By Jennifer Williams
Watchmaker Fossil Group is losing sales on purpose.
Around this time last year, new leadership looked at the company and saw some problems. Fossil sold too many watches at a discount, which was eating into profits, so executives reduced the price cuts expecting that the move would diminish sales. Walking away from discounted online sales is part of the executives' turnaround plan, which has also included closing stores and cutting jobs.
"Our discount rate on e-commerce has been reduced more than 50% in the last year," said Fossil Chief Financial Officer Randy Greben. This means that if items on sale were previously marked down 20%, the discount would now be 10%. "We knew it would shrink our e-commerce business and it absolutely has. And that's been OK," he said.
Greben joined Fossil in March, roughly six months after the board appointed its first outsider chief executive in four decades and around the time that the turnaround plan was announced. Fossil, once a multibillion-dollar business, has seen its market cap dwindle to around $213 million with sales down for at least the past two years. Part of the attempt to recalibrate the company includes simplifying: Fossil exited its smartwatch business and now focuses on its five core brands -- its namesake brand and licensed products from Emporio Armani, Armani Exchange, Michael Kors and Diesel -- out of 14 total.
And cutting the discounts, which has come with some benefits. One is that wholesale partners -- which include Macy's, Amazon.com and Nordstrom -- are happier because they aren't pressured to follow Fossil in discounting to sell products. Another is that selling higher priced items is better for margins, the CFO said. Fossil expects margins in the mid-50s this year, up roughly 6% from a year earlier.
While Fossil works to further limit discounting, the company is also looking at where it can lift prices. "We absolutely do believe that we have the right to move up from where we are today," said Greben. Most Fossil products sell for between $150 and $350. But any increases would be small -- "I'd be surprised if one day you wake up and Fossil's [average price] is flirting with $1,000" -- and executives will react accordingly if consumers push back, he said.
Less than a year into the turnaround, Fossil's sales remain under pressure. Net sales have been down for at least the last eight consecutive quarters, in the double digits for six of them. Shrinking the online business along with other moves such as reducing Fossil's store count are driving the sales decline, which Greben said is part of the plan. And the losses in sales have narrowed, down 6.1% in the three months ended Oct. 4, compared with a year earlier.
"Our aspirations are 100% to grow," Greben said. "Our plan was first, shrink to stabilize, get to profit, return to growth."
Fossil is currently 10% smaller than it was a year ago. Along with a smaller online business, the company has closed 44 stores so far this year and plans to shutter around six more by the end of December. The workforce is also leaner after job cuts early this year. Fossil declined to share how many roles were affected or if additional employee reductions are planned. The company has cut roughly $60 million in costs this year and expects to eliminate another $40 million by the end of the year through ongoing efforts to right-size the cost structure.
Analysts are mixed on the success of the turnaround so far.
For Tom Forte, a managing director at investment bank Maxim Group, it's working. "It's unusual for a management team to walk away from sales," he said. But the purchases the company is leaving behind are discounted, low-margin ones, he said. Plus, Fossil is investing in marketing new products, such as watches in collaboration with singer Nick Jonas. Forte sees this as a positive.
"Usually, a company doesn't go heavy on marketing unless it's highly confident on where it stands in the turnaround strategy," he said. "Early-stage turnarounds are usually all about expense management. That's an element that's not about expense management."
S&P Global Ratings analyst Lauren Slade has a different view. Fossil is in its second turnaround or restructuring effort in the past roughly three years and sales remain pressured, she said. "I think it's still a story that's under way," said Slade. "We've seen some narrowing of the sales losses and of the operating losses, but certainly something that still remains to be proven."
Write to Jennifer Williams at jennifer.williams@wsj.com
(END) Dow Jones Newswires
December 16, 2025 06:00 ET (11:00 GMT)
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