Fossil Group, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Fossil Group third quarter 2025 earnings call. At this time, all parties are in listen-only mode. This conference call 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 me on the call today is Franco Fogliato, Chief Executive Officer, and Randy Grebin, Chief Financial Officer. Before we begin, I would like to remind you that information made available during this conference call contains forward-looking information, and actual results 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 8-K, 10-Q, and 10-K 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, as well as certain non-GAAP financial measures. 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 on FossilBrews.com. With that, I'll now turn the call over to Franco.

Thank you, Christine. Good afternoon, everyone, and thank you for joining us today. I'm pleased to open this call with the headline that we have successfully transformed our balance sheet, marking a major milestone under our turnaround plan. We announced today the completion of our bond restructuring, which extends our debt maturity to 2029 and brings more than $32 million of new capital to the business. Strengthening the bond sheet was one of the three pillars under our turnaround plan and has been a major focus of our team over the past year. After months of hard work and with the support of key stakeholders, we now have the financial flexibility needed to drive the business forward and turn the page to our next phase of long-term value creation. Another noteworthy achievement I want to highlight is Fossil's second consecutive year on Time Magazine list of world's best brands. For 2025, Fossil made every country list survey, ranking as the number one watch brand in Germany number two in the U.S., number five in both the U.K. and Mexico. We're incredibly proud of this recognition by consumers around the world, which speaks to fossil-rich manufacturing and storytelling heritage. Importantly, this achievement comes against the backdrop of a strengthening watch market globally. U.S. Circana data from Q3 2020 highlights indirect market growth versus last year of low single digits, with the department and specialty store channel up low double digits. For the fossil brand in Q3, we saw traditional watch sales trending better than the market, up high double digits in these channels. This fundamental industry and brand strength underpins the ongoing success of our tournament plan. Moving now to our Q3 results, we're pleased to have delivered another quarter of strong financial performance. We narrowed our sales decline to 7%, reflecting year-over-year improvement in both the wholesale channel and our fossil retail stores. Global growth in the wholesale demonstrates continuing strength from our strategic initiatives as well as the shift in the timing of certain shipments from Q4 into Q3. A key call-out this quarter is the quality of sales. Average unit retail is higher in both our wholesale and direct-to-consumer channels, reflecting a strong combination of lower promotional activity, product mix, and pricing architecture. Third quarter gross margin remains strong, notwithstanding the recognition of minimum royalty deficit, which Randy will cover during his remarks. Our focus on full price selling has fundamentally changed the margin structure of the business, positioning us to return Fossil Group to a best-in-class gross margin profile in the mid-50s this year. During Q3, our disciplined approach to promotion and strict cost control translated to the bottom line. where we substantially narrowed our adjusted operating loss year over year. The improvement on a year-to-date basis is even more pronounced, moving from a loss of $58 million in the first nine months of 2024 to nearly break-even for the same period in 2025. For full year 2025, we expect to achieve a break-even to slightly positive adjusted operating margins. Our teams are continuing to deliver sharp execution across our three turnaround pillars, refocusing on our core, right-size our cost structure, and strengthen the balance sheet. Looking at the strategy under our first pillar, refocusing on our core, over the past nine months, we have reunited our design and storytelling engines to build a robust fossil-brand platform for the future. In Q3, Nick Jonas officially took the helm as a fossil global brand ambassador. Since the August launch, the worldwide campaign has generated nearly 6 billion impressions. We kicked off with a one-day event for France and media in New York City, which included a surprise appearance by Nick, followed by regional events in major cities, including Berlin, Manila, Mumbai, and Paris. Simultaneous with the campaign launch, we partnered with Nick to introduce an exclusive product line for Fossil. This bold and nostalgic collection has exceeded our expectations in its first few months. Also compelling, some of the best-selling items serve for $300-$400, a much higher price point for Fossil, which is driving higher average unit retail. Additionally, Nick's global reach and influence is attracting a younger male democratic to Fossil. Together, the campaign and product launches will generate positive global press coverage and draw the incremental traffic to both our website and stores. In addition to the success of our new collection with Nick Jonas, Fossil collaboration with Fantastic Four and Galactus have been standout performance in key markets globally. In the U.S., Fantastic Four sold out during our early access event online. It was out of stock in stores within week one. In EMEA, the collaboration sold out online within three days. Galactus was also a tremendous success selling out online in both the U.S. and EMEA on day one. For the upcoming holiday season, we will continue to amplify the Nick Jonas collection and position Fossil at the center of key shopping moments. Initial trends in our DTC channels indicate that our holiday collation is resonating with consumers with momentum building week over week. We will be extending that energy globally with initiatives like our immersive pop-up in Les Marais in Paris during December, which is designed to showcase fossil gifting spirit in a culturally relevant way. Across markets, we're staying committed to brand investment, working closely with media and PR partners to build awareness, desiderability, and brand heat. Turning now to our co-licensed brand, Armani Coals & Diesel. We're continuing to generate improved performance in key markets across the Americas, EMEA, and Asia, driven by product innovation as well as our investments in point-of-sales and in-store presentations. From a brand perspective, Coarse, Armani Exchange, and Diesel all demonstrated year-over-year growth in the wholesale channel during the first nine months of the year, while the Armani brand remained pressured by the macro environment in China. Next, we continue to make progress towards optimizing our global wholesale footprint, which can be seen in many of our leading indicators. During the third quarter, the wholesale channel increased mid-single-digit globally, with notable strength in the EMA and Asia region. In the US, traditional watch performance was up slightly in wholesale, while the fossil brand grew double-digit. Within Asia, both India and Japan grew double-digit. We recently strengthened our team in Asia with the appointment of Devin Leong as a general manager of the region. Devin is a seasoned leader who will advance our global commercial strategy to drive and enhance market presence and accelerate growth across the region. In ANA, the transition to a distributor-led model in select European markets is enabling us to simplify our operation while driving increased sales and profitability. Most recently, we signed a new distribution agreement with Morellato Group in Italy, which takes effect January 1, 2026. Modelato brings decades of expertise in watches and jewelry, along with a deep understanding of local markets, which is expected to help us extend our reach and fuel long-term profitable growth in this key geography. Thus far, we have transitioned six European markets to a distributor model and will continue to evaluate opportunities to drive scalable growth in highly relevant markets going forward. As I mentioned earlier, our initiative to strengthen channel profitability are returning the business to a healthy gross margin profile. This is primarily being driven by our commitment to a full price of selling model, which was one of the first major initiatives we put into place when I joined the company a little over one year ago. This discipline is driving improved traffic quality at both our fossil stores and e-commerce website, while also generating higher average unit retail. Traffic and conversion trends in our fossil retail stores improved notably in Q3, with particular strength in the U.S. as our new clientele initiative started to gain traction. Our store of the future, which we discussed in our Q2 learning call, has been rolled out to all of our U.S. stores in over a dozen EMEA locations. The mission behind this new concept is to deliver a standout experience for the customer. We have remade retail to meet the evolving needs of today's guests, empowering stores to shine as a distinctive, experience-driven destination where personalized service leads, community matters, and strong results follow. We believe we can unlock profitable sales growth by blending lifestyle selling, data-informed decision, and a purpose-driven strategy with the goal of creating meaningful impact beyond the sale. The initial results are compelling for driving increased traffic to our store, fueling higher average order value, and attracting new customers. Looking now at our second turnaround pillar, right-sizing fossil growth cost structure. We're taking these actions to strengthen our operating model and continue to act with financial rigor to position the business for long-term profitable growth. Year-to-date, we have generated over $60 million in cost savings and reduced our SG rate by 260 basis points on a 10% sales decline achieving better leverage on our cost structures as we transform the business. Lastly, I'm happy to reiterate that we have delivered on our third key pillar, strengthening the balance sheet. This week marks a significant turning point of our business and sets us up for the long-term success. Randy will share more details with you in just a few moments. Entering the final month of the year, we are reiterating our financial guidance and remain confident in our path to drive profitable growth. We have strengthened our core, the turn to healthy gross margin profile, right-sized our cost structure, improved working capital management, and fortified our balance sheet. While there are a number of successes to celebrate, we are clear about what we have yet to accomplish. Our teams are energized by the opportunity in front of us and committed to delivering flawless execution as we strive to build a stronger policy group and deliver value to all of our stakeholders. Now I will turn the call over to Randy to review the third quarter financial and discuss our outlook.