Fossil Group, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Fossil Group fourth quarter and full year 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 will turn the call over to Christine Graney 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 Grevin, 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 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 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 FossilGroup.com. With that, I'll now turn the call over to Franco to begin.

Hello, everyone, and thank you for joining us. 2025 was a transformative year for the company, defined by operational excellence and financial performance that exceeded our expectations. We took bold steps to advance our turnaround plan, delivering strong execution against the three pillars we laid out just one year ago. Those include refocusing on our core, right-sizing our cost structure, and strengthening our balance sheet. We built a brand-led, consumer-focused operating model, assembled an exceptional management team, and established a culture of accountability. We recently appointed a new chief people officer who will be a valuable part of our efforts to continue strengthening our organizational capabilities, culture, and customer-first mindset. I'm incredibly proud of our teams and wanted to thank everyone across the organization for their energy, passion, and hard work, and for upholding our commitment to keep the consumer at the center of everything we do. Our turnaround efforts gained traction quickly, enabling us to end the year ahead of our initial plan. We delivered full-year performance above the updated guidance we provided halfway through the year. Net sales totaled $1 billion. Gross margin expanded the 380 basis points to 55.9%, and we reduced SG&E by over $100 million. This drove a positive adjusted operating income of $11 million, a year-over-year improvement of 48 million. Now I will turn to the operating highlights and key accomplishments of 2025. First and foremost, we created a fossil brand platform for the future. We accomplished this by improving the customer journey and delivering a robust pipeline of product innovation, all supported by powerful heritage brand storytelling. At the same time, we successfully established a full-price selling model by radically transforming our promotional cadence across channels. This enabled us to return the business to a healthy gross margin profile in the mid-50s and improve profitability in both our wholesale and direct-to-consumer channels. Importantly, this has strengthened our wholesale-partner relationship creating a powerful flywheel effect that is delivering benefits across all channels. Next, we re-energize our core license brands, Microcourse, Emporio Armani, Armani Exchange, and Diesel. Most notably, strategic investment in point-of-sale and a renewed focus on specialty watch retail enable us to improve our in-store presentation and performance in the wholesale channels. We also drove a momentum in our traditional watch business by prioritizing our most scalable markets in the wholesale channel, including the US and India. This resulted in wholesale traditional watch growth in our core brands of 2% globally for the full year in 2025. At the same time, we took a clear action to right-size our cost structure and instituted a cultural strict cost control. Lastly, and as importantly, we transformed our balance sheet. We now have the runway and flexibility to support the next phase of our turnaround, build a sustainable, profitable business model, and deliver long-term value creation. We have entered 2026 well-positioned to leverage our foundational assets, including our 40-plus year heritage, iconic brand, innovative design, global reach, and talented teams. Also notable, the industry is experiencing strong momentum across markets and demographies. At the same time, our comeback is capturing increasing attention from consumer, partners, and the press. Just last month, I was at the Inorganta Watch and Jewelry Show in Munich, where many of our brands were center stage. In 2026, we will be making more bold moves on our journey to reinvent Fossil Group and lead the industry. It's an exciting time for the company as we continue to foster a collaborative, creative, and energetic culture with accountability and a strong commitment to win. We're turning the page to a new chapter and evolving our three strategic pillars as follows. Returning to profitable growth, optimizing our operating model, and building shareholder value. Over the next three years, this evolution of our turnaround is expected to generate a return to top-line growth, high single-digit adjusted operating margin, and positive free cash flow. More on our financial outlook shortly. But first, let's talk about the initiative we will be executing against to further advance our turnaround. Within our first pillar, Returning to Profitable Growth, our teams will be focusing on the fine initiative across the positive brand platform to fuel innovation, deepen consumer engagement, grow the traditional watch business, and reinvigorate our jewelry and leather categories. In 2026, we'll be fueling innovation through design, technology, and storytelling. This includes the reigning key icons continuing to delight our customers with culturally relevant collaboration, reviving one of Fossil's most sought-after Y2K innovations, and introducing a selected group of premium products. Let me take you through the roadmap. Starting with our watch icons, which make up a significant portion of our business, we will be innovating and expanding upon key collections, including our Everett, Arlo, machine, and Raquel platforms, and our watch rings. Additionally, we will be doubling down on our minis collection across all of our top women's platforms. Following the success of 2025 collaboration, such as Fantastic Four, Galactus, Minecraft, Shelby, and Superman, we will continue activating culturally relevant partnership with both new and returning properties in 2026. These collaborations deliver highly engaged audiences, customer acquisition at scale, and meaningful earned media. Importantly, as we anniversary successful 2025 partnership, we're focusing on converting collaboration shoppers into long-term foster customers, improving retention and lifetime value. One of our most significant interactions this year is the return of Fossil Big Tick, a bold animated movement that combines analog craft with digital innovation. Originally introduced in the late 90s, Big Tick is one of Fossil's most recognizable and emotionally resonant designs. The designs are geared towards millennial watch consumers, nostalgic for Y2K, Gen Z consumers crowding an analog forward accessory. and the male watch enthusiast looking for a big, bold watch to match his style. Earlier this month, we recently launched a nostalgic limited edition Y2K capsule, quickly followed by a reinvention of Big Tech machine. Initial response from consumer and acclaim from the press has been tremendous thus far. Our big tech marketing campaign reflects the evolution of our creative strategy, featuring a dynamic animated concept built around the idea that everything big tech touches becomes larger than life. It's bold storytelling, reinforced product distinctness, while driving modern relevance. We have a lot more exciting basic innovation coming and anticipate the momentum we will continue to build as we roll out additional collections throughout the year. Another significant innovation coming later this year is the introduction of Signature, Fossil's first premium platform in more than a decade. Rotated in craftsmanship and timeless design, the collection represents an important evolution for the brand and is designed to resonate with watch enthusiasts and collectors alike. Signature will also introduce a new level of technical sophistication and assembly that reflects hostile continued commitment to quality and innovation. We look forward to sharing more details in the coming quarters. While we're first and foremost a watchmaker, our jewelry and leather offerings expand our expression as a necessary brand Our strategy for this category focuses on staying true to our brand DNA of quality, value, and timelessness. We're repositioning the business with modern design, including jewelry introduction inspired by our most important watch collection and increased personalization through engravable offerings. We will be supporting all of this product innovation with a focused, high-impact marketing roadmap. In 2025, we concentrated our investments in priority markets, and the results validated that discipline, brand-led investment, drives stronger engagement and return. This year, we will continue scaling this approach, deploying our resources to opportunities where we can build further brand equity and accelerate growth. Our 2026 storytelling is designed to celebrate fossil heritage, reinforce our quality and design credential, and elevate cultural relevance. A great example of this is our exciting partnership with brand ambassador Nick Jonas. Nick has proven to be an authentic and highly engaged partner, currently anchoring campaign across Nick Jonas' collection, Machine, and Big Tick. Moving now to our omni-channel initiatives, which are designed to modernize our brand expression of wholesale, improve our e-commerce business, and optimize our fossil store portfolio. In the wholesale channel, we are focusing on our top customers in must-win markets, including the US, France, Germany, and India. For example, in the US, the strength of the fossil brand, our robust product pipeline, and engaging campaigns are driving growth with key partners. We're expanding distribution to specialty and energy retailers that can help to build the brand awareness and create excitement among a younger demographic. In the e-commerce channel, we have reshaped our business through two major actions over the past 18 months. First, we dramatically reduced our discount posture by more than 50%, establishing a full price-to-selling model. Next, We implemented a comprehensive redesign of the fossil site, featuring richer storytelling and a more seamless customer journey. The result is a smaller but more profitable sales channel with higher AUR across the entire marketplace. As we pursue long-term growth, we will continue to deliver consistent price and promotion while investing in personalization, inspiration, and more cohesive brand representation to drive customer engagement and strengthen brand perception. In the retail channel, we are optimizing our store portfolio and deploying our store of the future strategy in the US and EMEA. We're very pleased with the initial results from our store of the future concept, which blends lifestyle selling, data-led decision-making, and a purpose-driven strategy Importantly, it is shifting our selling culture to proactively planning and telling at outreach, personalized service, and community focus. This has a result in improvement across key performance indicators, including AUR and conversion. Turning to our co-licensed brands, we're focusing on initiatives to return the brand to sustained sales growth. We believe there is a significant opportunity to unlock potential in microcourse jewelry and men's watches. Our strategy for course jewelry is centered on modern wearable design while leaning into one of our strongest assets, the MK logo. We have recalibrated our pricing architecture to improve accessibility and enhance our competitive position. Men's watches, we are returning to proven microcourse design codes and investing behind hero platforms that have historically driven scale. We will do this by focusing on bold, confident styling, recognizable attributes, and strong perceived value within key price tiers. For the Emporio Armani brand, we're pushing opportunities in selected market outside of China, where there is a strong local demand for premium products and additional runway in the wholesale channel to broaden assortment and leverage longstanding partnerships. We're also continuing to drive their money exchange brand, which is experiencing strong momentum across major markets, including the U.S. and India. Key initiatives include elevating our retail presence, expanding distribution, building on the success of our icons, and delivering localized product offerings. Turning now to the final area of focus under our growth pillar. We see a significant opportunity in India, which has been the fastest growing large economy in the world for the past four years. This is an important strategic market where our brands have category leadership, strong momentum, and secular tailwind. I was in India last month with other members of our executive team as part of our focus on unlocking the full potential of this geography, where we are experiencing growth across all channels and brands. In 2026, we will be building further brand heat across our portfolio by broadening our assortment, entering premium price points, and introducing limited edition, all supported by dynamic storytelling. We will also be increasing our footprint to expand our distribution, opening additional wholesale doors with both new and existing partners, and opening new fossil retail stores. We have a highly seasoned team in India who is committed to driving continued growth and rapidly scaling the business. Moving now to our second turnaround pillar, optimizing our operating model. We made significant progress toward wide-sizing our expense structure in 2025. With this improved baseline and an emphasis on stricter cost control, we're well positioned to continue to drive optimization across the organization. We will be focused on initiatives to strengthen our omnichannel strategy and go-to-market execution while prioritizing operational investment and infrastructure improvement. Key areas of focus include sharpening our go-to-market execution to elevate point-of-sales engagement, reducing complexity and improving business agility, enhancing our digital and technology infrastructure, delivering best-in-class supply chain performance, and prioritizing high-impact projects and key performance indicators. I will now turn to our third and final pillar, building shareholder value. The rapid progress we made in year one of the turnaround, our accelerating profit profile, and our strengthening balance sheet give us the conviction that we're set up to create lasting value for all of our stakeholders. We expect to continue improving profitability affording us the optionality to strategically invest for growth and value creation. Building on the strong execution and financial performance we deliver in 2025, we're pleased to be raising the financial target we introduced one year ago. As a reminder, we previously communicated 2027 sales target of at least $800 million. We now expect to surpass that benchmark one year earlier than planned, In 2026, we expect sales in the range of 945 to 965 million, highlighted by a return to top-line growth in the fourth quarter. Additionally, we expect positive adjusted operating margin of 3% to 5% and breakeven free cash flow. Our commitment to operational excellence and returning the business to profitable growth is grounded in a focus on discipline, accountability, and performance. I'm grateful to our team's partners and shareholders for their continuing support of Fossil Group and look forward to reporting to you on our progress throughout the year. Before I turn the call to Randy, I would like to acknowledge the current geopolitical climate. As a global company, we are disheartened by the events occurring in the Middle East, and we're closely monitoring the safety and well-being of our employees and partners in the region. Now I will turn the call to Randy to discuss the financials. Thank you, Franco.