Q3 2025 Fossil Group Inc Earnings Call

In listen only mode. This conference call is being recorded and may not be reproduced in whole or in part without written permission from the company now I'll turn the call over to Christine Greenie of the Blue shirt group to begin.

Hello, everyone and thank you for joining us with me on the call today is Franco <unk> co Chief Executive Officer.

Franco Fogliato: For 2025, Fossil made every country list a survey, ranking as the number one watch brand in Germany, number two in the US, and number five in both the UK and Mexico. We're incredibly proud of this recognition by consumers around the world, which speaks to Fossil-rich manufacturing and storytelling heritage. Importantly, this achievement comes against the backdrop of a strengthening watch market globally. US Circana data from Q3 highlights indirect market growth versus last year of low single digits, with the department and specialty store channel up low double digits. For the Fossil brand in Q3, we saw traditional watch sales trending better than the market, up high double digits in these channels. This fundamental industry and brand strength underpins the ongoing success of our turnaround plan. Moving now to our Q3 results, we're pleased to have delivered another quarter of strong financial performance.

And Randy Grubhub, Chief Financial Officer.

Before we begin I would like to remind you.

That information made available during this conference call contains forward looking information and.

And actual results could differ materially from those that will be discussed during this call.

Fossil group's policy on forward looking statements and additional information concerning a number of factors that could cause actual results to differ materially from such statements is readily available in the company's form 8-K, 10-Q, and 10-K reports filed with the SEC.

In addition, fossil assumes no obligation to publicly update or revise.

Any forward looking statements, whether as a result of new information future events or otherwise except as required by law.

During today's call, we will refer to constant currency results as well as certain non-GAAP financial measures. Please note that you can find a reconciliation of actual results to constant currency results.

Speaker #1: Good Good afternoon, ladies and gentlemen, and welcome to the Fossil Group third quarter 2025 earnings call. At this time, all parties are in listen-only mode.

Franco Fogliato: We narrowed our sales decline to 7%, reflecting year-over-year improvement in both the wholesale sales channel and our Fossil retail stores. Global growth in the wholesale sales demonstrates continuing strength from our strategic initiative, as well as a shift in the timing of certain shipments from Q4 into Q3. A key callout this quarter is the quality of sales. Average unit retail is higher in both our wholesale and direct-to-consumer channels, reflecting a strong combination of lower promotional activity, product mix, and pricing architecture. Third-quarter gross margin remains strong, notwithstanding the recognition of minimum royalty deficit, which Randy will cover during his remarks. Our focus on full-price selling has fundamentally changed the margin structure of the business, positioning us to return Fossil Group to a best-in-class gross margin profile in the mid-50s this year.

And other information regarding non-GAAP financial measures discussed on this call and fossils earnings release, which was filed today on form 8-K and is available in the investors section on fossil group Dot com.

Speaker #1: This conference call is being recorded and may not be reproduced in whole or in part without written permission from the company. Now, I'll turn the call over to Christine Greany of the Blue Shirt Group to begin.

With that I'll now turn the call over to Franco.

Thank you Christine good afternoon, everyone and thank you for joining us today.

Speaker #2: Hello, everyone, and thank you for joining us. With me on the call today is Franco Fogliato, Chief Executive Officer and Randy Greben, Chief Financial Officer.

I'm pleased to open this call with the Avalon that we have successfully transformed our balance sheet, marking a major milestone under our turnaround plan.

Speaker #2: like to remind you Before we begin, I would that information made available during this conference call contains forward-looking information. An actual result could differ materially from those that will be discussed during this call.

We announced today the completion of our bond restructuring, which extend our debt maturity to 2020.

Benign and brings more than $32 million of new capital to the business.

Speaker #2: Fossil Group's policy on forward-looking statements and additional information concerning a number of factors that could cause actual results to differ materially from such statements is readily 8K, 10Q, available in the company's form SEC.

Strengthening the balance sheet was one of the three pillars under our turnaround plan and has been a major focus of our team over the past year.

After months of about the work with the support of key stakeholders. We now have the financial flexibility needed to drive the business forward in terms of page two our next phase of long term value creation.

Franco Fogliato: During Q3, our disciplined approach to promotion and strict cost control translated to the bottom line, where we substantially narrowed our adjusted operating loss year over year. The improvement on a year-to-date basis is even more pronounced, moving from a loss of $58 million in the first nine months of 2024 to nearly break-even for the same period in 2025. For full year 2025, we expect to achieve a break-even to slightly positive adjusted operating margin. Our teams are continuing to deliver sharp execution across our three turnaround pillars, refocusing on our core, right-sizing our cost structure, and strengthening the balance sheet. Looking at the strategy under our first pillar, refocus on our core. Over the past nine months, we have reignited our design and storytelling engines to build a robust Fossil brand platform for the future.

Speaker #2: obligation to publicly update or addition, Fossil assumes no revise any forward-looking statements, whether as a result and 10K reports filed with the of new information, future In events, or otherwise, except as required by law.

In other noteworthy achievements I want to highlight is first to second consecutive year on time magazine lease Awards best brands.

Speaker #2: During today's call, we will refer to constant currency results as well as certain non-GAAP financial measures. Please note that you can find results related to constant currency regarding non-GAAP financial measures discussed on this call filed today on Form 8-K and available in the investor section on results and other information at FossilGroup.com.

For 2025 full shouldn't made every count released a survey ranking as the number one watch brand in Germany number two in the U S number five in both the UK and Mexico. We're incredibly proud of this recognition by consumers around the world, which speaks to foster the reach manufacturing and store.

Italian heritage.

Importantly, this achievement comes against the backdrop of a strengthening watch market globally.

Speaker #2: With that, I'll now turn the call over to find a reconciliation of actual

Speaker #2: Franco.

Speaker #3: Thank you, Christine.

U S <unk>, Canada from Q3 highlights in the active market growth versus last year of low single digits.

Speaker #3: joining us today. I'm pleased to open this call with the headline that we have balance sheet marking a Good afternoon, everyone, and thank you for successfully transformed our major milestone under our turnaround plan.

Speaker #3: joining us

With the department and specialty store channel up low double digits.

Franco Fogliato: In Q3, Nick Jonas officially took the helm as a Fossil Global Brand Ambassador. Since the August launch, the worldwide campaign has generated nearly 6 billion impressions. We kicked it off with a one-day event for fans and media in New York City, which included a surprise appearance by Nick, followed by regional events in major cities, including Berlin, Manila, Mumbai, and Paris, simultaneous with a campaign launch. We partnered with Nick to introduce an exclusive product line for Fossil. This bold and nostalgic collection has exceeded our expectations in the first few months. Also compelling, some of the best-selling items sold for $300, $400, a much higher price point for Fossil, which is driving higher average unit retail. Additionally, Nick's global reach and influence are attracting a younger male demographic to Fossil.

For the fossil brand in Q3, we saw traditional watch sales trending better than the market.

Speaker #3: We announced today the completion of our bond restructuring which extends our debt maturity to 2029 and brings more than 32 million of new capital to the business.

Double digits in these channels.

These fundamental industry and brand strength underpins the ongoing success of our turnaround plan.

Moving now to our Q3 results were.

Speaker #3: was one of the three pillars under our turnaround plan and has been a major focus of our team in Fossil's earnings release, which was Strengthening the balance sheet over the past year.

We're pleased to have delivered another quarter of strong financial performance.

We know that with our sales declined to 7%.

Speaker #3: After months of hard work and with the support of key stakeholders, we now have the financial flexibility needed to drive the business forward and turn the page to our next phase of long-term value noteworthy achievement I want to creation.

<unk> year over year improvement in both of the water channel in our full suite of retail stores.

Global growth and also demonstrates continued strength from our strategic initiatives as well as a shift in the timing of certain shipments from Q4 into Q3.

Speaker #3: For the second consecutive year, Fossil made Time magazine's list of the world's highlights. Fossil ranked as the number one watch brand in Germany, number two in the U.S., and number five in both the U.K. and Mexico, according to a survey that included every country.

The key called out this quarter is the quarter doses average unit retail desire in both our wholesale and direct to consumer channels, reflecting a strong combination of lower promotional activity product mix and pricing architecture.

Franco Fogliato: Together, the campaign and product launch of Worldwide generated positive global press coverage and drove incremental traffic to both our website and stores. In addition to the success of our new collection with Nick Jonas, Fossil collaborations with Fantastic Four and Galactus have been standout performances in key markets globally. In the US, Fantastic Four sold out during our early access event online, as was out-of-stock in stores within week one. In EMEA, the collaboration sold out online within three days. Galactus was also a tremendous success, selling out online in both the US and EMEA on day one. For the upcoming holiday season, we will continue to amplify the Nick Jonas collection and position Fossil at the center of key shopping moments. Initial trends in our DTC channels indicate that our holiday collection is resonating with consumers, with momentum building week over week.

Speaker #3: We are incredibly proud of this recognition by consumers around the world, which speaks to Fossil's rich manufacturing and storytelling heritage. Importantly, this achievement comes against the backdrop of a strengthening watch market globally.

Third quarter gross margin remained strong notwithstanding the recognition of minimum royalty deficit, which Randy will cover during his remarks.

Our focus on full price selling as a fundamentally change the margin structure of the business positioning us to return for Citigroup to a best in class gross margin profile in the mid fifties this year.

Speaker #3: US circana data from indirect market growth versus last year of low single digits. With the Department and Q3 highlights specialty store channel up low double digits, for the Fossil brand in Q3, we saw traditional watch sales trending better than the market, up channels.

During Q3, our disciplined approach to promotion and strict cost control translated to the bottom line, where we substantially narrowed our adjusted operating loss year over year.

The improvement on a year to date basis is even more pronounced moving from a loss of $58 million in the first nine months of 2024 to nearly breakeven for the same period in 2025.

Speaker #3: This fundamental high double digits in these industry and brand strength underpins the ongoing success of plan. Moving now to our Q3 results. We're pleased to have delivered another quarter of strong financial our turnaround performance.

For full year 2025, we expect to achieve a breakeven to slightly positive adjusted operating margin.

Franco Fogliato: We will be extending that energy globally with initiatives like our immersive pop-up in Le Marais in Paris during December, which is designed to showcase Fossil's gifting spirit in a culturally relevant way. Across markets, we're staying committed to brand investment, working closely with media and PR partners to build awareness, visibility, and brand ed. Turning now to our co-licensed brand, Armani Exchange and Diesel. We'll continue to generate improved performance in key markets across the Americas, EMEA, and Asia, driven by product innovation, as well as our investments in point of sales and in store presentation. From a brand perspective, Armani Exchange and Diesel all demonstrated year-over-year growth in the world sales channel during the first nine months of the year, while the Armani brand remained pressured by the macro environment in China.

Speaker #3: We narrowed our sales decline to 7%, reflecting year-over-year improvement in both the world sales channel and our fossil retail stores. Global growth in the world sales demonstrates continuing strength from our strategic initiative as well as a shift in the timing of certain shipments from Q4 into Q3.

Our teams are continuing to deliver sharp execution across our three turnaround pillars refocusing on our core right size, our cost structure and strengthening the balance sheet.

Looking at the strategy under our first pillar refocus on our core.

Over the past nine months, we have reiterated our designers storytelling amg's to build a robust the fossil brand platform for the future.

Speaker #3: A key callout this quarter is the quality of sales. Average unit retail is higher in both our world channels. Reflecting a strong combination of lower promotional activity, sales and direct-to-consumer product mix, and pricing architecture.

In Q3, Nick John US officially took the helm as a fossil global brand ambassador since the August launch the worldwide campaign has generated nearly 6 billion impression.

Speaker #3: Third quarter gross margin remains strong notwithstanding the recognition of minimum royalty deficit, which Randy will cover during his remarks. Our focus on full price selling as a fundamentally changed the margin structure of the business, positioning us to return Fossil Group to a best-in-class gross margin profile in the mid-50s this year.

We kick it off with a one day event for fast and media in Europe, CD, which included a surprise of periods by Nick followed by regional events in major city, including Burley Manila, Mumbai and Paris.

Simultaneous with the campaign launch we partnered with <unk> to introduce an exclusive product lines propulsion.

Franco Fogliato: Next, we continue to make progress towards optimizing our global wholesale sales footprint, which can be seen in many of our leading indicators. During the third quarter, the wholesale sales channel increased mid-single digit globally, with notable strength in the EMEA and Asia region. In the US, traditional watch performance was up slightly in wholesale sales, while the Fossil brand grew double digit. Within Asia, both India and Japan grew double digit, recently strengthening our team in Asia with the appointment of Devin Leong as General Manager of the region. Devin is a seasoned leader who will advance our global commercial strategy, drive and enhance market presence, and accelerate growth across the region. In EMEA, the transition to a distributor-led model in select European markets is enabling us to simplify our operation while driving increased sales and profitability.

Speaker #3: During Q3, our discipline approach to promotion and strict cost control translated to the bottom line, where we substantially narrowed our adjusted operating loss year over year.

It's both in the study population has exceed our expectations first few months.

Well, so compelling some of the best selling items for free under the 400 doors at much higher price point for <unk>, which is driving higher average unit retail. Additionally mix global reach and influences is attracting a younger male democratic deposit.

Speaker #3: The improvement on a year-to-date basis is even more pronounced moving from a loss of 58 million in the first nine months of 2024 to nearly break even for the same period in 2025.

Together the campaign and product launches will Brian eat generative positive global press coverage and drove incremental traffic to both our website and stores.

Speaker #3: For the full year 2025, we expect to achieve a break-even to slightly positive adjusted operating margin. Our teams are continuing to deliver sharp execution across our three turnaround pillars: refocusing on our core, right-sizing our cost structure, and strengthening the balance sheet.

In addition to the success of our new collection will join US Foster collaborations with fantastic four and collectors have been standout performance in key markets globally.

In the U S fantastic four sold out to beauty, our early assess event online.

Speaker #3: Looking at the strategy under our first pillar, refocusing on our core, over the past nine months, we have reignited our design and storytelling engines to build a robust fossil brand platform for the future.

Water out of stocking stores within a week one.

In EMEA collaborations sold out online within three days galactose was also tremendous success selling out online in both the U S and EMEA on day one.

Franco Fogliato: Most recently, we signed a new distribution agreement with Morellato Group in Italy, which takes effect 1 January 2026. Morellato brings decades of expertise in watches and jewelry, along with a deep understanding of local markets, which is expected to help us extend our reach and fuel long-term, profitable growth in these key geographies. Thus far, we have transitioned six European markets to a distributor model and will continue to evaluate opportunities to drive scalable growth in highly relevant markets going forward. As I mentioned earlier, our initiative to strengthen channel profitability is returning the business to a healthy gross margin profile. This is primarily being driven by our commitment to a full-price selling model, which was one of the first major initiatives we put into place when I joined the company a little over one year ago.

Speaker #3: In Q3, Nick Jonas officially took the helm as a fossil global brand ambassador. Since the August launch, the worldwide campaign has generated nearly 6 billion impressions.

For the upcoming already season, we will continue to amplify the <unk> collection and position portion at the center of key shopping moment.

Speaker #3: We kicked it it off with a one-day event for fans and media in New York City which included a surprise appearance by Nick, followed by regional events in major cities, including Berlin, Manila, Mumbai, and Paris.

The initial trends in our DTC channels indicate that our already coalition is resonating with consumers with momentum building week over week.

We will be extending that energy globally with initiatives like our immersive pop up in memory in Paris During December which is designed to showcase vasu gifting spirited culturally relevant way.

Speaker #3: Simultaneous with the campaign launch, we partnered with Nick to introduce an exclusive product line for Fossil. This bold and nostalgic collation has exceeded our expectations in its first few months.

Speaker #3: Also compelling, some of the best-selling items sold for 300, 400 dollars and much higher price points for Fossil, which is driving higher average unit retail.

Across markets, we're staying committed to brand investment working with closely with media and PR partners to build awareness visitor ability and brand heat.

Speaker #3: Additionally, Nick's global reach and influence is attracting a younger male democratic to Fossil. Together, the campaign and product launch fuel brand Eat, generate a positive global press coverage, and drove incremental traffic to both our website and stores.

Turning now to our core licensed brands, our mining costs and diesel.

Franco Fogliato: This discipline is driving improved traffic quality at both our Fossil stores and e-commerce website, while also generating higher average unit retail. Traffic and conversion trends in our Fossil retail stores improved notably in Q3, with particular strength in the US as our new clientele initiatives started to gain traction. Our store of the future, which we discussed in our Q2 earning call, has been rolled out to all of our US stores and over a dozen EMEA locations. The mission behind this new concept is to deliver a standout experience for the customer. We have reimagined retail to meet the evolving needs of today's guests, empowering stores to shine as a distinctive, experience-driven destination where personalized service leads, community matters, and strong results follow.

We're continuing to generate improved performance in key markets across the Americas, EMEA and Asia, driven by product innovation as well as our investments in point of sales and in store presentation from a brand perspective course, Mannix, chief and diesel all demonstrated year over year growth.

Speaker #3: In addition to the success of our new collection with Nick Jonas, Fossil collaboration with fantastic four and Galactus have been standout performance in key markets globally.

In the wholesale channel during the first nine months of the year. While there are many brands remain pressured by the macro environment in China.

Speaker #3: In the US, Fantastic Four sold out during our early access event online, as was out of stock in stores within week one. In EMEA, the collaboration sold out online within three days.

Next we continue to make progress towards optimizing our global footprint.

Which can be seen in many of our leading indicators during.

Speaker #3: Galactus was also a tremendous success, selling out online in both the US and EMEA on day one. For the upcoming holiday season, we will continue to amplify the Nick Jonas collection and position Fossil at the center of key shopping moments.

During the third quarter, the wholesale channel increased mid single digits globally.

With notable strength in EMEA and Asia region in the U S. Traditional watch performance was up slightly and also while the fossil brand grew double digit.

Speaker #3: Initial trends in our DTC channels indicate that our holiday collection is resonating with consumers with momentum building week over week. We will be extending that energy globally with initiatives like our immersive pop-up in Le Marais in Paris during December, which is designed to showcase Fossil gifting spirit in a culturally relevant way.

Franco Fogliato: We believe we can unlock profitable sales growth by blending lifestyle selling, data-informed decision, and a purpose-driven strategy, with the goal of creating meaningful impact beyond the sale. The initial results are compelling for driving increased traffic to our store, fueling higher average order value, and attracting new customers. Looking now at our second turnaround pillar, right-sizing Fossil Group cost structure. We're taking these actions to strengthen our operating model and continue to act with financial rigor to position the business for long-term profitable growth. Year to date, we have generated over $60 million in cost savings and reduced our SG&A by 260 basis points on a 10% sales decline, achieving better leverage on our cost structure as we transform the business. Lastly, I'm happy to reiterate that we have delivered on our third key pillar, strengthening the balance sheet.

Within Asia, <unk>, India, Japan grew double digits, we recently strengthened our team in Asia with the appointment of David and Leon as a general manager of the region.

Revenues of season leader will advance our global commercial strategy through drive and enhance our market presence and accelerated growth across the regions.

Speaker #3: Across markets, we're staying committed to brand investment, working with closely with media and PR partners to build awareness, desirability, and brand Eat. Turning now to our co-licensed brand, Armani Courts & Diesel.

In EMEA the transition to a distributor led model in select European markets is enabling us to simplify our operation, while driving increased sales and profitability.

Most recently, we signed a new distribution agreement with Motorola group in Italy, which takes effect January one 2026, modern alpha brings decades of expertise in watches and jewelry, along with a deep understanding of local market, which is expected towards to either extend our reach and for long term.

Speaker #3: We'll continue to generate improved performance in key markets across the Americas, EMEA, and Asia, driven by product innovation as well as our investments in point-of-sale and in-store presentation.

Speaker #3: From a brand perspective, Courts, Armani Exchange, and Diesel all demonstrated year-over-year growth in the world sales channel during the first nine months of the year.

Stable growth.

In this key geography.

Thus far we have transitioned six European markets to a distributor model and we'll continue to evaluate opportunities to drive scalable growth taeniidae relevant market going forward.

Speaker #3: While the Armani brand remained pressured by the macro environment in China. Next, we continue to make progress towards optimizing our global world sales footprint.

Franco Fogliato: This week marks a significant turning point of our business and sets us up for the long-term success. Randy, we'll share more details with you in just a few moments. Entering the final month of the year, we are reiterating our financial guidance and remain confident in our path to drive profitable growth. We have strengthened our core, returned to healthy gross margin profile, right-sized our cost structure, improved working capital management, and fortified our balance sheet. While there are a number of successes to celebrate, we're clear about what we have yet to accomplish. Our teams are energized by the opportunity in front of us, and committed to delivering full-effort execution as we strive to build a stronger Fossil Group and deliver value to all of our stakeholders. Now, I will turn the call over to Randy to review the third quarter financial and discuss our outlook.

As I mentioned earlier, our initiative to strengthen channel profitability are returning the business to a healthy gross margin profile. This is primarily being driven by our commitment to a full price selling model, which was one of the first the major initiatives, we put into place when I joined the.

Speaker #3: Which can be seen in many of our leading indicators. During the third quarter, the world sales channel increased mid-single-digit globally. With notable strength in the EMEA and Asia region.

Speaker #3: In the U.S., traditional watch performance was up slightly in world sales, while the Fossil brand grew double digits. Within Asia, both India and Japan grew double digits.

Company, a little over one year ago. This discipline is driving improved traffic quality at both our <unk> stores and E. Commerce website, while also generating higher average unit retail.

Speaker #3: We recently strengthened our team in Asia with the appointment of Devin Leong as a general manager of the region. Devin is a seasoned leader who will advance our global commercial strategy through drive and enhanced market presence and accelerate growth across the region.

Traffic and conversion trends in our fossil retail stores improved notably in Q3, with particularly strength in the U S. As our new clientele initiatives started to gain traction.

Speaker #3: In EMEA, the transition to a distributor-led model in select European markets is enabling us to simplify our operation while driving increased sales and profitability.

Our store of the future, which we discussed in our Q2 earnings call has been rolled out to all of our U S store and over a dozen <unk> indication.

Franco Fogliato: Thank you, Franco, and good afternoon, everyone. We delivered strong Q3 performance, reflecting another quarter of progress and momentum under our turnaround plan. Third-quarter net sales totaled $267 million, down 7% in constant currency versus prior year. This is slightly ahead of our expectations, reflecting ongoing traction from our turnaround initiatives, as well as a shift in the timing of some wholesale channel shipments from Q4 into Q3. Gross margin in the third quarter came in at 48.7%. That's down 70 basis points versus last year, and more meaningfully on a sequential basis. There are so many positive proof points with respect to our turnaround taking root that were offset by the minimum royalty shortfall show-off I spoke about on our last call, but I'd like to take a moment to talk about that.

Emission beyond this new concept is to deliver a standout experience for the customer we have EMEA retail to meet the evolving needs of today's guests empowered stores to shine and distinctive experience driven destination, where personalized service lease community matters and strong.

Speaker #3: Most recently, we signed a new distribution agreement with Morelato Group in Italy, which takes effect January 1st, 2026. Morelato brings decades of expertise in watches and jewelry, along with a deep understanding of local markets, which is expected to help us extend our reach and fuel long-term profitable growth in these key geographies.

Results follow we believe we can unlock profitable sales growth by blending lifestyle selling data informed decision and a purpose driven strategy with a goal of creating meaningful impact beyond the this sale.

Speaker #3: Thus far, we have transitioned six European markets to a distributor model, and we'll continue to evaluate opportunities to drive scalable growth in highly relevant markets going forward.

The initial results are compelling for driving increased traffic over store with a higher average order values and attracting new customers.

Speaker #3: As I mentioned earlier, our initiative to strengthen channel profitability are returning the business to a healthy gross margin profile. This is primarily being driven by our commitment to a full-price selling model which was one of the first major initiatives we put into place when I joined the company a little over one year ago.

Franco Fogliato: Our focus on full-price selling has fundamentally changed our margin architecture, with a reduction in discount rate of more than 50% versus last year on Fossil brand e-commerce sales in Q3 being just one example. Our sourcing initiatives resulted in improved product margins in our core categories, driven by optimization of our supply chain and successful negotiation with key suppliers in all categories. We have retooled our open-to-buy process, distorting our investments deeper into best sellers, and driving more efficient inventory turns and productivity. We implemented targeted price increases, and to date have not seen any meaningful reduction in purchase behavior or any notable volume shifts. Lastly, we drove an increased mix of higher margin traditional watch sales. All of these actions helped us mitigate expected tariff headwinds in the quarter.

Looking now at our second turnaround pillars, right sizing phosphate rock cost structure, we're taking actions to strengthen our operating model and continue to act with financial rigor to position the business for long term profitable growth year to date, we have generated over $60 million in cost savings.

Speaker #3: This discipline is driving improved traffic quality at both our Fossil stores and e-commerce website, while also generating higher average unit retail. Traffic and conversion trends in our Fossil retail stores improved notably in Q3, with particularly strength in the US as our new clientele initiative started to gain traction.

And reduce our SG&A by 160 basis points on a 10% sales decline achieving better leverage on our cost structure as we transform the business.

Lastly, I'm happy to reiterate that we have delivered on our key pillar strengthening the balance sheet. This week's marks a significant turning point of our business and set us up for the long term success, Randy will share more details with you in just a few moments.

Speaker #3: Our store of the future, which we discussed in our Q2 earnings call, has been rolled out to all of our US stores and over a dozen EMEA locations.

Speaker #3: The mission behind this new concept is to deliver a standout experience for the customer. We have reimagined retail to meet the evolving needs of today's guests and powering stores to shine as a distinctive experience-driven destination where personalized service lives, community matters, and strong results follow.

Entering the final months of the year, we are reiterating our financial guidance and remain confident in our path to drive profitable growth. We have strengthened our core returned to healthy gross margin profile right size, our cost structure improved working capital management and 45%.

Franco Fogliato: However, the aggregate benefits from these moves were offset in Q3 by the impact of licensed brand minimum royalty payment drops. As we discussed on our August earnings call, from an accounting perspective, we have historically recognized any minimum royalty deficits in the second half of the year, the majority of which were recorded in our third quarter. Because of our smaller sales base, this year the impact was more pronounced. It's worth noting that underlying gross margins improved in Q3 compared to the prior year, but the improvement was offset by the impact of royalties. It's also worth repeating my comments from our August call.

Speaker #3: We believe we can unlock profitable sales growth by blending lifestyle selling data-informed decisions and a purpose-driven strategy with the goal of creating meaningful, impact beyond the sale.

Our balance sheet, while there are a number of successes to celebrate we're clear about what we have yet to accomplish our teams are energized by the opportunity for all of us and committed to delivering flown FX execution as we strive to build a stronger profit group and deliver value to all of our stakeholders.

Speaker #3: The initial results are compelling, but driving increased traffic to our store fueling higher average order value and attracting new customers. Looking now at our second turnaround pillar, right-sizing Fossil Group cost structure.

Now I will turn the call over to Randy to review, the third quarter financials and discuss our outlook.

Franco Fogliato: While we did receive some minimum royalty reductions with our key license partners that benefit us moderately in 2025, we have agreed on significantly more meaningful reductions for 2026, when we expect to materially reduce the Q3 minimum royalty guarantee shortfalls that we've experienced as our licensed business has contracted. Our turnaround initiatives are foundational and have resulted in a structurally higher margin business. Therefore, we continue to expect full-year gross margin to be in the mid-50s, caveating, of course, that the tariff environment remains quite fluid. Turning now to operating expenses, we continue to demonstrate exceptional expense management in the quarter. We lowered SG&A expenses by 10% versus prior year, primarily driven by our cost reduction initiatives. As a percentage of sales, SG&A leveraged by 160 basis points versus prior year, coming in at 54.3%.

Thank you Franco and good afternoon, everyone.

We delivered strong Q3 performance, reflecting another quarter of progress and momentum under our turnaround plan.

Speaker #3: We're taking this action to strengthen our operating model and continue to act with financial rigor to position the business for long-term profitable growth. Year to date, we have generated over 60 million in cost savings and reduced our SGA by 260 basis points on a 10% sales decline achieving better leverage on our cost structures as we transform the business.

Third quarter net sales totaled $267 million down.

Down 7% in constant currency versus prior year.

This is slightly ahead of our expectations, reflecting ongoing traction from our turnaround initiatives as well as a shift in the timing of some wholesale channel shipments from Q4 into Q3.

Speaker #3: Lastly, I'm happy to reiterate that we have delivered on our third key pillar, strengthening the balance sheet. This week's marks a significant turning point of our business and sets us up for the long-term success.

Gross margin in the third quarter came in at 48, 7%, that's down 70 basis points versus last year and more meaningfully on a sequential basis.

There are so many positive proof points with respect to our turnaround taking root that were offset by the minimum royalty shortfall schropp spoke about on our last call, but I'd like to take a moment to talk about that.

Speaker #3: Randy will share more details with you in just a few moments. Entering the final month of the year, we are reiterating our financial guidance and remain confident in our path to drive profitable growth.

Our focus on full price selling is fundamentally changed our margin architecture.

Franco Fogliato: The year-over-year improvement can be traced to 47 fewer stores in operation versus a year ago, and lower compensation and administrative expenses. During Q3, we closed another 10 stores, bringing us to 44 closures year to date, all occurring at natural lease expiration with minimal closing costs. Our teams are continuing to act with discipline, enabling us to deliver meaningful SG&A savings of over $60 million year to date in 2025. Looking now at earnings, as we anticipated, the impact to gross profit from the minimum royalty deficit resulted in an adjusted operating loss for the quarter. Nevertheless, we substantially narrowed Q3 adjusted operating loss to $15 million from $22 million a year ago. Moving to the balance sheet, we ended the quarter with $102 million of liquidity, including $80 million in cash and cash equivalents.

Speaker #3: We have strengthened our core, returned to healthy gross margin profile, right-sized our cost structure, improved working capital management, and fortified our balance sheet. While there are a number of successes to celebrate, we're clear about what we have yet to accomplish.

The reduction in discount rate of more than 50% versus last year on fossil brand E. Commerce sales in Q3 being just one example.

Our sourcing initiatives resulted in improved product margins in our core categories, driven by optimization of our supply chain and successful negotiations with key suppliers in all categories.

Speaker #3: Our team is energized by the opportunity in front of us and committed to delivering flawless execution as we strive to build a stronger Fossil Group and deliver value to all of our stakeholders.

We have retooled our open to buy process distorting, our investments deeper into best sellers and driving more efficient inventory turns and productivity.

Speaker #3: Now I will turn the call over to Randy to review the third quarter financial and discuss our

We implemented targeted price increases and to date have not seen any meaningful reduction in purchase behavior or any notable volume shifts.

Speaker #3: outlook. Thank you, Franco, and good afternoon,

Speaker #2: everyone. We delivered strong Q3 performance, reflecting another quarter of progress and momentum under our turnaround plan. Third quarter net sales totaled 267 million dollars down 7% in constant currency versus prior year.

And lastly, we drove an increased mix of higher margin traditional watch sales.

All of these actions helped us mitigate expected tariff headwinds in the quarter.

However, the aggregate benefits from these move was offset in Q3 by the impact of licensed brand minimum royalty payments for ups.

Speaker #2: This is slightly ahead of our expectations reflecting ongoing traction from our turnaround initiatives as well as a shift in the timing of some wholesale channel shipments from Q4 into Q3.

Franco Fogliato: Liquidity was down sequentially from Q2, reflecting the planned ramp-up in marketing spend and the normal cadence of seasonal working capital movements. That said, comparisons to prior periods are somewhat distorted by the transition to the new ABL facility reported on our last call and entered into during the quarter. This new structure is more efficient and purpose-built to align with the scale and seasonality of our business. Importantly, the facility carries a five-year maturity. Quarter-end inventory totaled $167 million, down 26% year over year, consistent with our expectations. Cash conversion performance remains on track, supported by ongoing initiatives aimed at reducing structural cash volatility and driving more consistent free cash flow generation. Overall working capital discipline continues to improve. Global net working capital declined by approximately $90 million year over year, reflecting lower inventory levels, and tighter management of receivables and payables across the organization.

As we discussed on our August earnings call from an accounting perspective, we have historically recognized any minimum royalty deficit in the second half of the year. The majority of which were recorded in our third quarter.

Speaker #2: Gross margin in the third quarter came in at 48.7%. That's down 70 basis points versus last year and more meaningfully on a sequential basis.

Because of our smaller sales base this year the impact was more pronounced.

Speaker #2: There are so many positive proof points with respect to our turnaround taking root that we're offset by the minimum royalty shortfall trough I spoke about on our last call that I'd like to take a moment to talk about that.

It's worth noting that underlying gross margins improved in Q3 compared to the prior year, but the improvement was offset by the impact of royalties.

It's also worth repeating my comments from our August call.

Speaker #2: Our focus on full-price selling has fundamentally changed our margin architecture. With a reduction in discount rate of more than 50% versus last year, on fossil brand e-commerce sales in Q3 being just one example.

While we did receive some minimum royalty reductions with our key licensed partners that benefit us moderately in 2025.

We have agreed on significantly more meaningful reductions for 2026, when we expect to materially reduce the Q3 minimum royalty guarantees shortfalls that we've experienced as our license business has contracted.

Speaker #2: Our sourcing initiatives resulted in improved product margins in our core categories, driven by optimization of our supply chain and successful negotiation with key suppliers in all categories.

Our turnaround initiatives are foundational and have resulted in a structurally higher margin business.

Speaker #2: We have retooled our open-to-buy process, distorting our investments deeper into best sellers and driving more efficient inventory turns and productivity. We implemented targeted price increases into date have not seen any meaningful reduction in purchase behavior or any notable volume shifts.

Therefore, we continue to expect full year gross margin to be in the mid fifties caveat and of course that the tariff environment remains quite fluid.

Franco Fogliato: Turning now to our balance sheet transformation. To echo Franco's sentiment, we are thrilled to have reached a major turning point with respect to the capital structure of the company, delivering on the third pillar under our turnaround plan. We successfully completed the exchange of our 7% senior notes due 2026 for new 9.5% notes due 2029, which extends the maturity of our debt by three years and comes with $32.5 million in incremental new money financing. Further, the completed exchange gives the company expanded access to availability under our $150 million asset-based credit facility, which had been partially restricted pending the completion of the exchange offer. With the completion of the refinancing, we believe Fossil Group has the balance sheet fortitude necessary to advance the business on a path to profitable growth and positive free cash flow.

Turning now to operating expenses, we continued to demonstrate exceptional expense management in the quarter.

We lowered SG&A expenses by 10% versus prior year, primarily driven by our cost reduction initiatives.

Speaker #2: And lastly, we drove an increased mix of higher-margin traditional watch sales. All of these actions helped us mitigate expected tariff headwinds in the quarter.

As a percentage of sales SG&A leveraged by 160 basis points versus prior year coming in at 54, 3%.

Speaker #2: However, the aggregate benefits from these moves were offset in Q3 by the impact of licensed brand minimum royalty payment troughs. As we discussed on our August earnings call, from an accounting perspective, we have historically recognized any minimum royalty deficits in the second half of the year; the majority of which were recorded in our third quarter.

The year over year improvement can be traced to 47 fewer stores in operation versus a year ago, and lower compensation and administrative expenses.

During Q3, we closed another 10 stores, bringing us to 44 closures year to date, all occurring at natural lease expirations with minimal closing costs.

Speaker #2: Because of our smaller sales base, this year the impact was more pronounced. It's worth noting that underlying gross margins improved in Q3 compared to the prior year, but the improvement was offset by the impact of royalties.

Our teams are continuing to act with discipline, enabling us to deliver meaningful SG&A savings of over $60 million a year to date in 2025.

Franco Fogliato: Our refinancing was an all-hands effort by our internal teams and our collections of world-class advisors. We're thankful for the conviction that our noteholders and lenders have in our company, and are excited to have completed this critical turnaround pillar. Based on our ongoing business momentum and strong execution of our turnaround plan, we are reiterating our full-year guidance. Worldwide net sales are expected to decline in the mid-teens, which includes approximately $40 million of impact related to store closures, and adjusted operating margin is expected to be break-even to slightly positive. Importantly, in the fourth quarter, we anticipate gross margin will be similar to last year, which, combined with ongoing expense control, is expected to drive positive adjusted operating margin. We're pleased with the meaningful progress we've made year to date, and remain focused on driving durable growth and building long-term value for our shareholders.

Looking now at earnings as we anticipated the impact to gross profit from the minimum royalty deficit resulted in an adjusted operating loss for the quarter never.

Speaker #2: It's also worth repeating my comments from our August call. While we did receive some minimum royalty reductions with our key license partners that benefit us moderately in 2025, we have agreed on significantly more meaningful reductions for 2026.

Nevertheless, we substantially narrowed Q3, adjusted operating loss of $15 million from $22 million a year ago.

Speaker #2: When we expect to materially reduce the Q3 minimum royalty guarantee shortfalls that we've experienced as our licensed business has contracted. Our turnaround initiatives are foundational and have resulted in a structurally higher margin business.

Moving to the balance sheet, we ended the quarter with $102 million of liquidity, including $80 million in cash and cash equivalents.

Liquidity was down sequentially from Q2, reflecting the planned ramp up in marketing spend and the normal cadence of seasonal working capital movements.

Speaker #2: Therefore, we continue to expect full-year gross margin to be in the mid-50s caveating, of course, that the tariff environment remains quite fluid. Turning now to operating expenses, we continue to demonstrate exceptional expense management in the quarter.

That said comparisons to prior periods are somewhat distorted by the transition to the new ABL facility reported on our last call and entered into during the quarter.

This new structure is more efficient and purpose built to align with the scale and seasonality of our business.

Speaker #2: We lowered SG and A expenses by 10% versus prior year, primarily driven by our cost reduction initiatives. As a percentage of sales, SG and A leveraged by 160 basis points versus prior year, coming in at 54.3%.

Franco Fogliato: Now, I'll ask the operator to open the call to Q&A. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Francesco Marmo with Maxim Group. Hi, it's Francesco. Thank you for taking my question. Congratulations on the quarter and on the bond exchange. Three quick ones for me, if I may. First of all, your wholesale grew 3% in constant currency, while store comps was down 22%. Can you please help us understand what is driving that gap? I was wondering if you guys could give us some color around any regional difference, maybe there's some region that might be more retail-heavy than others. Thank you.

Importantly, the facility carries a five year maturity.

Quarter end inventory totaled $167 million down 26% year over year consistent with our expectations.

Speaker #2: The year-over-year improvement can be traced to 47 fewer stores in operation versus a year ago and lower compensation and administrative expenses. During Q3, we closed another 10 stores, bringing us to 44 closures year-to-date.

Cash conversion performance remains on track supported by ongoing initiatives aimed at reducing structural cash volatility and driving more consistent free cash flow generation.

Overall working capital discipline continues to improve.

Speaker #2: All occurring at natural lease expiration with minimal closing costs. Our teams are continuing to act with discipline enabling us to deliver meaningful SG and A savings of over 60 million dollars year to date in 2025.

Global net working capital declined by approximately $90 million year over year, reflecting lower inventory levels and tighter management of receivables and payables are across the organization.

Turning now to our balance sheet transformation to.

Speaker #2: Looking now at earnings, as we anticipated, the impact to gross profit from the minimum royalty deficit resulted in an adjusted operating loss for the quarter.

To Echo Franco sentiment, we are thrilled to have reached a major turning point with respect to capital structure of the company delivering on the third pillar under our turnaround plan.

Speaker #2: Nevertheless, we substantially narrowed Q3 adjusted operating loss to 15 million dollars from 22 million dollars a year ago. Moving to the balance sheet, we ended the quarter with 102 million dollars of liquidity including 80 million dollars in cash and cash equivalents.

We successfully completed the exchange of our 7% senior notes due 2026 for new nine 5% notes due 2029, which extends the maturity of our debt by three years and comes with $32 5 million and.

Franco Fogliato: Francesco, thank you for the question. We missed the first part of it. Could you please repeat it? Sure. The wholesale channel grew 3% in constant currency, while store comps fell 22%. I was hoping you guys could help us understand the difference between the two channels. Yes, absolutely. I just want to correct one point. When you talk about the store comps declining, that's not store comps. That's our full direct-to-consumer. We're actually quite pleased with the performance of our physical fleet. Our stores are performing quite well. As we've talked about in prior calls, the company has intentionally shrunk its e-commerce business as we've changed the full promotional strategy to drive really better margin architecture and more sales. You have to look at it, we have to look at it really on a channel-by-channel basis. To your point, wholesale is performing quite well.

Speaker #2: Liquidity was down sequentially from Q2, reflecting the planned ramp-up in marketing spend and the normal cadence of seasonal working capital movements. That said, comparisons to prior periods are somewhat distorted by the transition to the new ABL facility reported on our last call and entered into during the quarter.

And incremental new money financing.

Further the completed exchange gives the company expanded access to availability under our $150 million asset based credit facility, which had been partially restricted pending the completion of the exchange offer.

With the completion of the refinancing we believe fossil group has the balance sheet fortitude necessary to advance the business on a path to profitable growth and positive free cash flow.

Speaker #2: This new structure is more efficient and purpose-built to align with the scale and seasonality of our business. Importantly, the facility carries a five-year maturity.

Our refinancing with an all hands effort by our internal teams and our collection of World class advisers, we're thankful for the conviction that our note holders and lenders have in our company and are excited to have completed this critical turnaround pillar.

Speaker #2: Quarter-end inventory totaled $167 million, down 26% year-over-year, consistent with our expectations. Cash conversion performance remains on track, supported by ongoing initiatives aimed at reducing structural cash volatility and driving more consistent free cash flow generation.

Based on our ongoing business momentum and strong execution of our turnaround plan, we are reiterating our full year guidance.

Worldwide net sales are expected to decline in the mid teens, which includes approximately $40 million of impacts related to store closures.

Speaker #2: Overall, working capital discipline continues to improve. Global net working capital declined by approximately 90 million dollars year-over-year, reflecting lower inventory levels and tighter management of receivables and payables across the organization.

Franco Fogliato: When you deconstruct direct-to-consumer, we're very pleased with our store performance. Our e-commerce business is performing absolutely in line with our expectations, which was to be smaller. With respect to regions, I'll hand it to Franco. Yeah, look, Francesco, I think let me recall probably one of the first calls I did when I joined the company. We clearly said that our retail direct-to-consumer was very promotional, was driving the entire AUR marketplace price down. We took a, since I would say, towards the end of Q4 last year, we changed completely the policy. We said that we're going to reduce dramatically the promotional activity. We've been performing very well to the point, honestly, that the wholesale came back probably faster than what we were expecting. Our retailers, our customers, and partners have been very pleased with our policies, very encouraged.

And adjusted operating margin is expected to be breakeven to slightly positive.

Importantly in the fourth quarter, we anticipate gross margin will be similar to last year, which combined with ongoing expense control is expected to drive positive adjusted operating margin.

Speaker #2: Turning now to our balance sheet transformation. To echo Franco's sentiment, we are thrilled to have reached a major turning point with respect to the capital structure of the company delivering on the third pillar under our turnaround plan.

We're pleased with the meaningful progress we've made year to date and remain focused on driving durable growth and building long term value for our shareholders now.

Speaker #2: We successfully completed the exchange of our 7% senior notes due 2026 for new 9.5% notes due 2029, which extends the maturity of our debt by three years and comes with 32.5 million dollars in incremental new money financing.

Now I'll ask the operator to open the call for Q&A.

At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.

Speaker #2: Further, the completed exchange gives the company expanded access to availability under our 150 million dollar asset-based credit facility which had been partially restricted pending the completion of the exchange offer.

Okay.

And your first question comes from the line of Francesco Mormile with Maxim Group.

Speaker #2: With the completion of the refinancing, we believe Fossil Group has the balance sheet fortitude necessary to advance the business on a path to profitable growth and positive free cash flow.

Yeah.

Hi, Francesco Thank you for taking my question congratulation on the quarter and on the bond exchange.

Franco Fogliato: I remember the first time I met with them, they were like, Oh, we already heard that story, and now they're seeing that we're very consistent with what we said, to the point that they're growing the business with us and are very willing to invest with us going forward. Our DTC will continue. I think it will find it's performing well from a comp perspective. We're driving AUR higher, we're converting better than what we use because we have initiatives like Store of the Future, and we're pretty pleased with that. Now, performances have been very different depending by region. I think from a DTC perspective, our store has been performing better than what we anticipated in the US. We still see a little weakness out of some of our retail in Asia, while in general, India remains strong.

Speaker #2: Our refinancing was an all-hands effort by our internal teams and our collections of world-class advisors. We're thankful for the conviction that our noteholders and lenders have in our company and are excited to have completed this critical turnaround pillar.

A quick one for me if I may so first of all.

<unk> grew 3% in constant currency by store comp was down 22%.

Please help us understand the what is driving that gap and I was wondering if you guys could give us some color around <unk> and maybe just some region that might be more.

Speaker #2: Based on our ongoing business momentum and strong execution of our turnaround plan, we are reiterating our full-year guidance. Worldwide net sales are expected to decline in the mid-teens, which includes approximately 40 million dollars of impact related to store closures, and adjusted operating margin is expected to be break-even to slightly positive.

More retail habits.

Thank you.

So Jessica.

Thank you for the question we missed the first part of it could you please repeat it.

Speaker #2: Importantly, in the fourth quarter, we anticipate gross margin will be similar to last year, which combined with ongoing expense control is expected to drive positive adjusted operating margin.

Sure. So the wholesale channel grew 3% in constant currency to one.

22% I was hoping you guys could.

Understanding the.

The difference between the two channels, yes, absolutely I just want to correct. One when you talk about the store comps declining that's not store comps thats, our full direct to consumer we're actually quite pleased with the performance of our physical fleet. Our stores are performing quite well as we've talked about in prior calls the comp.

Speaker #2: progress we've made year to date and remain focused on driving durable We're pleased with the meaningful growth and building long-term value for our shareholders.

Franco Fogliato: Those are kind of trends we see probably common to the watch industry, with really US coming back. Asia is still pretty challenging. Even instead, we've seen some improvements, but India is continuing to perform strong. Okay. Thank you. That makes a lot of sense. This is great leading to my next question. Actually, this quarter, I would say, positive growth in constant currency. I think it was flat overall in reported currency. There were strengths in traditional watches, there were strengths in jewelry, and even gross margin expansion for the region. I was wondering whether you guys could give us some color around what's happening in the region. Sorry, Francesco. Once again, we missed the first part of your question. If you could please repeat it. Okay. Sure. I was asking about Asia.

Speaker #2: Now, I'll ask the operator to open the call to Q&A. At At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad.

He has intentionally strunk its ecommerce business as we've changed the full promotional strategy to drive really a better margin architecture and more sales. So you have to look at it we have to look at it really on a channel by channel basis to your point wholesale performing quite well and then when you deconstruct direct to.

Speaker #2: We'll pause for just a moment to compile the Q&A roster. And your first question comes from the line of Francesco Marmo with Maxim Group.

<unk>, we're very pleased with our store performance and our ecommerce business is performing absolutely in line with our expectations, which was to be smaller with respect to regions I'll hand, it to Frank Yes look at Francesco I think let me recall, probably one of the first caller data.

Speaker #3: And hi, it's Francesco. Thank you for taking my question. Congratulations on the quarter and on the bond exchange. Three quick ones for me if I may.

Speaker #3: So first of all, your wholesale grew 3% in cost and currency, while store comps was down 22%. Can you please help us understand what is driving that gap?

You're under company, we clearly said that our retail direct to consumer.

Speaker #3: And I was wondering if you guys could give us some color around any regional differences, maybe just some region that might be more retail-heavy than others.

<unk>.

Very promotional was driving the entire AUR marketplace price down and we took a six I would say towards the end of quarter four last year, we changed completely the policy and we said that we're going to reduce dramatically.

Franco Fogliato: The Asia region seemed particularly solid this quarter with positive cost and currency growth, strengths in traditional watches and jewelry, and gross margin expansion. I was wondering if you guys could give us some color. You already mentioned India, but anything else would be appreciated. Thank you. No, thanks for asking. It's a great question. Look, we're pleased. The region performances have been led by India. We continue to be extremely positive, not only about our leading position in India, but we have a very strong team, very strong recognition. Our retail performed well, and the market is growing. It's really a combination of a perfect storm from that perspective, and we are one of the leading companies there. No doubt about that. We've seen, I would say, maybe we still are shrinking in China, honestly. The market is better, but still not into positive growth.

Speaker #3: Thank you.

Speaker #4: Francesco, thank you for the question. We missed the first part of it. Could you please repeat

Speaker #4: it? Sure.

The promotional activity.

Speaker #3: So, the wholesale channel grew 3% in cost and currency, while store comps fell 22%. I was hoping you guys could help us understand the difference between the two channels.

We have been performing very well to the point that honestly that the woods so came back.

Probably faster than what we were expecting.

Our retailers, our customer and partners have been very pleased with our policies very encouraged I remember the first time I met with them and they would like.

Speaker #4: Yes, absolutely. I just want to correct one point. When you talk about the store comps declining, that's not store comps; that's our full direct-to-consumer.

We already.

Speaker #4: We're actually quite pleased with the performance of our physical fleet. Our stores are performing quite well. As we've talked about in prior calls, the company has intentionally shrunk its e-commerce business as we've changed the full promotional strategy to drive really better margin architecture and more sales.

Heard that story and now Youre seeing that were very consistent with what we set it to the point that there are growing the business with us and are very willing to invest with us going forward. Our DTC will continue I'll speak a wildfire is performing well from a comp perspective.

We are driving AUR higher.

Speaker #4: So you have to look at it. We have to look at it really on a channel-by-channel basis. To your point, wholesale is performing quite well.

We're driving we're converting better than what we use because we have initiatives like store of the future.

Speaker #4: And then when you deconstruct direct-to-consumer, we're very pleased with our store performance and our e-commerce business is performing absolutely in line with our expectations.

Franco Fogliato: We've been also taking a policy of being less promotional to drive improving gross margin. I think that's also helping. I would say the other market, which has been pretty pleased, has been Japan. Honestly, Japan was one of the question marks we had 12 months ago when I joined the company. We have a strong team there, and our brands are performing well. In particular, Diesel is very strong in the region, and we're very encouraged about the opportunities there. We have a new leader for the region, Devin Leong, joined early October. We're very excited because we needed that leadership to come from the region. He's a very strong leader, and we're very encouraged. Well, it's good to see Asia performing better and performing well. It's definitely led by India, but also pleasing to see Japan doing well and China maybe seeing some better soon.

And we're pretty pleased with that performance has been very different depending by region. I think a pro made DTC perspective, our store have been performing better than what we anticipated in the U S.

Speaker #4: Which was to be smaller. With respect to regions, I'll hand it to Franco.

Speaker #5: Yeah, look, Francesco, I think let me recall probably one of the first calls I did when I joined the company. We clearly said that our retail direct-to-consumer was very promotional, was driving the entire AUR marketplace price down.

We still see a little weakness out of some of our retail in Asia, while in general India remains strong. So those are kind of ramp that we see.

Probably comment to the watch industry with with the really U S soup coming back.

Speaker #5: And we took a cease, I would say, towards the end of Q4 last year. We changed completely the policy, and we said that we're going to reduce dramatically the promotional activity.

Asia is still pretty challenging even said.

<unk> seen some improvement, but the India continuing to perform a strong.

Okay, great. Thank you bet that that makes sense.

Speaker #5: We've been performing very well to the point, honestly, that the wholesale came back probably faster than what we were expecting. Our retailers, our customer and partners have been very pleased with our policies very encouraged.

This is a great lead into my next question.

Actually this quarter.

Okay.

Let's say.

Positive growth in constant currency.

It was like slots overall, a reported and currency there was strength in traditional watches.

Speaker #5: I remember the first time I met with them. They were like, "Oh, we already heard that story, and now they're seeing that we're very consistent with what we said." To the point that they're growing the business with us and are very willing to invest with us going forward.

Our strengths in jewelry and even gross margin expansion for the region I was wondering whether that's good.

Franco Fogliato: Okay. Great. Thank you. If I may, one last question that has to do with your inventory position. Your inventory appears leaner every quarter, which is great. I was wondering whether you guys could give a sense for what initiatives are driving these improvements, and also how this tighter inventory position fits within your broader distribution and promotional strategy. Thank you. It's a great question. Let me take a general view, and then I'll let Randy and Josh get in. Look, we're very pleased. I think I've made it clear we're going to be a smaller company, but we're going to be a lot more profitable than what we used to be. I think the working capital position, the inventory control, we had the sales down 7% in the quarter, but inventory was down 26%. We've reduced the number of SKUs.

Give us some clarity around the what's what's happening in the region.

Sorry, Francesco once again, we missed the first part of your question. If you could please repeat it okay.

Speaker #5: Our DTC will continue; I think it will find it's performing well from a comp perspective. We're driving AUR higher; we're driving we're converting better than what we used because we have initiative like store of the future.

Sure.

He was asking about Asia.

The Asia Pacific region, that's really solid this quarter with positive customer growth.

In traditional watches and jewelry and gross margin expansion I was wondering if you guys could give us some color can be youll reach in India by Internet will be appreciated. Thank you.

Speaker #5: And we're pretty pleased with that. Now, performances have been very different depending on the region. I think from a DTC perspective, our store has been performing better than we anticipated in the U.S.

Thanks for asking a great question look we're pleased.

The region performance is being led by India, we continue to be.

Speaker #5: We still see a little weakness out of some of our retail in Asia, while in general, India remains strong. So those are kind of trends we see probably common to the watch industry.

Three many positive not only about our leading position in India, but we have a very strong team was very strong recognition, our retail performed well and the market is growing so is it is it is.

Speaker #5: With really US coming back, Asia is still pretty challenging even said we've seen some improvement. But India continuing to perform strong.

Franco Fogliato: We're focusing on what matters. We're really driving stories that count. All of this comes together with a higher gross margin, comes together higher AUR, and drives the company in a better position. Would I expect this to continue forever? No. We will invest going forward. We believe we have performed a very clean inventory, both on what we own and what sits in our retailers. We manage inventory together with them. Our sales are performing well. We're very encouraged. The fact that we fixed the balance sheet is also helping a lot to drive our investment from a strategic perspective. I will ask Randy maybe to comment a little more into the details.

<unk> is really a combination of the perfect storm from that perspective, and we are one of the leading company Dear.

<unk> talked about that we've seen I would say maybe.

Speaker #3: Okay, thank you. That makes a lot of sense. And this is a great lead into my next question. Actually, this quarter, I would say, we saw positive growth in cost and currency.

I Wouldnt, we still are shrinking in China honestly.

The market is in.

Is better but still not into positive growth.

And we've been also taking a policy of being less promotional to drive improving gross margin and I think that's it.

Speaker #3: I think it was like flat overall in reported currency. There was strength in traditional watches. There was strength in jewelry and even gross margin expansion for the region.

Also helping and.

Speaker #3: I was wondering whether you guys could give us some color around what's happening in the region.

And I would say the other market, which was being pretty pleased as being Japan.

Honestly, Japan is one of the question, Michael we add 12 months ago, when I joined the company.

Speaker #4: Sorry, Francesco. Once again, we missed the first part of your question. If you could please repeat it.

We we have a strong team there.

Franco Fogliato: Francesco, I'm so glad that you asked the question because it gives us an opportunity to acknowledge the work that the organization has done really across the globe to manage working capital in a significantly tighter fashion. We're proud of the work that we've done as it relates to overhauling the way we think about open to buy, the way in which we think about where we lean in on product investment. The wonderful byproduct of all of this is not only has working capital become quite more efficient, but we've managed to increase availability of products at the same time. We're ordering the right inventory, getting it to the right place. It's a comprehensive effort that is nice to be seeing bearing fruit. Right. Thank you very much. At this time, there are no further questions.

Speaker #3: Okay, sure. I was asking about Asia. The Asian region seemed particularly solid this quarter, with positive cost and currency growth, strength in traditional watches and jewelry, and gross margin expansion.

Our brands are performing well.

In particular with diesel is very strong in the region.

And we're very encouraged about the opportunities there we have a new leader for the region <unk> been longer join early October we're very excited because we needed that leadership to come for the region has got a very strong leader and we're very encouraged so.

Speaker #3: I was wondering if you guys could give us some color, clearly you already mentioned India, but anything else would be appreciated. Thank you.

Speaker #4: No, thanks for asking. It's a great question. Look, we're pleased the region's performances have been led by India. We continue to be extremely positive not only about our leading position in India, but we have a very strong team and very strong recognition.

It's good to see Asia performing.

Better and performing well.

It's definitely led by India, but also pleasing to see Japan doing well in China maybe.

<unk> seen some better soon.

Speaker #4: Our retail performed well and the market is growing. So it's really a combination of a perfect storm from that perspective. And we are one of the leading companies there, not doubt about that.

Okay, great. Thank you and then if I may one last question.

That has to do with your inventory position and your inventory.

Leaner every quarter, which is great I was wondering whether you guys could give us a sense for what initiatives.

Franco Fogliato: I will now turn the call back over to management for closing remarks. Thank you, everyone, for joining us today. This has been an exciting earnings call, an exciting week. We have announced a new milestone, the company with a stronger balance sheet. We're looking forward to meet everyone for the Q4 earnings call, and we wish everyone happy holidays. Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

Speaker #4: We've seen, I would say, maybe I wouldn't. We still are shrinking in China. Honestly, the market hasn't improved, but it is still not into positive growth.

Driving this improvement and also how the tighter inventory position.

Within your broader distribution and promotional strategy.

It's a great question, let me take a general view and then I'll, let Andy of Andy and just getting a look at what we're very pleased.

Speaker #4: And we've been also taking a policy of being less promotional to drive improving gross margin. And I think that's also helping. And I would say the other market, which has been pretty pleased, has been Japan.

I think could be.

We are very.

I made it clear we're going to be a smaller company, but we're going to be a lot more profitable than what we used to be and I think the.

Speaker #4: Honestly, Japan was one of the question marks we had 12 months ago when I joined the company. We have a strong team there. Our brands are performing well.

Working capital position that the inventory control, we have the sales down 7% in the quarter, but inventory was down 26.

Speaker #4: We've, in particular, diesel is very strong in the region. And we're very encouraged about the opportunities there. We have a new leader for the region, David Leong, joined early October.

We reduced the number of Skus, we're focusing on what matters, we're really driving stories that count all of this comes together with a higher gross margin comes together.

Speaker #4: We're very excited because we needed that leadership to come for the region. It's a very strong leader and we're very encouraged. So look, we it's good to see Asia performing better and performing well.

AUR and drive the company in a better position.

Would I expect these to continue forever no we will we will invest.

Going forward, we believe we have the.

The former a very clean inventory bolt on what we own and what sits in our retailers, we manage inventory together with them our <unk>.

Speaker #4: It's definitely led by India, but it's also pleasing to see Japan doing well, and China may be seeing some better results.

Speaker #4: soon. Okay.

Sales are performing well and we're very encouraged and the fact that we fixed the balance sheet is also helping a lot to drive our investment from a strategic perspective.

Speaker #3: Great. Thank you. And then if I may, one last question. That has to do with your inventory position. Your inventory appears leaner every quarter, which is great.

Speaker #3: I was wondering whether you guys could give us a sense for what initiatives are driving these improvements and also how these tighter inventory position fits within your broader distribution and promotional strategy.

I will ask Randy maybe to comment a little more into the details Francesco I'm. So glad that you asked the question because it gives us an opportunity to acknowledge the work that the organization has done really across the globe.

Manage working capital and AR.

Speaker #3: Thank you.

Significantly tighter fashion.

Speaker #4: It's a great question. Let me take a general view, and then I'll let Randy and Josh get into it. Look, we're very pleased. I think we're very... I made it clear we're going to be a smaller company, but we're going to be a lot more profitable than what we used to be.

We're proud of the work that we've done as it relates to overhauling the way, we think about open to buy the way in which we think about where we lean in on product investment.

And the wonderful byproduct of all of this is not only is working capital become quite more efficient, but we've managed to increase availability of products at the same time. So we're ordering the right inventory getting it to the right place and it's a comprehensive effort that.

Speaker #4: And I think the working capital position that the inventory control we have the sales down 7% in the quarter, but inventory was down 26.

It's nice to be seeing bearing fruits.

Speaker #4: We've reduced the number of SKUs. We're focusing on what matters. We're really driving stories that count, all of this comes together with a higher gross margin, comes together higher AUR, and drives the company in a better position.

Great. Thank you very much.

At this time there are no further questions I will now turn the call back over to management for closing remarks.

Speaker #4: Would I expect this to continue forever? No, we will invest. Going forward, we believe we have performed a very clean inventory, both on what we own and what sits in our retailers.

Yeah.

Thank you everyone for joining us today. This has been an exciting earning call an exciting week, we have announced a new milestone the company with a stronger balance sheet. We're looking forward to meet everyone for the quarter for earning call and we wish everyone happy holidays.

Speaker #4: We manage inventory together with them. Our sales are performing well. We're very encouraged. And the fact that we fixed the balance sheet is also helping a lot to drive our investment from a strategic perspective.

Yeah.

Ladies and gentlemen. This concludes today's conference call you may now disconnect.

Speaker #4: I will ask Randy maybe to comment a little more into the details.

Speaker #2: Francesco, I'm so glad that you asked the question because it gives us an opportunity to acknowledge the work that the organization has done really across the globe to manage working capital in a significantly tighter fashion.

Speaker #2: We're proud of the work that we've done as it relates to overhauling the way we think about open-to-buy, the way in which we think about where we lean in on product investment.

Speaker #2: And the wonderful byproduct of all of this is not only is working capital become quite more efficient, but we've managed to increase availability of products at the same time.

Speaker #2: So we're ordering the right inventory, getting it to the right place. And it's a comprehensive effort that is nice to be seeing bearing fruit.

Speaker #3: Right. Thank you very much.

Speaker #1: At this time, there are no further questions. I will now turn the call back over to management for closing.

Speaker #1: remarks. Thank

Speaker #4: you for everyone for joining us today. This has been an exciting earning call, an exciting week. We have announced a new milestone, the company with a stronger balance sheet.

Okay.

Speaker #4: We're looking forward to meet everyone, to for the quarter four earning call, and we wish everyone happy

Speaker #4: holidays. Ladies and