. Competition The businesses in which we compete are highly competitive and fragmented.
Our ability to identify and respond to changing fashion trends and consumer preferences (including wearable 9 Table of Contents technology), to maintain existing relationships and develop new relationships with manufacturing sources, to deliver quality merchandise in a timely manner, to manage the retail sales process, and to continue to integrate technology into our business model are important factors in our ability to compete.
Our ability to identify and respond to changing fashion trends and consumer preferences, to maintain existing relationships and develop new relationships with manufacturing sources, to deliver quality merchandise in a timely manner, to manage the retail sales process, and to continue to integrate technology into our business model are important factors in our ability to compete.
We share our employee survey results with our Board of Directors to keep them apprised of related sentiment, interests and concerns. The Nominating and Corporate Governance Committee helps to oversee ESG matters.
We share our employee survey results with our Board of Directors to keep them apprised of related sentiments, interests, and concerns. The Nominating and Corporate Governance 12 Table of Contents Committee helps to oversee ESG matters.
The Hyperion planning tool also provides more dynamic and robust budgeting and forecasting capabilities. Point-of-Sale System We plan to begin the global implementation of a new point-of-sale system in 2022 at our retail stores beginning in Europe with additional implementation in the Americas and Asia in 2023.
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.
Oversight Our Board of Directors and related committees are actively involved in areas associated with excellence in human resources management and related oversight of certain policies, practices and outcomes – including compensation, diversity and inclusion, employee development, engagement, and succession planning.
Oversight Our Board of Directors and related board committees are actively involved in areas associated with excellence in human resource management and related oversight of certain policies, practices, and outcomes – including compensation, DE&I, employee development, engagement, and succession planning.
However, we believe our design and branding are strong competitive advantages. Although the level and nature of competition varies among our product categories and geographic regions, we compete on the basis of style and technical features, price, value, quality, brand name, advertising, marketing, distribution and customer service.
Although the level and nature of competition varies among our product categories and geographic regions, we compete on the basis of style and technical features, price, value, quality, brand name, advertising, marketing, distribution and customer service.
The training provides the factories with a more in-depth explanation of our Manufacturer Code. In addition to the contractual obligation, we evaluate our suppliers' compliance with our Manufacturer Code through audits conducted both by our employees and third-party compliance auditing firms. In most cases, the audits are announced.
In addition to the contractual obligation, we evaluate our suppliers' compliance with our Manufacturer Code through audits conducted both by our employees and third-party compliance auditing firms. In most cases, the audits are announced.
For example, our products imported to 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. Factors that may influence the modification or imposition of these restrictions include the determination by the U.S.
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.
Digital Our holistic e-commerce efforts include three forms of digital channels. First, our owned global e-commerce websites for our branded portfolio deliver mobile-friendly experiences, engaging brand content, and seamless omni-channel integration with retail stores, including the ability to buy certain products online and pick up in store, curbside pickup and ship from store.
Digital Our holistic e-commerce efforts include three forms of digital channels. First, our owned global e-commerce websites for our brands deliver mobile-friendly experiences, personalized content, and seamless omni-channel integration with retail stores, including buy online pick up in store, curbside pickup and ship from store. Second, we sell our products to leading third-party online retailers and our wholesalers’ e-commerce websites.
In fiscal year 2021, we created an in-house marketing center of excellence, serving both our owned and licensed brands, to better connect with consumers and drive sustained engagement and awareness. This capability works across channels, including digital marketing, social media, email marketing, Customer Relationship Management, partner marketing and digital media.
We have an in-house global marketing team with representation across our regions serving both our owned and licensed brands, to better connect with consumers and drive sustained engagement and awareness. This capability works across channels, including digital marketing, social media, social commerce, email marketing, Customer Relationship Management, partner marketing and brand and performance media.
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.
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.
We expect to release our first Corporate Social Responsibility report in 2022. Available Information Our website address is www.fossilgroup.com . The information on our website is not, and shall not be deemed to be, a part of this Annual Report on Form 10-K or incorporated into any other filings we make with the SEC.
The information on our website (including the CSR report) is not, and shall not be deemed to be, a part of this Annual Report on Form 10-K or incorporated into any other filings we make with the SEC.
Sales of our accessory lines accounted for 16.9%, 16.7% and 16.2% of our consolidated net sales in fiscal years 2021, 2020 and 2019, respectively.
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.
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 January 1, 2022, none of our patents were material to our business.
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.
Products We design, develop, market and distribute accessories across a variety of product categories: traditional watches, smartwatches, jewelry, handbags, small leather goods, belts and sunglasses. 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.
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.
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 strategies and tactics.
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.
Manufacturing and Sourcing The vast majority of our products are sourced internationally. 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.
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.
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.
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.
Furthermore, the manufacturers understand our quality standards, which allow us to produce quality products supporting overall operating margins. We have also added third-party facilities and relationships for manufacturing our wearable technology products. Our quality control program attempts to ensure that our products meet the standards established by our product development and quality staff.
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.
Our Manufacturer Code specifically requires our manufacturers to not use child, forced or involuntary labor and to comply with applicable environmental laws and regulations. We provide training to our factories related to our Manufacturer Code and the applicable laws in the country in which the factory is located.
We expect that our business partners will share these commitments, which we enforce through our Manufacturer Code. Our Manufacturer Code specifically requires our manufacturers to not use child, forced or involuntary labor and to comply with applicable environmental laws and regulations.
In 2021, we joined the UN Global Compact and launched the Fossil Group Human Rights Policy. T his further supports our commitment to human rights within our entire supply chain.
In 2021, we launched the Fossil Group Human Rights Policy. T his further supports our commitment to human rights within our entire supply chain. In addition, we are committed to compliance with applicable environmental requirements and are committed to seeing that all of our products are manufactured and distributed in compliance with applicable environmental laws and regulations.
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. We have global information security and privacy compliance programs, comprised of risk management policies and procedures for our information systems, cybersecurity practices and protection of consumer and employee personal data and confidential information.
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.
Stores Our products are sold across approximately 145 countries worldwide through 23 Company-owned sales subsidiaries and through a network of 70 independent distributors. Our products are offered on airlines and cruise ships and in international Company-owned retail stores. Our network of Company-owned stores included 171 retail stores and 199 outlet stores as of 7 Table of Contents January 1, 2022.
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.
None of our domestic or foreign-based employees are represented by a trade union. However, certain European-based employees are represented by work councils, which includes a number of our current employees who negotiate with management on behalf of all the employees.
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.
By capitalizing on fashion trends and leveraging proprietary data and insights, we are able to deliver relevant, high-value products and experiences to consumers across a diverse range of price points, style preferences and geographies. Licensed Brands Our main licensed brands include ARMANI EXCHANGE, DIESEL, DKNY, EMPORIO ARMANI, KATE SPADE NEW YORK, MICHAEL KORS, PUMA, and TORY BURCH.
By capitalizing on fashion trends and leveraging proprietary data and insights, we are able to deliver relevant, high-value products and experiences to consumers across a diverse range of price points, style preferences and geographies. Brand Building Our ambition is to capture a greater share of the growing global accessories market with a collection of the world's most distinctive brands.
Our community goals include empowering women and girls and to continue to increase our impact on underserved young lives. 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.
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.
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. 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.
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.
Certain of our hybrid and other smartwatches use operating systems developed by us or as otherwise licensed to us by Google. 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 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.
Women represent 62% of our employees and men 38%. In the U.S., including corporate, retail and distribution employees, in the aggregate 57% of employees identify as black and indigenous people of color (“BIPOC”), 42% identify as white and 1% did not self-identify.
In the U.S., including corporate, retail, and distribution employees, 59% of employees identify as black and indigenous people of color (“BIPOC”), 40% identify as white, and 1% did not self-identify. We're dedicated to fostering an environment where diversity, equity, and inclusion (DE&I) propel both our employees and the company forward.
We have built proprietary algorithms to support the profitable flow-through of marketing investment, optimized across channels, brands and countries. We deliver increasingly better personalization through ongoing test-and-learn as well as through the consumer insight and predictive analytics capabilities we have built over the past few years.
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.
With regard to business success, the views of our employees are aligned with business needs to establish a workplace culture including: • Comprehensive health and leading-edge wellness benefits; • Innovative two-way communication; • Value-creating employee development programs; • Performance management through Company-sponsored time to grow; • Meaningful recognition; and • Values-based culture and work environment.
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.
The Future of the Fossil Group Workforce As we look towards the future workplace, we used the past year to listen and understand how to create the best employee experience, while driving our business forward.
The Future of the Fossil Group Workforce In our journey toward shaping the future of work, this past year has been pivotal for us in listening and learning how to craft the optimal employee experience while propelling our business forward.
In certain international markets, our products are also sold through licensed and franchised FOSSIL retail stores, retail concessions operated by us and kiosks. Marketing Our marketing approach meets the consumer wherever they are, both online and offline.
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.
However, in the expanding wearable technology industry, we face competition from technology brands such as Apple, Garmin and Samsung, from fitness brands such as Fitbit and from many established traditional watch manufacturers that have launched wearable technology products. As this industry evolves and grows, there will likely be increased competition as well.
In addition, we face intense competition in the watch market from smartwatches from technology brands such as Apple, Garmin and Samsung, and from fitness brands such as Fitbit. Many of these brands have significantly more resources than we do in areas such as product development and marketing.
In fiscal year 2021, our digital sales comprised 41.3% of consolidated net sales compared to 38.8% in fiscal year 2020 and 20.1% in fiscal year 2019. We will continue to invest in growing our e-commerce capabilities in fiscal year 2022, with a focus on improving and streamlining the consumer experience.
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.
Across our owned brands, we create great products at competitive prices and deliver engaging experiences directly to our consumers—through our owned channels of distribution and via third party distributors. Our consumer-first mindset drives every decision we make.
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 operate in a challenging business environment, particularly given the global pandemic. However, we see opportunities for sustainable growth and value creation by focusing on the following strategic priorities: Intensify Brand Heat Design, creativity and innovation are the lifeblood of our Company.
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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.
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We drive excitement and demand for our brands with great product, storytelling and customized communications to build engaged communities of passionate consumers. As the consumer moves toward more normal and stronger purchasing patterns, they will be looking for differentiated and exciting merchandise online and in store.
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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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We plan to invest more in the creativity and marketing of our flagship FOSSIL brand and leverage our increasing digital capabilities to drive brand awareness and sales.
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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.
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Drive to digital We continue to focus on becoming a digital-first organization, which for us entails four pillars: (i) extending our direct-to-consumer foundation; (ii) reimagining how we participate in marketplaces; (iii) building a marketing and analytics powerhouse; and (iv) transforming to a digital-first company through new talent, tools and technologies.
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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.
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We have and will continue to make significant investments to strengthen and further mature our digital capabilities related to these four objectives.
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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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Importantly, in fiscal year 2021, our successful initiatives included extending our Salesforce Commerce Cloud capabilities around the world, investing in a new Digital Asset Management platform to streamline the production and dissemination of digital-first content around the world, and developing new digital initiatives for our employees to drive engagement and fluency.
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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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We also became more agile, creating cross-functional teams to work together on dedicated digital projects, accelerating speed and collaboration, and instilling a “fail fast” mindset. We will continue building on our digital-first strategies throughout fiscal year 2022, including key investments in technology platforms, digital talent and new capabilities to accelerate our direct-to-consumer experience.
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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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Optimize Operations We have made significant changes in our infrastructure, our commercial activities and in how we manage SKUs, inventory and cash. We will continue to rationalize our retail store base, critically manage our capital investments, and further optimize our tactics and strategies in inventory management and our end-to-end supply chain.
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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.
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Overall, we want to reinvent the entire business and be as cost-effective as possible. Expand Opportunity in Mainland China and India We are continuing to execute against a strategy centered around localized marketing and segmented assortments in mainland China and India.
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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.
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Although the impact of COVID-19 is likely to disrupt our growth trajectory in the short to intermediate term, we continue to view mainland China and India as compelling long-term opportunities.
Added
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.
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Make Time for Good 4 Table of Contents While commercial success is essential for our future, it is critical that we continue to do the right thing for our people, planet and communities. We call our platform for Sustainability or ESG (Environmental, Social, and Corporate Governance) “Make Time for Good”.
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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.
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We believe a sense of purpose is also critically important to our employees, shareholders, and customers. Our people goals include continuing to strengthen our diversity, equity and inclusion programs and objectives. Our planet goals include significantly reducing our carbon footprint and emphasizing recycling and use of resources.
Added
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.
Removed
Each reportable operating segment provides similar products and services. Brands Owned Brands Our owned brands include FOSSIL, SKAGEN, MICHELE, RELIC and ZODIAC. FOSSIL FOSSIL has been inspired by American ingenuity and creativity since its founding over 35 years ago.
Added
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.
Removed
Fossil is dedicated to crafting quality, fashionable watches, smartwatches, bags, wallets and jewelry that reflect the brand’s creative spirit and complement every style. Its versatile products are designed to be fun, yet accessible while breathing new life into the industry.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

122 edited+68 added−55 removed131 unchanged
Biggest changeInternational commerce and our international operations are subject to many risks, some of which are discussed in more detail below, including: • recessions in foreign economies; • 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, particularly in the areas of wearable technology and data privacy; • our ability to finance foreign operations; • tariffs and other trade barriers; 22 Table of Contents • U.S. government licensing requirements for exports; and • the continuing impact of COVID-19, including any “shelter in place” or other similar mandated or suggested isolation protocols, which have disrupted, and could continue to disrupt, our retail locations and wholesale customers’ stores, as a result of store closures or reduced operating hours and decreased retail traffic.
Biggest changeInternational 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.
Any interruption or delay in the supply of any of these components could significantly harm our ability to meet scheduled product deliveries to our customers and cause us to lose sales. Interruptions or delays in supply may be caused by a number of factors that are outside of our and our contract or manufacturers' control.
Any interruption or delay in the supply of any of these components could significantly harm our ability to meet scheduled product deliveries to our customers and cause us to lose sales. Interruptions or delays in supply may be caused by a number of factors that are outside of our and our contract manufacturers' control.
In addition, restrictions on travel to and from this and other regions, such as the travel restrictions that have occurred with COVID-19, and any delays or cancellations of customer orders or the manufacture or shipment of our products, including on account of the COVID-19 pandemic or other health crises, could have a material adverse effect on our ability to meet customer deadlines and timely distribute our products in order to match consumer expectations.
In addition, restrictions on travel to and from this and other regions, such as the travel restrictions that occurred with COVID-19, and any delays or cancellations of customer orders or the manufacture or shipment of our products, including on account of a pandemic or other health crises, could have a material adverse effect on our ability to meet customer deadlines and timely distribute our products in order to match consumer expectations.
These tariffs, imposed via four successive “Lists” were the result of an April 2018 determination by the Office of the U.S. Trade Representative that China’s acts, practices, and policies with respect to technology transfer, intellectual property, and innovation are unreasonable or discriminatory and burden or restrict U.S. commerce.
These tariffs, imposed via four successive “Lists” were the result of an April 2018 determination by the Office of the U.S. Trade Representative (“USTR”) that China’s acts, practices, and policies with respect to technology transfer, intellectual property, and innovation are unreasonable or discriminatory and burden or restrict U.S. commerce.
If our supply of certain components is disrupted, our lead times are extended or the cost of our components increases, our business, operating results and financial condition could be materially affected. Seasonality of our business may adversely affect our net sales and operating income.
If our supply of certain components is disrupted, our lead times are extended or the cost of our components increases, our business, operating results and financial condition could be materially affected. Seasonality of our business may adversely affect our net sales, operating income and liquidity.
We have been, are and may in the future be subject to legal proceedings involving claims of alleged infringement of the intellectual property rights of third parties by us and our customers in connection with their marketing and sale of our products.
We have been, are and may in the future be subject to legal proceedings involving claims of alleged infringement of the intellectual property rights of third parties by us and our customers in connection with the marketing and sale of our products.
For example, our products imported to the United States 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 U.S. Customs and Border Protection for duties and other charges.
For example, our products imported for distribution in the United States 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 U.S. Customs and Border Protection for duties and other charges.
We sell products under certain licensed brands, including, but not limited to, ARMANI EXCHANGE, DIESEL, DKNY, EMPORIO ARMANI, KATE SPADE NEW YORK, MICHAEL KORS, PUMA and TORY BURCH.
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.
If the factories in China are disrupted for any reason, we would need to arrange for the manufacture and shipment of products by alternative sources.
If these factories in China are disrupted for any reason, we would need to arrange for the manufacture and shipment of products by alternative sources.
If we are unable to achieve the minimum net sales thresholds, minimum marketing spend, restrictive covenants and/or other obligations of a license in the future, we would need to seek a waiver of the non-compliance from the applicable licensor or amend the agreement to modify the thresholds, covenants or obligations or face the possibility that the licensor could terminate the license agreement before its expiration date.
If we are unable to achieve the minimum net sales thresholds, minimum marketing spend, restrictive covenants and/or other obligations of a license, we would need to seek a waiver of the non-compliance from the applicable licensor or amend the agreement to modify the thresholds, covenants or obligations or face the possibility that the licensor could terminate the license agreement before its expiration date.
Our operations internationally are conducted from various administrative, distribution and assembly facilities outside of the U.S., particularly in China, Germany, Hong Kong, Switzerland and Vietnam. 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 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.
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 2021, we met 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 2023, we met the net sales thresholds for MICHAEL KORS.
Our quarterly results of operations have fluctuated in the past and may continue to fluctuate as a result of a number of factors, including seasonal cycles, timing of new product introductions, timing of orders by our customers and mix of product sales demand. Our business is seasonal by nature.
Our quarterly results of operations have fluctuated in the past and will continue to fluctuate as a result of a number of factors, including seasonal cycles, timing of new product introductions, timing of orders by our customers and mix of product sales demand. Our business is seasonal by nature.
Further, controls can be circumvented by individual acts of some persons, by collusion of two or more persons, or by management override of the controls.
Further, controls can be circumvented by individual acts, by collusion of two or more persons, or by management override of the controls.
As is typical with new products, market acceptance of new designs, features, technology and products is subject to uncertainty. In addition, we generally make decisions regarding product designs and technology development several months in advance of the time when consumer acceptance can be measured.
As is typical with new products, market acceptance of new designs, features, and products is subject to uncertainty. In addition, we generally make decisions regarding product designs several months in advance of the time when consumer acceptance can be measured.
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.
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.
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 holiday season. The seasonality of our business may adversely affect our net sales and operating income 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 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.
Our operations are subject to domestic and international laws and regulations in a number of areas, including, but not limited to, labor, advertising, consumer protection, real estate, product safety, e-commerce, promotions, intellectual property, tax, import and export, anti-corruption, anti-bribery, foreign exchange controls and cash repatriation, data privacy, anti- 28 Table of Contents competition, environmental, health and safety.
Our operations are subject to domestic and international laws and regulations in a number of areas, including, but not limited to, labor, advertising, consumer protection, real estate, product safety, e-commerce, promotions, intellectual property, tax, import and export, anti-corruption, anti-bribery, foreign exchange controls and cash repatriation, data privacy, anti-competition, environmental, health and safety.
Finally, smart watches, certain jewelry products, and several of our traditional watch products were subject to an additional 15% ad valorem tariff, based on the first sale export price as imported into the U.S., beginning in September 2019, a rate that was lowered to 7.5% ad valorem from February 2020 to present (“List 4A”).
Finally, smartwatches, certain jewelry products, and several of our traditional watch products were subject to an additional 15% ad valorem tariff, based on the first sale export price as imported into the U.S., beginning in September 2019, a rate that was lowered to 7.5% ad valorem from February 2020 to present (“List 4A”).
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.
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.
The loss of any of our license agreements for globally recognized fashion brand names may result in the loss of significant revenues and may adversely affect our business. 18 Table of Contents We have entered into multi-year, worldwide exclusive license agreements for the manufacture, distribution and sale of products bearing the brand names of certain globally recognized fashion brands.
The loss of any of our license agreements for globally recognized fashion brand names may result in the loss of significant revenues and may adversely affect our business. We have entered into multi-year, worldwide exclusive license agreements for the manufacture, distribution and sale of products bearing the brand names of certain globally recognized fashion brands.
Even if the U.S. further modifies these tariffs, it is always possible that our business will be impacted by retaliatory trade measures taken by China or other countries in response to existing or future tariffs, causing us to raise prices or make changes to our operations, any of which could materially harm our revenue or operating results.
Even if the U.S. further modifies these tariffs, it is always possible that new products we introduce could be impacted by the changes, or that our business will be impacted by retaliatory trade measures taken by China or other countries in response to existing or future tariffs, causing us to raise prices or make changes to our operations, any of which could materially harm our revenue or operating results.
We also use tools provided by salesforce.com, inc. in our CRM initiatives. In fiscal year 2022, we also plan 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. 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.
In addition, Delaware law limits the ability of a Delaware 31 Table of Contents corporation to engage in certain business combinations with interested stockholders. Finally, Mr. Kartsotis has the ability, by virtue of his stock ownership, to influence a vote regarding a change in control.
In addition, Delaware law limits the ability of a Delaware corporation to engage in certain business combinations with interested stockholders. Finally, Mr. Kartsotis has the ability, by virtue of his stock ownership, to influence a vote regarding a change in control.
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 wearable technology products in a timely manner, or at all, in response to changing consumer preferences for wearable technology, 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 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.
If we do not continue to develop innovative products that provide better design, technology and performance attributes than the products of our competitors and that are accepted by consumers, or if our future product lines misjudge consumer demands, we may lose consumer loyalty, which could result in a decline in our sales and market share.
If we do not continue to develop innovative products that provide better design and features than the products of our competitors and that are accepted by consumers, or if our future product lines misjudge consumer demands, we may lose consumer loyalty, which could result in a decline in our sales and market share.
In addition, the limitations imposed by financing agreements on our ability to incur additional debt might significantly impair our ability to obtain other financing.
In addition, the limitations imposed by financing agreements on our ability to incur additional debt and liens might significantly impair our ability to obtain other financing.
Uncertainty in global markets, slowing economic growth, high levels of unemployment, the impact and duration of the COVID-19 pandemic, inflation, rising interest rates and eroding consumer confidence can negatively impact the level of consumer spending for discretionary items. This can affect our business as it is dependent on consumer demand for our products.
Uncertainty in global markets, slowing economic growth, high levels of unemployment, a pandemic, inflation, rising interest rates and eroding consumer confidence can negatively impact the level of consumer spending for discretionary items. This can affect our business as it is dependent on consumer demand for our products.
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 Fossil entities or restrict the ability to incur liens; • enter into transactions with affiliates; and • 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 21 Table of Contents • consolidate or merge.
There continues to be a significant decrease in traffic in many of the shopping malls and retail centers in which our stores are located, which has been accelerated by the impact of COVID-19, and has resulted in a significant decrease in traffic to our stores.
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.
If we encounter difficulties with our distribution facilities, or if any such facilities were to shut down or be limited in capacity for any reason, including as a result of fire, other natural disaster, labor disruption, or pandemic 16 Table of Contents (including as a consequence of public health directives, quarantine policies or social distancing measures resulting from the COVID-19 pandemic), we could face shortages of inventory, and we could experience disruption or delay, or incur significantly higher costs and longer lead times for distributing our products to our consumers which could result in customer dissatisfaction.
If we encounter difficulties with our distribution facilities, or if any such facilities were to shut down or be limited in capacity for any reason, including as a result of fire, other natural disaster, labor disruption, cyberattack or pandemic (including as a consequence of public health directives, quarantine policies or social distancing measures resulting from a pandemic), we could face shortages of inventory, and we could experience disruption or delay, or incur significantly higher costs and longer lead times for distributing our products to our consumers which could result in customer dissatisfaction.
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.
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.
Our significant third-party fashion brand license agreements have various expiration dates between the years 2023 and 2028.
Our significant third-party fashion brand license agreements have various expiration dates between the years 2024 and 2028.
The Senior Notes are general unsecured obligations of the Company and rank equally in right of payment with all of our existing and future senior unsecured and unsubordinated indebtedness, and rank senior in right of payment to any future subordinated indebtedness.
The Senior Notes are general unsecured 22 Table of Contents obligations of the Company and rank equally in right of payment with all of our existing and future senior unsecured and unsubordinated indebtedness, and rank senior in right of payment to any future subordinated indebtedness.
Substantially all of our import operations are subject to customs duties imposed by the governments where our production facilities are located on imported products, 32 Table of Contents including raw materials.
Substantially all of our import operations are subject to customs duties imposed by the governments where our production facilities are located on imported products, including raw materials.
Although we attempt to stay abreast of emerging lifestyle and fashion trends and technology advances affecting 15 Table of Contents accessories, any failure by us to identify and respond to such trends could adversely affect consumer acceptance of our existing brand names and product lines, which in turn could result in inventory valuation reserves and adversely affect sales of our products.
Although we attempt to stay abreast of emerging lifestyle and fashion trends affecting accessories, any failure by us to identify and respond to such trends could adversely affect consumer acceptance of our existing brand names and product lines, which in turn could result in inventory valuation reserves and adversely affect sales of our products.
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.
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.
We cannot assure you that we will be granted waivers or amendments to these agreements if for any reason we are unable to comply with these agreements or that we will be able to refinance our debt on terms acceptable to us, or at all.
We cannot know for certain that we will be granted waivers or amendments to these agreements if for any reason we are unable to comply with these agreements or that we will be able to refinance our debt on terms acceptable to us, or at all.
Financial Risks Changes in the mix of product sales demand could negatively impact our gross profit margins.
Changes in the mix of product sales demand could negatively impact our gross profit margins.
Fluctuations in the price, availability and quality of the raw materials used in our products could have a material adverse effect on our cost of sales or ability to meet our customers' demand.
Fluctuations in the price, availability and quality of raw materials could cause delays and increase costs. Fluctuations in the price, availability and quality of the raw materials used in our products could have a material adverse effect on our cost of sales or ability to meet our customers' demand.
Any of these issues could have an adverse effect on our business and harm our reputation. We regularly develop new products, features and technology, and new products introduced by us may not achieve consumer acceptance comparable to that of our existing product lines. We regularly update our product offerings, particularly in the wearable technology space.
Any of these issues could have an adverse effect on our business and harm our reputation. We regularly develop new products and features, and new products introduced by us may not achieve consumer acceptance comparable to that of our existing product lines. We regularly update our product offerings.
This could in turn negatively affect our ability to access public debt or equity markets for capital. Item 1B. Unresolved Staff Comments None.
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
Risks Related to our Indebtedness Our debt agreements subject us to certain covenants, which may restrict our ability to operate our business and to pursue our business strategies.
Our debt agreements subject us to certain covenants, which may restrict our ability to operate our business and to pursue our business strategies.
In addition, an event of default under the Revolving Facility would permit the lenders to terminate all commitments to extend further credit under the Revolving Facility. Furthermore, the Revolving Facility is secured by liens on our assets.
In addition, an event of default under the Revolving Facility would permit the lenders to terminate all commitments to extend further credit under the Revolving Facility and to accelerate the maturity of all outstanding loans under the Revolving Facility. Furthermore, the Revolving Facility is secured by liens on our assets.
The Revolving Facility also requires us to maintain specified financial ratios and satisfy other financial condition tests 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 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.
This could intensify already-existing risks related to our indebtedness. 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, these restrictions are subject to a number of important qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial.
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. In addition, sales of our wearable technology products have produced gross profit margins below our historical consolidated gross profit margins.
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.
Our certificate of incorporation and bylaws, as well as the General Corporation Law of the State of Delaware, contain provisions that may have the effect of discouraging a proposal for a takeover.
Our organizational documents contain anti-takeover provisions that could discourage a proposal for a takeover. Our certificate of incorporation and bylaws, as well as the General Corporation Law of the State of Delaware, contain provisions that may have the effect of discouraging a proposal for a takeover.
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 ongoing impacts and developments relating to the COVID-19 pandemic; 30 Table of Contents • 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; • 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 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; • 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; • the occurrence of any of the other risk factors included or incorporated by reference in this prospectus; and • general market and economic conditions.
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.
This level of indebtedness could have important consequences, including the following: • it requires us to use a meaningful percentage of our cash flow from operations for debt service and the repayment of our indebtedness, including indebtedness we may incur in the future, and such cash flow may not be available for other purposes; • 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; • debt service requirements could make it more difficult for us to make payments on our other indebtedness; 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.
Our 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.
Competition for qualified personnel in the fashion industry is intense. Our ability to attract and retain employees, especially in the competitive market for employees with digital experience, is influenced by our ability to offer competitive compensation and benefits, employee morale, our reputation, recruitment by other employers, perceived internal opportunities, non-competition and non-solicitation agreements and macro unemployment rates.
Our ability to attract and retain employees, especially in the competitive market for employees with digital experience, is influenced by our ability to offer competitive compensation and benefits, employee morale, our reputation, recruitment by othe r employers, perceived internal opportunities, non-competition and non-solicitation agreements and macro unemployment rates.
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, including as a result of COVID-19, adversely affect morale, hiring and/or retention, we may not achieve our objectives and our results of operations could be adversely impacted.
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.
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 tariffs is approximately $8.7 million in fiscal year 2022.
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.
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 debt securities of the Senior Notes shall, declare the principal amount plus accrued and unpaid interest, premium and additional amounts, if any, on the Senior Notes 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 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.
The failure by us to maintain or renew one or more of our existing license agreements could result in a significant decrease in our sales and have a material adverse effect on our results of operations.
The failure by us to maintain or renew one or more of our existing license agreements could result in a significant decrease in our sales and have a material adverse effect on our results of operations. Our inability to effectively manage our retail store operations could adversely affect our results of operations.
For fiscal years 2021, 2020 and 2019, 63.5%, 66.1% and 63.0% of our consolidated net sales were generated outside of the U.S. 27 Table of Contents 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 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.
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 or we are unable to achieve our digital transformation goals, 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 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.
The price and availability of such raw materials may fluctuate significantly, depending on many factors, including natural resources, increased freight costs, increased labor costs, especially in China, increased component costs and weather conditions. Recent inflation rates in the U.S. and certain international markets have reached historical highs.
The price and availability of such raw materials may fluctuate significantly, depending on many factors, including natural resources, increased freight costs, increased labor costs, especially in China, increased component costs and weather conditions. Recently inflation rates in the U.S. and certain international markets reached levels not seen in decades.
Our business may not generate sufficient cash flow from operations and future sources of capital under the Revolving Facility or otherwise may not be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. If we complete an acquisition, our debt service requirements could increase.
In the future, our business may not generate sufficient cash flow from operations and future sources of capital under the Revolving Facility or otherwise may not be available to us in an amount sufficient to enable us to pay our debt service obligations and to fund our other liquidity needs.
If trends shift away from our products, if our wearable technology becomes outdated, if we are not able to develop and introduce new products that incorporate new technologies or if we misjudge the market for our product lines, including demand for older generation technology products, we may be faced with significant amounts of unsold inventory or other conditions which could have a material adverse effect on our financial condition and results of operations.
If trends shift away from our products, if we are not able to develop and introduce new compelling products or if we misjudge the market for our product lines, we may be faced with significant amounts of unsold inventory or other conditions which could have a material adverse effect on our financial condition and results of operations.
The covenants under the Revolving Facility allow us to incur additional indebtedness from other sources in certain circumstances. On November 8, 2021, we sold $150,000,000 aggregate principal amount of our 7.00% Senior Notes due 2026 (the “Senior Notes”).
As of December 31, 2023, we had $62.1 million outstanding under the Revolving Facility. The covenants under the Revolving Facility allow us to incur additional indebtedness from other sources in certain circumstances. On November 8, 2021, we sold $150 million aggregate principal amount of our 7.00% Senior Notes due 2026 (the “Senior Notes”).
During the time that the sub-zone is shut down, we may be unable to adequately meet the supply requests of our customers and our Company-owned retail stores, which could have an adverse effect on our sales, relationships with our customers, and results of operations, especially if the shutdown were to occur during our third or fourth quarter. 20 Table of Contents Fluctuations in the price, availability and quality of raw materials could cause delays and increase costs.
During the time that the sub-zone is shut down, we may be unable to adequately meet the supply requests of our customers and our Company-owned retail stores, which could have an adverse effect on our sales, relationships with our customers, and results of operations, especially if the shutdown were to occur during our third or fourth quarter.
Failure to comply with any of the covenants in our existing or future financing agreements could result in a default under those agreements and under other agreements containing cross-default provisions. A default would permit lenders to accelerate the maturity of the debt under these agreements.
Various risks, uncertainties and events beyond our control could affect our ability to comply with any of the covenants in our existing or future financing agreements, which could result in a default under those agreements and under other agreements containing cross-default provisions. A default would permit lenders to accelerate the maturity of the debt under these agreements.
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.
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.
The failure of new product designs, technology or next generation wearable products or new product lines to gain market acceptance could also adversely affect our business and the image of our brands. Achieving market acceptance for new products or technology may also require substantial marketing efforts and expenditures to generate consumer demand.
The failure of new product designs or new product lines to gain market acceptance could also adversely affect our business and the image of our brands. Achieving market acceptance for new products may also require substantial marketing efforts and expenditures to generate consumer demand. These requirements could strain our management, financial and operational resources.
A 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.
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.
If an event of default relating to certain events of bankruptcy, insolvency or reorganization of the Company occurs, the principal amount plus accrued and unpaid interest, and premium, if any, on the Senior Notes will become immediately due and payable without any action on the part of 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 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.
The success of our business also depends on our ability to continue to develop and maintain a reliable digital experience for our customers. We strive to give our customers a seamless omni-channel experience both in stores and through digital technologies, such as computers, mobile phones, tablets, and other devices.
The success of our business also depends on our ability to continue to develop and maintain a reliable digital experience for our customers. We strive to give our customers a seamless omni-channel experience both in stores and online across devices.
A portion of our cash flow will be required to pay interest and principal on our outstanding indebtedness, and we may be unable to generate sufficient cash flow from operations, or have future borrowings available under our Revolving Facility, to enable us to repay our indebtedness or to fund other liquidity needs.
A portion of our cash flow will be required to pay interest and principal on our outstanding indebtedness, and we may be unable to generate sufficient cash flow from operations or borrow additional funds under our Revolving Facility or otherwise, to enable us to meet our debt service obligations and fund our other liquidity needs.
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.
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.
Increased competition from online only retailers and a highly promotional retail environment may increase pressure on our margins. The continued increase in e-commerce competitors for retail sales and slowing mall traffic has resulted in significant pricing pressure and a highly promotional retail environment, which has been heightened by the impact of COVID-19.
The continued increase in e-commerce competitors for retail sales and slowing mall traffic has resulted in significant pricing pressure and a highly promotional retail environment, which was heightened by the impact of COVID-19.
We face competition from traditional competitors as well as new competitors in the wearable technology category. 21 Table of Contents There is intense competition in each of the businesses in which we compete. In all of our businesses, we compete with numerous manufacturers, importers and distributors who may have significantly greater financial, distribution, advertising and marketing resources than us.
There is intense competition in each of the businesses in which we compete. In all of our businesses, we compete with numerous manufacturers, importers and distributors who may have significantly greater financial, distribution, advertising and marketing resources than us.
We also operate FOSSIL brand stores and other watch stores globally to further strengthen our brand image. As of January 1, 2022, we operated 370 stores worldwide.
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.
Further, if it became necessary for us to resort to litigation to protect our intellectual property rights, any proceedings could be burdensome and costly and we may not prevail.
Further, if it became necessary for us to resort to litigation to protect our intellectual property rights, any proceedings could be burdensome and costly and we may not prevail. The failure to obtain or maintain trademark, patent or other intellectual property rights could materially harm our business.
COVID-19 Pandemic Risks The COVID-19 pandemic has had, and may continue to have, a material adverse impact on our business, operations, liquidity, financial condition and results of operations.
Pandemic and Public Health Risks A pandemic has had in the past, and may have in the future, a material adverse impact on our business, operations, liquidity, financial condition and results of operations.
We and our contract manufacturers currently purchase a number of key components used to manufacture our products from limited sources of supply for which alternative sources may not be readily available.
Certain key components in our products come from limited sources of supply, which exposes us to potential supply shortages that could disrupt the manufacture and sale of our products. We and our contract manufacturers currently purchase a number of key components used to manufacture our products from limited sources of supply for which alternative sources may not be readily available.
We may not be able to consummate these asset sales to raise capital or sell assets at prices and on terms that we believe are fair, and any proceeds that we do receive may not be adequate to meet any debt service obligations then due.
We may not be able to consummate asset sales or other transactions at prices and on terms that we believe are commercially reasonable, or at all, and any proceeds that we do receive may not be available for, or adequate to meet, any debt service obligations then due.
The loss of key senior management personnel or our failure to attract and retain qualified personnel could negatively affect our business. We depend on our senior management and other key personnel, particularly Kosta N. Kartsotis, our Chief Executive Officer ("CEO") and Chairman. We do not have "key person" life insurance policies for any of our personnel.
The loss of key senior management personnel or our failure to attract and retain qualified personnel could negatively affect our business. We depend on our senior management and other key personnel. We do not have "key person" life insurance policies for any of our personnel. Competition for qualified personnel in the fashion industry is intense.
The base and first supplemental indentures governing the Senior Notes (collectively, the “Indenture”) contain customary events of default and cure provisions.
The base indenture and first supplemental indenture that govern the Senior Notes contain customary events of default and cure provisions.
For example, due to a generally weaker U.S. dollar in fiscal year 2021, the translation of foreign-based net sales into U.S. dollars increased our reported net sales by approximately $33.4 million compared to fiscal year 2020.
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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe that our material existing facilities are well maintained, in good operating condition, and are adequate for our needs.
Biggest changeWe believe that our material existing facilities are well maintained, in good operating condition, and are adequate for our needs. Item 3. Legal Proceedings Information in response to this item is provided in “Part II - Item 8. Note 14, Commitments and Contingencies” and is incorporated by reference into Part I of this Annual Report. Item 4.
Properties Company Facilities As of the end of fiscal year 2021, we owned or leased the following material facilities in connection with our U.S. and international operations: 33 Table of Contents Location Use Approximate Square Footage Owned / Leased Eggstätt, Germany Office, warehouse and distribution 383,000 Owned Richardson, Texas Corporate headquarters 536,000 Lease expiring in 2031 Dallas, Texas Office, warehouse and distribution 518,000 Lease expiring in 2026 Hong Kong Warehouse and distribution 205,000 Lease expiring in 2023 Basel, Switzerland Europe headquarters 140,000 Lease expiring in 2036 Grabenstätt, Germany Office 92,000 Lease expiring in 2029 Hong Kong Asia headquarters 42,000 Lease expiring in 2022 Retail Store Facilities As of the end of fiscal year 2021, we had 371 lease agreements for retail space for the sale of our products.
Properties 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.
Added
Mine Safety Disclosures Not applicable. 33 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+3 added−2 removed1 unchanged
Biggest changeThe $30 million repurchase program has no termination date, and as of January 1, 2022, no shares had been repurchased under it. As of January 1, 2022, the Company had $30.0 million of repurchase authorizations remaining under its repurchase program. There were no shares of common stock repurchased during fiscal years 2021, 2020 or 2019.
Biggest changeAs of December 30, 2023, the Company had $20.0 million of repurchase authorizations remaining under its repurchase program.
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 4, 2022, 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 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.
Removed
Common Stock Performance Graph The following performance graph compares the cumulative return of our shares of common stock over the preceding five year periods with that of the broad market Standard & Poor's 500 Stock Index ("S&P 500 Index") and the NASDAQ Retail Trades Group.
Added
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.
Removed
Each index assumes $100 invested at December 31, 2016 and is calculated assuming quarterly reinvestment of dividends and quarterly weighting by market capitalization. 2021 COMPARATIVE TOTAL RETURNS Fossil Group, Inc., NASDAQ Retail Trades and S&P 500 Index (Performance Results through 12/31/2021) 12/31/2016 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 Fossil Group, Inc. $ 100.00 $ 30.05 $ 60.83 $ 30.47 $ 33.53 $ 39.79 S&P 500 Index $ 100.00 $ 119.42 $ 111.97 $ 144.31 $ 167.77 $ 212.89 NASDAQ Retail Trades $ 100.00 $ 124.68 $ 133.27 $ 167.14 $ 235.98 $ 280.54 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.
Added
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.
Added
There were no repurchases of common stock during fiscal years 2023 and 2021. Item 6. [Reserved] 34 Table of Contents

Item 7. Management's Discussion & Analysis

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

68 edited+43 added−52 removed42 unchanged
Biggest changeComparable retail sales increased 3.2% on a 52-week calendar basis during fiscal year 2021. 40 Table of Contents The 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 2021 2020 Growth (Decline) Percentage of Total Percentage of Total Percentage as Reported Percentage Constant Currency Amounts Amounts Dollars Americas $ 785.9 42.0 % $ 642.2 39.8 % $ 143.7 22.4 % 21.4 % Europe 610.2 32.6 522.4 32.4 87.8 16.8 14.2 Asia 455.2 24.4 434.3 26.9 20.9 4.8 1.7 Corporate 18.7 1.0 14.4 0.9 4.3 29.9 29.2 Total net sales $ 1,870.0 100.0 % $ 1,613.3 100.0 % $ 256.7 15.9 % 13.8 % 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 2021 2020 Growth (Decline) Percentage of Total Percentage of Total Percentage as Reported Percentage Constant Currency Amounts Amounts Dollars Watches: Traditional watches $ 1,288.5 68.9 % $ 1,057.9 65.6 % $ 230.6 21.8 % 19.4 % Smartwatches 223.9 12.0 248.8 15.4 (24.9) (10.0) (10.9) Total watches $ 1,512.4 80.9 % $ 1,306.7 81.0 % $ 205.7 15.7 % 13.7 % Leathers 157.6 8.4 173.6 10.7 (16.0) (9.2) (10.6) Jewelry 158.8 8.5 96.1 6.0 62.7 65.2 62.1 Other 41.2 2.2 36.9 2.3 4.3 11.7 9.8 Total net sales $ 1,870.0 100.0 % $ 1,613.3 100.0 % $ 256.7 15.9 % 13.8 % The following table sets forth the number of stores by concept for the fiscal years ended below: January 1, 2022 January 2, 2021 Americas Europe Asia Total Americas Europe Asia Total Accessory stores 65 49 52 166 72 68 54 194 Outlets 97 74 28 199 113 76 32 221 Full priced multi-brand — 2 3 5 — 3 3 6 Total stores 162 125 83 370 185 147 89 421 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 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.
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 and Adjusted Earnings per Share: Adjusted EBITDA, Adjusted operating income (loss), Adjusted net income and Adjusted earnings 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 per Share: Adjusted EBITDA, Adjusted operating income (loss), Adjusted net income (loss) and Adjusted earnings (loss) per share are non-GAAP financial measures.
We have included Adjusted EBITDA, Adjusted operating income (loss), Adjusted net income and Adjusted earnings per share herein because they are widely used by investors for valuation and for comparing our financial performance with the performance of our competitors. We also use these non-GAAP financial measures to monitor and compare the financial performance of our operations.
We have included Adjusted EBITDA, Adjusted operating income (loss), Adjusted net income (loss) and Adjusted earnings (loss) per share herein because they are widely used by investors for valuation and for comparing our financial performance with the performance of our competitors. We also use these non-GAAP financial measures to monitor and compare the financial performance of our operations.
Revolving Facility: On September 26, 2019, we and Fossil Partners L.P., as the U.S. borrowers, and Fossil Group Europe GmbH, Fossil Asia Pacific Limited, Fossil (Europe) GmbH, Fossil (UK) Limited and Fossil Canada Inc., as the non-U.S. borrowers, certain other of our subsidiaries from time to time party thereto designated as borrowers, and certain of our subsidiaries from time to time party thereto as guarantors, entered into a secured asset-based revolving credit agreement (as amended from time to time, the "Revolving Facility”) with JPMorgan Chase Bank, N.A. as administrative agent (the "ABL Agent"), J.P.
Revolving Facility: On September 26, 2019, we and Fossil Partners L.P., as the U.S. borrowers, and Fossil Group Europe GmbH, Fossil Asia Pacific Limited, Fossil (Europe) GmbH, Fossil (UK) Limited and Fossil Canada Inc., as the non-U.S. borrowers, certain other of our subsidiaries from time to time party thereto designated as borrowers, and certain of our subsidiaries from time to time party thereto as guarantors, entered into a secured asset-based revolving credit agreement (as amended from time to time, the "Revolving Facility") with JPMorgan Chase Bank, N.A. as administrative agent (the "ABL Agent"), J.P.
Data Security : 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.
Data: 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.
Components of Results of Operations Revenues from sales of our products, including those that are subject to inventory consignment agreements, are recognized when control of the product is transferred to the customer and in an amount that reflects the consideration we expect to be entitled in exchange for the product. We accept limited returns from customers.
Components of Results of Operations Revenues from sales of our products, including those that are subject to inventory consignment arrangements, are recognized when control of the product is transferred to the customer and in an amount that reflects the consideration we expect to be entitled in exchange for the product. We accept limited returns from customers.
The results of operations and financial position for future periods could be impacted by changes in assumptions or resolutions of tax audits. 38 Table of Contents 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 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.
We define Adjusted net income and Adjusted earnings per share as net income attributable to Fossil Group, Inc. and diluted earnings per share, respectively, before impairment expense, restructuring expense and unamortized debt issuance costs included in loss on extinguishment of debt.
We define Adjusted net income (loss) and Adjusted earnings (loss) per share as net income attributable to Fossil Group, Inc. and diluted earnings per share, respectively, before impairment expense, restructuring cost of sales and expense and unamortized debt issuance costs included in loss on extinguishment of debt.
For every 1% of additional inventory valuation reductions as of fiscal year end 2021, 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 2023, we would have recorded an additional cost of sales of approximately $0.2 million. Property, Plant and Equipment and Lease Impairment.
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.
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.
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 $70.0 million is available under a European facility, $20.0 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 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 is subject to a line cap (the “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 facility, the French facility and the Canadian facility.
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 expense and unamortized debt issuance costs included in loss on extinguishment of debt minus interest income. We define Adjusted operating income (loss) as operating income (loss) before impairment expense and restructuring expense.
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 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.
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.
Additionally, cost of sales includes customs duties, product packaging cost, royalty cost associated with sales of licensed products, the cost of molding and tooling and inventory shrinkage and damages.
Additionally, cost of sales includes customs duties, product packaging cost, royalty cost associated with sales of licensed products, the cost of molding and tooling, inventory shrinkage and damages and restructuring charges.
We recorded impairment losses in restructuring charges of $0.2 million, $1.1 million and $0.6 million in fiscal years 2021, 2020 and 2019, respectively, related to property, plant and equipment. In fiscal year 2021, 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 $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.
If our allowance for product returns were to change by 10%, the impact, excluding taxes, would have been an approximate $2.1 million change to net income (loss). Inventories.
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.
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 83 Company-owned stores as of the end of fiscal 2021 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, 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.
We continually monitor returns and maintain a provision for estimated returns based upon historical experience and any specific issues identified. Product returns are accounted for as reductions to revenue and cost of sales and increases to customer liabilities and other current assets to the extent the returned product is resalable.
We continually monitor returns and maintain a provision for estimated returns based upon historical experience and any specific issues identified. Our product returns provision is accounted for as a reduction to revenue and cost of sales and an increase to customer liabilities and other current assets to the extent the returned product is resalable.
Operating Expenses include selling, general and administrative ("SG&A"), trade name impairments, other long-lived asset impairments and restructuring charges.
Operating Expenses include selling, general and administrative ("SG&A"), long-lived asset impairments and restructuring charges.
On and after November 30, 2023, we may redeem the Senior Notes (i) on or after November 30, 2023 and prior to November 30, 2024, at a price equal to $25.50 per $25.00 principal amount of Senior 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 Senior Notes and (iii) on or after November 30, 2025, at a price equal to $25.00 per $25.00 principal amount of Senior 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) 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 recorded impairment losses in other long-lived asset impairments of $1.7 million, $4.0 million and $0.7 million in fiscal years 2021, 2020 and 2019, respectively, related to property, plant and equipment. We recorded impairment losses in restructuring charges of $0.7 million, $2.9 million and $1.7 million in fiscal years 2021, 2020 and 2019, respectively, related to lease assets.
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.
In the direct to consumer channel, we had 162 Company-owned stores as of the end of fiscal 2021 and an extensive collection of products available through our owned websites. As of the end of fiscal 2021, net sales in the Americas segment accounted for 42.0% of our consolidated revenue.
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 125 Company-owned stores as of the end of fiscal 2021 and an extensive collection of products available through our owned websites. As of the end of fiscal 2021, net sales in the Europe segment accounted for 32.6% of our consolidated revenue.
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.
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 the foreseeable future.
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.
Should actual results or market conditions differ from those anticipated, additional losses may be recorded. We recorded impairment losses in other long-lived asset impairments of $7.5 million, $27.3 million and $7.9 million in fiscal years 2021, 2020 and 2019, 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 $1.7 million, $2.1 million and $7.5 million in fiscal years 2023, 2022 and 2021, respectively, related to lease assets.
Loans under the Revolving Facility may be made in U.S. dollars, Canadian dollars, euros, Hong Kong dollars or pounds sterling. 47 Table of Contents 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, minus (iv) 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, 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.
For the fiscal year ending December 31, 2022, we expect total capital expenditures to be between approximately $20 million to $25 million. Our capital expenditure budget is an estimate and is subject to change. Sources of Liquidity.
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.
The Revolving Facility also includes an up to $45.0 million subfacility for the issuance of letters of credit (the “Letters of Credit”). The Revolving Facility expires and is due and payable on September 26, 2024. The French facility includes a $1.0 million subfacility for swingline loans, and the European facility includes a $7.0 million subfacility for swingline loans.
The Revolving Facility also includes an up to $45.0 million subfacility for the issuance of letters of credit (the “Letters of Credit”). The French facility includes a $1.0 million subfacility for swingline loans, and the European facility includes a $7.0 million subfacility for swingline loans.
Amounts available under the Revolving Facility are reduced by any amounts outstanding under standby letters of credit. As of January 1, 2022, we had $199.7 million available for borrowing under the Revolving Facility. At January 1, 2022, 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 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.
Fiscal Year 2021 2020 Dollars % of Net Sales Dollars % of Net Sales Income (loss) before income taxes $ 53.1 2.8% $ (172.0) (10.7) % Plus: Interest expense 25.1 31.9 Amortization and depreciation 29.6 43.1 Impairment expense 9.2 34.0 Other non-cash charges (0.1) 23.7 Stock-based compensation 9.5 11.1 Restructuring expense 21.9 36.5 Unamortized debt issuance costs included in loss on extinguishment of debt 11.7 — Less: Interest income 0.4 0.6 Adjusted EBITDA $ 159.6 8.5 % $ 7.7 0.5 % 44 Table of Contents Adjusted Operating Income (Loss), Adjusted Net Income (Loss) and Adjusted Earnings (Loss) per Share.
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.
The valuation allowance for fiscal years 2021, 2020 and 2019 was $123.0 million, $109.3 million and $118.1 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 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.
Although we believe we have adequate sources of liquidity in the short-term and long-term, the success of our operations, in light of the market volatility and uncertainty as a result of the COVID-19 pandemic, among other factors, could impact our business and liquidity.
Although we believe we have adequate sources of liquidity, the success of our operations, in light of the market volatility and uncertainty, among other factors, could impact our business and liquidity.
The remaining net proceeds were used for general corporate purposes. The Senior Notes are our general unsecured obligations. The Senior Notes bear interest at the rate of 7.00% per annum. Interest on the Senior Notes is payable quarterly in arrears on February 28, May 31, August 31 and November 30 of each year, commencing on February 28, 2022.
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.
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. 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 point of sale, distributors and e-commerce channels.
The decrease in financing cash flows in fiscal year 2021 compared to fiscal year 2020 was reflective of our pay down of debt. Material Cash Requirements. We have obligations as part of our ordinary course of business.
The decrease in financing cash flows in fiscal year 2023 compared to fiscal year 2022 was reflective of net debt payments in fiscal year 2023 as compared to net debt borrowings in fiscal year 2022. Material Cash Requirements. We have various payment obligations as part of our ordinary course of business.
As of the end of fiscal 2021, net sales in the Asia segment accounted for 24.4% of our consolidated revenue. 37 Table of Contents Critical Accounting Estimates The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
Critical Accounting Estimates The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
Our presentation of Adjusted EBITDA, Adjusted operating income (loss), Adjusted net income and Adjusted earnings per share may not be comparable to similarly titled measures other companies report. Adjusted EBITDA, Adjusted operating income (loss), Adjusted net income and Adjusted earnings per share are not intended to be used as alternatives to any measure of our performance in accordance with GAAP.
Our presentation of Adjusted EBITDA, Adjusted operating income (loss), Adjusted net income (loss) and Adjusted earnings (loss) per share may not be comparable to similarly titled measures other companies report.
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 New World Fossil initiatives.
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.
Fiscal Year 2021 ($ in millions, except per share data): As Reported Other Long-lived Asset Impairment Restructuring Expenses Unamortized Debt Issuance Costs Included in Loss on Extinguishment of Debt As Adjusted Operating income (loss) $ 92.6 $ 9.2 $ 21.9 $ — $ 123.7 Operating margin (% of net sales) 5.0 % 6.6 % Interest expense 25.1 — — — 25.1 Other income (expense) - net (14.5) — — 11.7 (2.8) Income (loss) before income taxes 53.0 9.2 21.9 11.7 95.8 Provision for income taxes 26.4 1.9 4.6 2.5 35.4 Less: net income attributable to noncontrolling interest 1.2 — — — 1.2 Net income (loss) attributable to Fossil Group, Inc. $ 25.4 $ 7.3 $ 17.3 $ 9.2 $ 59.2 Diluted earnings (loss) per share $ 0.48 $ 0.14 $ 0.33 $ 0.17 $ 1.12 Fiscal Year 2020 ($ in millions, except per share data): As Reported Other Long-lived Asset Impairment Trade Name Impairment Restructuring Expenses As Adjusted Operating income (loss) $ (135.3) $ 31.6 $ 2.5 $ 36.5 $ (64.7) Operating margin (% of net sales) (8.4) % (4.0) % Interest expense 31.8 — — — 31.8 Other income (expense) - net (4.8) — — — (4.8) Income (loss) before income taxes (171.9) 31.6 2.5 36.5 (101.3) Provision for income taxes (76.0) 6.6 0.5 7.7 (61.2) Less: net income attributable to noncontrolling interest 0.2 — — — 0.2 Net income (loss) attributable to Fossil Group, Inc. $ (96.1) $ 25.0 $ 2.0 $ 28.8 $ (40.3) Diluted earnings (loss) per share $ (1.88) $ 0.49 $ 0.04 $ 0.56 $ (0.79) Fiscal Year 2020 Compared to Fiscal Year 2019 For a discussion of our results of operations in fiscal year 2020 compared to fiscal year 2019, please see Item 7 of our Annual Report on Form 10-K for the fiscal year ended January 2, 2021 filed with the SEC, which is incorporated herein by reference. 45 Table of Contents Liquidity and Capital Resources Our cash and cash equivalents balance at the end of fiscal year 2021 was $250.8 million, including $199.0 million held by foreign subsidiaries outside the U.S., in comparison to $316.0 million at the end of fiscal year 2020, including $277.4 million held by foreign subsidiaries outside the U.S.
Fiscal Year 2023 ($ 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.
The remaining net proceeds will be used for general corporate purposes 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.
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.
Comparable retail sales were adjusted to normalize the 52-week fiscal year 2021 with the 53-week fiscal year 2020. Comparable retail sales also 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.
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.
Over time, we have made progress right-sizing our fleet of stores, focusing on closing our least profitable stores, and the size and quality of our store fleet have a direct impact on our sales and profitability. 39 Table of Contents Total Liquidity: We define Total liquidity as cash and cash equivalents plus available borrowings on our revolving credit facility.
Over time, we have made progress right-sizing our fleet of stores by focusing on closing our least profitable stores. Total Liquidity: We define total liquidity as cash and cash equivalents plus available borrowings on our revolving credit facility. We monitor and forecast total liquidity to ensure we can meet our financial obligations.
A 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.
Among our foreign suppliers, China is the source of a substantial majority of our imports. A material increase in the cost of our products or transportation without any offsetting price increases or a disruption in the flow of finished goods from China may significantly increase our costs.
Sales declined in the other major markets for fiscal year 2021. 42 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 Asia segment (dollars in millions): Net Sales Fiscal Year Growth (Decline) Percentage as Reported Percentage Constant Currency 2021 2020 Dollars Watches: Traditional watches $ 359.3 $ 337.4 $ 21.9 6.5 % 3.0 % Smartwatches 38.3 50.7 (12.4) (24.5) (24.8) Total watches $ 397.6 $ 388.1 $ 9.5 2.4 % (0.6) % Leathers 30.6 32.4 (1.8) (5.6) (7.8) Jewelry 21.5 7.6 13.9 182.9 170.0 Other 5.5 6.2 (0.7) (11.3) (13.8) Total $ 455.2 $ 434.3 $ 20.9 4.8 % 1.7 % 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 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 Europe segment (dollars in millions): Net Sales Fiscal Year Growth (Decline) Percentage as Reported Percentage Constant Currency 2021 2020 Dollars Watches: Traditional watches $ 396.8 $ 317.2 $ 79.6 25.1 % 22.2 % Smartwatches 74.9 87.3 (12.4) (14.2) (15.7) Total watches $ 471.7 $ 404.5 $ 67.2 16.6 % 14.0 % Leathers 31.8 36.6 (4.8) (13.1) (15.3) Jewelry 96.0 71.2 24.8 34.8 32.3 Other 10.7 10.1 0.6 5.9 2.6 Total $ 610.2 $ 522.4 $ 87.8 16.8 % 14.2 % 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 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.
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.
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.
Certain line items presented in the table below, when aggregated, may not foot due to rounding (dollars in millions).
The following table reconciles Adjusted EBITDA to the most directly comparable GAAP financial measure, which is income (loss) before income taxes. Certain line items presented in the table below, when aggregated, may not foot due to rounding (dollars in millions).
Historically, our business operations have not required substantial cash during the first several months of our fiscal year. 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.
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.
For fiscal year 2021, total operating expenses decreased to $873.7 million or 46.7% of net sales, compared to $905.7 million or 56.1% of net sales in fiscal year 2020. SG&A expenses were $842.6 million in fiscal year 2021 compared to $835.1 million in fiscal year 2020.
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.
Comparable retail sales increased moderately on a 52-week calendar basis during fiscal year 2021, with strong growth in our retail stores partially offset by a moderate decline in e-commerce net 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 Americas segment (dollars in millions): Net Sales Fiscal Year Growth (Decline) Percentage as Reported Percentage Constant Currency 2021 2020 Dollars Watches: Traditional watches $531.4 $403.3 $128.1 31.8% 30.7% Smartwatches 110.7 110.7 — — (0.7) Total watches $642.1 $514.0 $128.1 24.9% 24.0% Leathers 95.2 104.6 (9.4) (9.0) (9.8) Jewelry 41.4 17.3 24.1 139.3 137.4 Other 7.2 6.3 0.9 14.3 17.6 Total $785.9 $642.2 $143.7 22.4% 21.4% 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.
Interest expense decreased by $6.7 million in fiscal year 2021 primarily driven by a lower debt balance. 43 Table of Contents Other Income (Expense)—Net. During fiscal year 2021, other income (expense) - net was expense of $14.5 million, including a $13.0 million loss on the extinguishment of debt, compared to expense of $4.8 million the prior fiscal year.
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.
We had net repayments of $152.0 million under the Term Credit Agreement during fiscal year 2021 at an average interest rate of 10.1%. We had net repayments of $96.1 million under the Revolving Facility during fiscal year 2021 at an average interest rate of 1.5%.
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.
Provision for Income Taxes. During fiscal year 2021, there was an income tax expense of $26.4 million, resulting in an effective tax rate of 49.8%, compared to 44.2% in fiscal year 2020.
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.
Not more than 60% of the aggregate borrowing base under the Revolving Facility may consist of the non-U.S. borrowing bases. Fiscal Year 2021 Activity: During fiscal year 2021, we had net borrowings of $150.0 million under the Senior Notes at an average annual interest rate of 7.0%.
Not more than 60% of the aggregate borrowing base under the Revolving Facility may consist of the non-U.S. borrowing bases.
Known or Anticipated Trends Based on our recent operating results and current perspectives on our operating environment, we anticipate the following trends will continue to impact our operating results: COVID-19 : Our business operations and financial performance continue to be materially impacted by COVID-19.
Known or Anticipated Trends Based on our recent operating results and current perspectives on our operating environment, we anticipate the following trends will continue to impact our operating results: Economic Environment Impacting Consumer Spending Ability and Preferences: Macroeconomic factors, including inflation and increased interest rates, impacted customer behavior in fiscal year 2023.
Valuation allowances were released in 2020 related to these carrybacks. Net Income (Loss) Attributable to Fossil Group, Inc. Fiscal year 2021 net income (loss) attributable to Fossil Group, Inc. was net income of $25.4 million, or $0.48 per diluted share, in comparison to a net loss of $96.1 million, or $1.88 per diluted share, in the prior fiscal year.
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.
At the end of fiscal year 2021, we had $0.6 million of outstanding short-term borrowings and $141.4 million in long-term debt. Operating Activities. Cash provided by operating activities is net income (loss) adjusted for certain non-cash items and changes in assets and liabilities.
Cash used in operating activities is net income (loss) adjusted for certain non-cash items and changes in assets and liabilities.
To date, none of these risks, intrusions, attacks or human error have resulted in any material liability to us.
To date, none of these risks, intrusions, attacks or human error have resulted in any material liability to us. While we carry insurance policies that would provide liability coverage for certain of these matters, if we experience a significant security incident, we could be subject to liability or other damages that exceed our insurance coverage.
While we carry insurance policies that would provide liability coverage for certain of these matters, if we experience a significant security incident, we could be subject to liability or other damages that exceed our insurance coverage, and 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. 36 Table of Contents Business Strategies and Outlook: Notwithstanding the COVID-19 pandemic, we plan to execute the following strategies to enhance our brands, grow our revenue and improve profitability.
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.
Accounts receivable, net of allowances, increased by 11.0% to $255.1 million at the end of fiscal year 2021 compared to $229.8 million at the end of the prior fiscal year, primary driven by an increase in sales. 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 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.
Operating income (loss) by operating segment is summarized as follows (dollars in millions): Fiscal Year Growth (Decline) Operating Margin % 2021 2020 Dollars Percentage 2021 2020 Americas $ 157.0 $ 33.1 $ 123.9 374.3 % 20.0 % 5.1 % Europe 110.0 25.4 84.6 333.1 18.0 4.9 Asia 70.9 64.9 6.0 9.2 15.6 15.0 Corporate (245.3) (258.7) 13.4 (5.2) Total operating income (loss) $ 92.6 $ (135.3) $ 227.9 (168.4) % 5.0 % (8.4) % Interest Expense.
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.
Gross profit of $966.4 million in fiscal year 2021 increased $196.1 million, or 25.5%, in comparison to $770.4 million in fiscal year 2020 driven by the increase in sales. Gross profit margin rate increased to 51.7% in fiscal year 2021 compared to 47.7% in fiscal year 2020.
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.
As of January 1, 2022, we had $150.0 million outstanding under the Senior Notes and no balance outstanding under the Revolving Facility. As of January 1, 2022, we had unamortized debt issuance costs of $8.7 million which reduces the corresponding debt liability. In addition, we had $4.7 million of outstanding standby letters of credit at January 1, 2022.
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.
Comparable retail sales decreased moderately on a 52-week calendar basis with a decline in retail stores partially offset by slight growth in our owned e-commerce for fiscal year 2021.
Comparable retail sales declined slightly during fiscal year 2023, with growth in e-commerce more than offset by declines in stores.
Notes Offering: In November 2021, we sold $150.0 million aggregate principal amount of our 7.00% Senior Notes due 2026. We used the majority of the net proceeds from the Senior Notes offering to repay all of the outstanding borrowings under the Term Credit Agreement (as defined below).
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.
Additionally, the gross profit margin rate was favorably impacted by reduced tariffs and reduced levels of minimum licensed product royalties, partially offset by increased freight costs and unfavorable regional and product mix. Operating Expenses.
The gross profit margin rate decreased to 48.1% in fiscal year 2023 compared to 49.4% in fiscal year 2022, largely due to increased promotions and licensor minimum royalty costs and unfavorable currency and product mix impacts, driven by connected products. These costs were partially offset by reduced freight costs. Operating Expenses.
Digital sales include sales on our own e-commerce sites, global third party platforms, and wholesale dot com sites. Comparable Retail Sales: Both stores and e-commerce sites are included in comparable retail sales in the thirteenth month of operation.
Adjusted EBITDA, Adjusted operating income (loss), Adjusted net income (loss) and Adjusted earnings (loss) per share are not intended to be used as alternatives to any measure of our performance in accordance with GAAP. Comparable Retail Sales: Both stores and e-commerce sites are included in comparable retail sales in the thirteenth month of operation.
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The COVID-19 pandemic has negatively affected the global economies, disrupted global supply chains and financial markets, and led to significant travel and transportation restrictions, including periodic mandatory closures of non-essential businesses and orders to shelter-in-place.
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In addition, our wholesale customers have shown caution in placing advance orders for merchandise. We expect interest rates to remain close to recent highs, along with continued economic uncertainty.
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We remain focused on protecting the health and safety of our employees, customers and suppliers to minimize potential disruptions and supporting the community to address challenges posed by the global COVID-19 pandemic.
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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.
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The total impact of the pandemic on our business is uncertain and depends in part on future developments including the duration and spread of COVID-19, the availability and acceptance of vaccines and continuing actions taken by governmental authorities to control the outbreak and mitigate its impact, including effects of any vaccine mandates, restrictions on movement and commercial activities and further stimulus and unemployment benefits.
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Inventory Levels: In fiscal year 2023, a slowing of consumer demand in our core categories, in part due to macro-economic factors such as higher inflation, resulted in excess inventory with many of our wholesale customers. With higher marketplace inventories and a worsening economic environment, retailers placed increased emphasis on rationalizing their inventory needs.
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Among our foreign suppliers, China is the source of a substantial majority of our imports. We have experienced, and expect to continue to experience, increased international transit times, particularly for our leathers products and packaging, and increased shipping costs for a majority of our products.
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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.
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The first strategic initiative is to increase brand excitement by crafting compelling stories that build upon brand equities for both owned and licensed brands across our product categories. Key to this strategy is our ongoing effort in innovation in our product categories and marketing capabilities, where we aim to build larger communities of brand loyalists.
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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.
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Our second strategic initiative is to increase digital engagement and online sales. We continue to invest in our owned e-commerce sites around the world and in third party marketplaces to enhance our direct to consumer engagement, which we believe can build long-term customer value. Our third strategic initiative is to optimize our operations.
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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.

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