Key Highlights

  • Net income was USD 11.7 million, or USD 0.19 per diluted share, against a net loss of USD 39.9 million, or USD 0.76, a year earlier; adjusted Net Income was USD 14.2 million, or USD 0.23 per share.
  • Net sales rose 0.4% to USD 271.2 million, or 2.0% in constant currency, while gross Margin widened 10.8 points to 59.8% from 49.0% in the prior-year quarter.
  • Adjusted EBITDA was USD 36.7 million, or 13.5% of net sales, compared with a loss of USD 15.0 million a year earlier, and Operating Income was USD 25.3 million against a loss of USD 21.7 million.
  • Full-year 2026 net sales guidance rose to USD 980 million to USD 990 million, with adjusted Operating Margin of 5.5% to 6.5% and positive free Cash Flow expected.

Gross Margin Jump Turns a Year-Ago Loss Into Profit

Fossil Group (NASDAQ:FOSL) reported fiscal third-quarter results for the period ended October 3, 2026, in a release dated November 10, 2026. Net sales were USD 271.2 million against USD 270.2 million. Gross Profit rose to USD 162.3 million from USD 132.4 million, and the company tied the 59.8% margin to lower licensed Brand minimum royalties, earlier recognition of those royalties and better product margins from full price selling, sourcing and reduced tariffs. Operating expenses fell 11.1% to USD 137.0 million, including USD 2.9 million of restructuring costs. Constant currency adjusted operating income was USD 30.2 million, an 11.0% margin, versus an adjusted loss of USD 14.4 million.

Fossil Brand and Asia Lead While Leathers and Jewelry Slip

The company designs and sells lifestyle accessories, including watches, jewelry and handbags, under owned brands such as Fossil and licensed names such as Michael Kors and Armani Exchange. In constant currency, the Fossil brand grew 13.6%, traditional watches rose 6.4% and Asia increased 15.1%, while Europe fell 5.6%. Leathers dropped 20.5% and jewelry fell 10.8%. Wholesale sales rose 4.4%, but direct to consumer sales fell 5.9%, with store closures costing about 190 basis points. On the call, management said about USD 10 million of wholesale shipments moved from the fourth quarter into the third, and that it extended its Diesel license through 2032.

Raised Outlook Meets Higher Interest Costs and a 44.6% Tax Rate

Management raised 2026 net sales guidance to USD 980 million to USD 990 million, from a prior range it described on the call as USD 955 million to USD 975 million. Adjusted operating margin guidance moved to 5.5% to 6.5% from 4% to 6%. The Balance Sheet is thinner: Liquidity was USD 111.7 million, made up of USD 77.0 million of cash and USD 34.7 million of revolver availability, against total Debt of USD 208.0 million. Interest expense more than doubled to USD 8.9 million, the effective tax rate was 44.6%, and inventories rose 13.4% to USD 189.2 million. The company lists tariffs, debt covenants and licensor minimum Royalty commitments among its risks.

Where Things Stand

Mostly through margin, not sales growth. Fossil Group (NASDAQ:FOSL) grew sales just 0.4% but gross margin rose 10.8 points, partly because of lower and earlier-recognized minimum royalty charges, so the profit swing is not all from underlying demand. Operating costs also fell, and the Fossil brand and Asia grew. Offsetting that, direct to consumer sales fell, a 44.6% tax rate trimmed the result and debt remains USD 208.0 million. Management said fourth-quarter SG&A should run in the low 50s as a share of sales, so the holiday quarter and the raised guidance are the next tests.