Fossil Group: Adjusted Operating Income Doubles – Revenue Declines
However, this applies only on a currency-adjusted basis. The U.S. company’s adjusted operating income, calculated using constant exchange rates, amounted to $8.6 million in the second quarter of fiscal year 2026, which ended on July 4.
In the second quarter of 2025, Fossil Group’s adjusted operating income was $4.3 million. This represents a doubling on a currency-adjusted basis within one year.
Reported operating income significantly lower
By contrast, Fossil Group’s operating profit on an actual exchange rate basis was only $3.2 million, compared with $8.5 million in the second quarter of 2025. This represents a decline of approximately 62 percent.
Gross profit totaled $130.8 million, compared with $126.7 million in the same period a year ago.
Net sales down
Net revenue totaled $209.7 million. This represents a decline of 4.9 percent on a reported basis and 4.4 percent on a currency-adjusted basis compared to $220.4 million in the second quarter of fiscal year 2025. The Fossil Group cites, among other things, measures to optimize its store network and distribution channels as the reason for the decline in revenue.
Revenue in Europe declined particularly sharply in the second quarter of fiscal year 2026, by 18.2 percent. In Asia, however, it rose by 3.7 percent, and in the Americas by 0.2 percent.
Wholesale sales increased by 0.9 percent on a currency-adjusted basis, while direct sales declined by 14.6 percent. Within the direct sales channels, which include e-commerce and Fossil retail stores, sales declined by 8 percent on a comparable basis.
Watch Sales Remain Nearly Stable – Smartwatches No Longer Play a Role
In the most important product category—classic watches—revenue in the second quarter of fiscal year 2026 fell by 0.9 percent on a currency-adjusted basis compared with the same period a year earlier.
Smartwatches, on the other hand, no longer play a significant role in the Fossil Group’s current business. This is interesting given that, just a few years ago, the Fossil Group was particularly focused on connected watches and smartwatches. In 2018, wearables already accounted for 18 percent of total watch sales; in the U.S., their share was as high as 21 percent.
The Fossil Group initially expanded its smartwatch business significantly and developed smartwatches for 14 of its own and licensed brands. In 2020, the company still described wearables as its fastest-growing category. In the years that followed, however, competition with technology companies became increasingly fierce, while at the same time the Fossil Group’s financial situation deteriorated. In 2024, the company finally withdrew completely from the smartwatch business.
Fossil Group Looks to the Future with Optimism
Franco Fogliato, CEO of the Fossil Group, nevertheless takes a positive view of the situation and looks to the future with optimism:
“We have once again posted results that exceeded our expectations for the quarter. This was driven by broad-based strength across our core brands, distribution channels, and many of our key geographic markets.”
Fogliato is also confident about the company’s future prospects: “The strong business performance in the first half of 2026 and the continued momentum of our business enable us to confidently raise our financial outlook for the full year. This outlook includes, in particular, the expected return to revenue growth in the fourth quarter, improved profitability, and positive free cash flow. It is clear that our continued evolution toward a brand-oriented, consumer-focused business model—combined with the watch industry’s healthy fundamentals—enables us to achieve profitable long-term growth and sustainable value for our shareholders.”
Financial Outlook for 2026
The company is raising its financial forecast for the full year 2026. Global net revenue is expected to decline by 3 to 5 percent, with a return to revenue growth anticipated in the fourth quarter.
About the Fossil Group
The Fossil Group is a global company specializing in lifestyle accessories. Its portfolio of proprietary and licensed brands includes watches, jewelry, handbags, small leather goods, belts, and sunglasses. Its proprietary brands include Fossil, Michele, Relic, Skagen, and Zodiac. It also includes the licensed brands Armani Exchange, Diesel, Emporio Armani, Michael Kors, Skechers, and Tory Burch. fossilgroup.com
