Fossil Group, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Fossil Group's second quarter 2021 earnings call. At the moment, all parties are in listen-only mode. This conference is being recorded and may not be reproduced in whole or in part without written permission from the company. Now I'll turn the call over to Christine Greeney of the Blue Shirt Group to begin.

Hello, everyone, and thank you for joining us. With us today on the call are Kosta Kartsotis, Chairman and CEO of Jeff Boyer, Chief Operating Officer, Sunil Doshi, Chief Financial Officer, and Greg McKelvey, EVP and Chief Commercial Officer. I would like to remind you that information made available during this conference call contains forward-looking information and the actual results could differ materially from those that will be discussed during this call. Fossil Group's policy on forward-looking statements and additional information concerning a number of factors that could cause actual results to differ materially from such statements, is readily available in the company's Form 8K and 10Q reports filed with the SEC. In addition, Fossil assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. During today's call, we will refer to constant currency results. Please note that you can find a reconciliation of actual results to constant currency results and other information regarding non-GAAP financial measures discussed on this call in Fossil's earnings release, which was filed today on Form 8K and is available in the Investors section of FossilGroup.com. With that, I'll now turn the call over to Costa.

Thanks, Christine. Good afternoon, everyone, and thank you for joining us today. We hope everyone is well and staying safe. We are pleased with our second quarter performance, which exceeded our guidance and reflected growth across all of our regions and categories. We achieved reported net sales growth of 59%, delivered strong gross margins, and maintained solid cost controls. As a result, we delivered adjusted operating income of $21 million, which significantly outpaced our 2019 levels. More importantly, Our Q2 results highlight that our strategic focus is gaining traction and enabling us to begin driving profitable sales growth. Now turning to Q2, our digital first focus continues to deliver results. In Q2, digital sales penetration was 41%, which includes sales on our own e-commerce sites, global third-party platforms, and wholesale.com sites. Digital sales increased 10% versus 2020, and were up 82% versus 2019. Each region's digital sales mix has grown substantially since 2019, and all indications point to exciting opportunities to further grow sales and deepen customer relationships. Looking at the second quarter of our region, starting with Asia, growth in mainland China remained very strong, up 38% versus prior year, and up 82% versus 2019. Performance in India, while positive in Q2 with triple-digit growth versus prior year, was still at depressed levels due to pandemic conditions. We continue to view China and India as high-growth markets with sustained long-term opportunities across all brands and categories. The Americas region delivered our strongest growth, up 64% in constant currency, primarily driven by the continued strengthening of our U.S. business. Sellout was particularly strong in our traditional watch category as we saw growth versus 2019 in our wholesale, owned e-com, and pure play channels. Our sellout trends in this key category of market are encouraging as we head into the back half of the year. Stepping back, we are on a growth path in the United States market as a result of the significant progress our teams have made on driving digital and building brand heat while transforming our distribution models. We returned to growth in the EMEA region this quarter, with net sales up 44%, which is a positive outcome considering the market had a lot of closures during the quarter. We are pleased with the overall transformation of the business there and feel we are in a good position as the markets open up. Turning now to our brands and product categories, we achieved strong top-line sales growth in both our owned and portfolio brands. Traditional watches performed well in all three geographic regions with products that celebrated iconic designs, sustainable materials, and were tailored for localized consumers. It's also worth noting that we are seeing positive performance in our jewelry category, which was up triple digits versus last year and almost 68% versus 2019. While jewelry is approximately 10% of our sales, it's a high-margin category, where our design and distribution capabilities make this a great adjacency for ongoing growth. Now turning to initiatives that are driving brand heat. In Q2, we leaned into key campaigns that generate significant brand heat for our brands on a global scale. First, our global ProPlanet campaign highlighted eco-friendly products and materials across multiple brands, which generated significant media impressions and created some of the highest customer engagement metrics we've seen in our own e-commerce channels. Second, our Global Pride campaign featured product and collaborations that not only drove engagement, but also resulted in a sellout of our limited edition collections. Both of these campaigns helped drive over 20% growth in our customer database versus a year ago. Finally, the end of Q2 marked the launch of our Fossil Space Jam collection, in conjunction with the worldwide release of Disney's Space Jam movie. The Fossil brand's limited edition Space Jam watch was one of our most successful media launches to date and highlighted our ability to bring the best of the Fossil brand's vintage DNA to life through collaborations with iconic characters and brands. While still ongoing, we are seeing this campaign bring in new customers to the brand. As we enter the second half of the year, we remain focused on the strategic pillars that have been driving our return to profitable growth. Digital acceleration, building brand heat through product innovation and marketing, our ongoing operating efficiency initiatives, and the growth opportunity in China and India. We are making significant progress on our digital and e-commerce initiatives, and we're pleased to announce the addition of our chief digital officer to the executive team. Holly Breedis has joined us from McKinsey. where she built exceptional expertise in driving customer-centric digital transformations for retail brands. In this role, Holly will lead our global efforts to drive digital sales, scale our customer data strategy, and deepen our marketing analytics capabilities. Second, with respect to building brand heat, we will lean into key markets, brand, and product launches, with greater investment in marketing in the third and fourth quarters to drive top-line sales. Our product innovation initiatives will continue in the back half of the year as we bring our next generation of connected watches to market. Although we are still navigating a global pandemic, we have made significant progress on the ongoing transformation of the business and feel we are well positioned to capitalize on the opportunities ahead of us. Through our new world fossil transformation programs and careful investments in technology, innovation, and talent, we have established a model that is poised to deliver profitable growth. As a result of our strong first half results and the momentum we're seeing as our strategic initiatives take hold, we are raising our sales growth outlook for the full year to a range of 14% to 17% and our adjusted EBITDA margin outlook to 6% to 8%. Sunil will provide additional perspective on our guidance during his remarks. In closing, We would like to thank our Fossil team members all over the world for their relentless execution and focus over the past few years. Their commitment to excellence has enabled us to transform the company and set it up for long-term success. Now, over to Sunil to discuss the financials.