Fossil Group, Inc. reported its worldwide net sales increased by 59 percent in the second quarter ended 3rd July, 2021.
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“Our strong second quarter performance reflects solid operational execution across all channels and regions in a challenging consumer environment. We are encouraged by improving consumer demand in our largest markets and our core category of traditional watches. Based on our strong year-todate performance and strengthening demand signals going into the second half of the year, we are raising our 2021 outlook. Looking ahead we are pleased that our digital initiatives, brand-building efforts and ongoing transformation activities are positioning the business to deliver sustained sales and earnings growth over the long-term,” said Kosta Kartsotis, Chairman and CEO.
Net sales totaled US$410.9 million, an increase of 59 percent on a reported basis and 51 percent in constant currency compared to US$259.0 million in the second quarter of fiscal 2020. Net sales, in constant currency, grew in all regions with the Americas at 64 percent, Europe at 44 percent and Asia at 41 percent versus the same quarter last year. Additionally, total digital sales grew 10 percent, in constant currency, in the second quarter and represented 41 percent of worldwide net sales.
Gross profit totaled US$221.8 million compared to US$140.6 million in the second quarter of 2020. Gross margin decreased 30 basis points to 54.0 percent versus 54.3 percent a year ago. The year-over-year decrease primarily reflects a non-recurrence of the prior year’s reduced minimum licensor royalty costs and increased Americas regional sales mix. These decreases were largely offset by improved product and channel mix, a favorable currency impact and reduced tariffs.
Operating expenses totaled US$207.5 million compared to US$177.4 million a year ago. As a percentage of net sales, operating expenses were 50.5 percent in the second quarter of 2021 compared to 68.5 percent in the prior year second quarter. Selling, general and administrative (“SG&A”) expenses were US$200.5 million compared to US$163.5 million in the second quarter of 2020.
The year-over-year increase reflects higher marketing and compensation costs, primarily due to lower levels of expense during the onset of the COVID-19 pandemic in the second quarter of 2020. As a percentage of net sales, SG&A expenses were 48.8 percent in the second quarter of 2021 compared to 63.1 percent in the prior year second quarter.
Operating income increased to US$14.3 million compared to an operating loss of US$36.8 million in the second quarter of 2020. Adjusted operating income totaled US$21.3 million compared to an adjusted operating loss of US$22.9 million in the second quarter of 2020.
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Net loss totaled US$1.2 million, compared to a net loss of US$22.5 million in the second quarter of 2020, as operating income of US$14.3 million was more than offset by the provision for income taxes and interest expense. On a per share basis, net loss was US$0.02 per diluted share, compared to a net loss of US$0.44 per diluted share in the second quarter of 2020. Per share data included restructuring charges of $0.09 per diluted share in the second quarter of 2021 and US$0.16 per diluted share in the second quarter of 2020. During the second quarter of 2021, currencies favorably affected income per diluted share by approximately US$0.13.