Fossil Group, Inc. announced financial results for the first quarter ended 4th April, 2020 and provided an update on the company’s response to COVID-19.
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For the first quarter of 2020, worldwide net sales totaled $390.7 million, a decrease of 16% on a reported basis and 15% in constant currency compared to $465.3 million in the first quarter of fiscal 2019. The year-over-year decline was primarily due to the impact of COVID-19, as stores and most of the company’s wholesale partners’ stores were closed beginning midMarch. Global retail comparable sales in constant currency decreased 14% on a 14-week calendar basis and were trending up 1% prior to COVID-19 store closings. The following table provides a summary of net sales performance, on both an as reported and constant currency basis, for the first quarter of 2020 compared to the 2019 first quarter.
Gross profit totaled $140.4 million compared to $248.0 million in the first quarter of 2019. Gross margin decreased to 35.9% from 53.3%, primarily reflecting liquidation and increased inventory valuation adjustments of older generation connected products and minimum licensed product royalties resulting from decreased sales due to the impact of COVID-19.
Operating expenses totaled $274.7 million compared to $267.9 million a year ago. Operating expenses in the first quarter of 2020 included $9.4 million of restructuring costs, primarily related to employee costs, professional services and store closures, approximately $20 million of non-cash charges related to operating lease right-of-use and intangible asset impairment, and minimum marketing royalties. Operating expenses in the first quarter of 2019 included $10.2 million of restructuring costs.
First quarter operating loss was $134.3 million compared to an operating loss of $19.9 million in the first quarter of 2019. Net loss totaled $85.6 million, or ($1.69) per diluted share, compared to net loss of $12.2 million, or ($0.25) per diluted share, in the first quarter of 2019. Per share data included restructuring charges of $0.15 per diluted share in the first quarter of 2020 and $0.16 per diluted share in the first quarter of 2019. During the first quarter of fiscal 2020, currencies, including both the translation impact on operating earnings and the impact of foreign currency hedging contracts, unfavorably affected loss per diluted share by approximately $0.12.
During 2019, the company initiated New World Fossil- Transform to Grow Program 2.0, which is designed to deliver gross margin benefits and operating expense reductions totaling $200 million over the three-year period from 2019 to 2021. As a result of the unprecedented impact of COVID-19, the company is significantly expanding its NWF 2.0 transformation program to include additional organizational efficiencies and to accelerate digital initiatives, resulting in additional cost savings of $50 million in 2020.
Kosta Kartsotis, Chairman and CEO, stated, “As people around the globe continue to face the many challenges presented by COVID-19, we are taking actions to mitigate the headwinds and chart our path forward amid a new operating environment. We are proud of our teams who have prioritized the health and safety of our communities while also moving quickly to protect our business, strengthen our financial position and accelerate our strategic priorities for 2020 and beyond.”