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Fossil announces second quarter financial results

Fossil Group

Fossil Group, Inc. announced financial results for the second quarter ended 4th July, 2020.

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“Our second quarter results were impacted by broad-based global store closures due to COVID-19 throughout much of the quarter. Our teams have responded quickly and executed well in the face of significant COVID-19 impacts. In navigating this challenging environment, we have taken aggressive actions to increase liquidity and reduce costs, and further engaged with our consumers through digital initiatives and product innovation. Importantly, we are maintaining our focus on the strategic priorities we outlined at the beginning of 2020, including the acceleration of our cost reduction actions through NWF 2.0 and the expansion of our digital capabilities to help drive continued growth in the e-commerce channel,” stated Kosta Kartsotis, Chairman and CEO.

Worldwide net sales totaled $259.0 million, a decrease of 48% on a reported basis and 47% in constant currency compared to $501.4 million in the second quarter of fiscal 2019. The year-over-year decline was primarily due to COVID-19 related retail closures, including both Fossil stores and wholesale doors. Partly offsetting brick-and-mortar sales declines was growth in digital channels, with owned e-commerce websites increasing 138% and dedicated third party marketplaces growing 20%, both on a constant currency basis.

Gross profit totaled $140.6 million compared to $265.1 million in the second quarter of 2019. Gross margin increased 140 basis points to 54.3% versus 52.9% a year ago, primarily reflecting a higher mix of e-commerce sales and reduced minimum licensor royalty costs, partially offset by heightened promotional activity and increased freight and duty costs.

Currency favorably impacted the gross profit margin rate in the second quarter of 2020 by approximately 50 basis points. Operating expenses totaled $177.4 million compared to $263.4 million a year ago. Operating expenses in the second quarter of 2020 included $10.5 million of restructuring costs, primarily related to employee costs, professional services and store closures, while operating expenses in the second quarter of 2019 included $7.3 million of restructuring costs. Second quarter selling, general and administrative expenses decreased on a year-over-year basis, reflecting lower compensation, marketing and discretionary costs.

Second quarter operating loss was $36.8 million compared to operating income of $1.7 million in the second quarter of 2019. Net loss totaled $22.5 million, or ($0.44) per diluted share, compared to net loss of $7.3 million, or ($0.15) per diluted share, in the second quarter of 2019. Per share data included restructuring charges of $0.16 per diluted share in the second quarter of 2020 and $0.11 per diluted share in the second quarter of 2019.

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During the second quarter of fiscal 2020, currencies, including both the translation impact on operating earnings and the impact of foreign currency hedging contracts, favorably affected loss per diluted share by approximately $0.05.

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