RICHARDSON, TX – Fossil Group’s Greek-American Chairman and CEO Kosta Kartsotis announced in a news release on June 3 that the fashion watch and accessories brand is working to reopen the majority of its stores around the world which had been closed due to the coronavirus pandemic since mid-March.
The news release also included Fossil’s first quarter 2020 financial results and a COVID-19 update. Kartsotis stated, “As people around the globe continue to face the many challenges presented by COVID-19, we are taking actions to mitigate the headwinds and chart our path forward amid a new operating environment. We are proud of our teams who have prioritized the health and safety of our communities while also moving quickly to protect our business, strengthen our financial position and accelerate our strategic priorities for 2020 and beyond.”
The company’s first quarter summary noted that “worldwide net sales of $391 million decreased 16% on a reported basis and 15% in constant currency. Sales in the quarter were significantly impacted by COVID-19 on a global basis beginning in February in Asia.
“The Company’s New World Fossil 2.0 – Transform to Grow Program ("NWF 2.0") was expanded to address additional challenges posed by COVID-19. The Company's actions to improve its cost structure are expected to result in cost savings totaling $100 million in 2020 versus previously estimated cost savings of $50 million.
“Operating loss of $134 million compared to $20 million a year ago, primarily due to COVID-19 impacts on sales, gross margin and non-cash asset impairments.
“Cash and cash equivalents of $245 million and net debt totaling $74 million as of April 4, 2020.”
Kartsotis continued, “As we continue to navigate the impacts of COVID-19, we are accelerating our focus on driving digital growth and capturing organizational efficiencies, two of our key strategic priorities for 2020. Our investments in digital capabilities, including the recent completion of a new global e-commerce platform, have allowed us to meet significantly increased demand and seamlessly serve our customers. As economies begin to reopen around the globe, we are working closely with our wholesale partners and executing a phased reopening of our Fossil stores.”
Fossil “operated 451 stores last year in North America, Europe and Asia, but expects to reduce that to between 350 to 400 this year because of growth in its e-commerce business,” the Dallas Morning News (DMN) reported on June 3, adding that “the retailer shifted sales toward the internet during COVID-19, both for retail consumers and its wholesale business.”
Kartsotis told DMN that “the shift to digital has been ‘dramatic,’” adding that “online sales were up 150% in April and 200% in May compared to prior years.”
“The investments we’ve been making in our digital capabilities prepare us to drive these significantly higher demand levels,” Kartsotis said, DMN reported.
Online sales are expected to make up about 60% of worldwide sales in the second half of this year for Fossil, DMN reported, noting that “Kartsotis said online sales accounted for only 10% of its first quarter business, but he expects that to rise above 30% in the current three-month cycle.”
During the pandemic and the worldwide economic shutdown, Fossil took steps to cut costs, announcing in May that “it cut base salaries for ‘a substantial number’ of its worldwide employees and its executive officers,” and “hourly employees’ work weeks were cut to 24 or 32 hours, reducing its costs nearly 40% for the first quarter,” said Jeffrey Boyer, the company’s chief operating and financial officer, DMN reported.
Kartsotis said, “Our teams are much leaner today than several months ago, but are functioning well, even on a remote basis due to improved focus and efficiency throughout the organization. We believe Fossil will emerge from this crisis as a stronger, leaner, more efficient and more digitized organization,” DMN reported.
About Fossil Group, Inc.
Fossil Group, Inc. is a global design, marketing, distribution and innovation company specializing in lifestyle accessories. Under a diverse portfolio of owned and licensed brands, its offerings include fashion watches, jewelry, handbags, small leather goods and connected products. The company includes the brands, Fossil, Michele, Misfit, Relic, Skagen and Zodiac, and licensed brands, Armani Exchange, BMW, Diesel, DKNY, Emporio Armani, kate spade new york, Michael Kors, PUMA and Tory Burch. More information is available online: www.fossilgroup.com.