Fossil Group, Inc. (FOSL) Bundle
Understanding Fossil Group, Inc. (FOSL) Revenue Streams
Understanding Fossil Group, Inc.’s Revenue Streams
The financial performance of Fossil Group, Inc. (FOSL) reveals significant insights into its revenue generation strategies and market dynamics as of 2024.
Breakdown of Primary Revenue Sources
Fossil Group's revenue is primarily derived from the following product categories:
- Watches: This category includes both traditional and smartwatches.
- Leathers: This segment encompasses a variety of leather goods.
- Jewelry: This includes various jewelry items.
- Other Products: This category covers miscellaneous items.
The total net sales for the year ended September 28, 2024, are summarized in the following table:
| Category | Net Sales (in millions) | Percentage of Total Net Sales | Prior Year Net Sales (in millions) | Percentage Change |
|---|---|---|---|---|
| Traditional Watches | 603.9 | 75.2% | 714.2 | (15.4)% |
| Smartwatches | 21.2 | 2.6% | 59.5 | (64.3)% |
| Leathers | 78.7 | 9.8% | 106.6 | (26.2)% |
| Jewelry | 81.9 | 10.2% | 91.0 | (10.0)% |
| Other Products | 17.0 | 2.2% | 19.8 | (14.1)% |
| Total | 802.7 | 100.0% | 991.1 | (19.0)% |
Year-over-Year Revenue Growth Rate
The company experienced a significant decline in revenue, with total net sales decreasing by $188.4 million or 19.0% compared to the previous year. The decline was attributed to reduced consumer demand across all regions and product categories.
Contribution of Different Business Segments to Overall Revenue
In the year-to-date period ending September 28, 2024, revenue contributions from different regions were as follows:
| Region | Net Sales (in millions) | Percentage of Total Net Sales | Prior Year Net Sales (in millions) | Percentage Change |
|---|---|---|---|---|
| Americas | 351.0 | 43.7% | 437.2 | (19.7)% |
| Europe | 250.6 | 31.2% | 301.6 | (16.9)% |
| Asia | 199.7 | 24.9% | 247.3 | (19.2)% |
| Corporate | 1.4 | 0.2% | 5.0 | (72.0)% |
Analysis of Significant Changes in Revenue Streams
Throughout the year, the company reported notable changes in its revenue streams. The most significant declines were seen in:
- Traditional Watches: Revenue dropped by $110.3 million from the previous year, reflecting a 15.4% decrease.
- Smartwatches: This segment saw a dramatic decline of $38.3 million, a decrease of 64.3%.
- Leathers: Revenue decreased by $27.9 million, which translates to a decline of 26.2%.
These declines were largely due to reduced consumer spending and increased competition in the watch and leather goods markets. Furthermore, the exit from the smartwatch category significantly impacted overall sales.
A Deep Dive into Fossil Group, Inc. (FOSL) Profitability
A Deep Dive into Fossil Group, Inc.'s Profitability
Gross Profit: For the Year To Date Period ended September 28, 2024, the gross profit was $412.6 million, a decrease of $66.5 million or 13.9% compared to $479.0 million in the Prior Year YTD Period. The gross profit margin increased to 51.4% from 48.3% in the previous year.
Operating Profit: The operating loss for the Year To Date Period was $87.7 million, compared to a loss of $119.0 million in the Prior Year YTD Period. The operating margin improved to (10.9)% from (12.0)%.
Net Profit: The net loss attributable to Fossil Group, Inc. for the Year To Date Period was $95.1 million, or $1.80 per diluted share, compared to a loss of $128.9 million, or $2.47 per diluted share in the Prior Year YTD Period.
| Metric | 2024 | 2023 | Change |
|---|---|---|---|
| Gross Profit | $412.6 million | $479.0 million | ($66.5 million) |
| Gross Margin | 51.4% | 48.3% | +3.1% |
| Operating Income (Loss) | ($87.7 million) | ($119.0 million) | $31.3 million |
| Operating Margin | (10.9)% | (12.0)% | +1.1% |
| Net Income (Loss) | ($95.1 million) | ($128.9 million) | $33.8 million |
| Diluted EPS | ($1.80) | ($2.47) | $0.67 |
Trends in Profitability: The profitability metrics show a general improvement in the operating and net margins over the past year. The operating loss has narrowed significantly, indicating better control over costs and improving sales performance.
Comparison with Industry Averages: The gross margin of 51.4% exceeds the industry average of approximately 45%, illustrating superior product pricing power and cost management. However, the operating margin of (10.9)% suggests challenges remain compared to the industry average of 5%-10%.
Operational Efficiency: Total operating expenses decreased to $500.2 million from $598.1 million, reflecting effective cost management strategies. Selling, general and administrative (SG&A) expenses were $466.7 million, representing 58.1% of net sales, which is higher than the previous year's 57.5%.
Restructuring expenses increased to $31.6 million from $27.7 million, indicating ongoing efforts to streamline operations amidst declining sales.
Adjusted EBITDA: For the Year To Date Period, Adjusted EBITDA was ($34.7 million), an improvement from ($61.0 million) in the Prior Year YTD Period, indicating a positive trend in operational cash flows despite losses.
| Adjusted EBITDA | 2024 | 2023 | Change |
|---|---|---|---|
| Adjusted EBITDA | ($34.7 million) | ($61.0 million) | $26.3 million |
| Adjusted EBITDA Margin | (4.3)% | (6.1)% | +1.8% |
Overall, the financial health of the company shows signs of recovery, but challenges remain, particularly concerning net profitability and operational efficiency.
Debt vs. Equity: How Fossil Group, Inc. (FOSL) Finances Its Growth
Debt vs. Equity: How Fossil Group, Inc. Finances Its Growth
Overview of Debt Levels
As of September 28, 2024, the company reported long-term debt of $173.4 million and short-term borrowings of $2.3 million. This represents a decrease from the previous year when long-term debt was $255.9 million and short-term borrowings were $0.5 million.
| Debt Type | Amount (in millions) | Previous Amount (in millions) |
|---|---|---|
| Long-term Debt | $173.4 | $255.9 |
| Short-term Debt | $2.3 | $0.5 |
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for the company stands at 1.06 as of the latest reports. This is in line with the industry average of approximately 1.0 to 1.5, indicating a balanced approach to leveraging debt against equity.
Recent Debt Issuances and Credit Ratings
In the recent fiscal year, the company issued $69.7 million in new debt and made payments totaling $102.9 million. The company maintained compliance with all debt covenants related to its credit facilities. As of September 2024, the company's credit rating reflects a stable outlook.
Balancing Debt Financing and Equity Funding
The company has strategically balanced its financing between debt and equity. With total stockholders' equity reported at $164.4 million as of September 28, 2024, the company has effectively used its financing options to support operational needs while managing its debt levels prudently.
| Financial Metrics | Amount (in millions) |
|---|---|
| Stockholders' Equity | $164.4 |
| Debt-to-Equity Ratio | 1.06 |
| New Debt Issued | $69.7 |
| Total Debt Payments | $102.9 |
Assessing Fossil Group, Inc. (FOSL) Liquidity
Assessing Fossil Group, Inc.'s Liquidity
Current and Quick Ratios
The current ratio for the company as of September 28, 2024, is 1.17, indicating a moderate liquidity position. This is calculated based on current assets of approximately $384.7 million and current liabilities of about $329.2 million. The quick ratio, which excludes inventory from current assets, stands at 0.76, reflecting potential liquidity concerns as it indicates that the company may not be able to cover its short-term liabilities without relying on inventory sales.
Analysis of Working Capital Trends
Working capital has seen a significant decline, with net working capital reported at $258.3 million at the end of the third quarter in 2024, down from $436.4 million in the prior year. This decline signals potential liquidity issues as the company has less buffer to meet short-term obligations.
Cash Flow Statements Overview
Cash flow from operating activities for the year-to-date period ending September 28, 2024, shows a positive trend, with cash provided amounting to $16.2 million, a notable improvement compared to cash used of $108.0 million in the prior year. This improvement is attributed to a U.S. tax refund of $57.3 million and reduced inventory purchases.
In terms of investing activities, cash outflow was reported at $4.7 million for capital expenditures, which includes proceeds from the sale of a building in France generating approximately $7.8 million in net proceeds. Financing activities reflected net debt repayments of $102.9 million, which indicates a focus on reducing leverage.
Potential Liquidity Concerns or Strengths
Despite the positive cash flow from operations, the significant decrease in working capital and the quick ratio below 1 suggest potential liquidity concerns. The company holds $106.3 million in cash and cash equivalents, down from $116.1 million in the prior year, indicating tighter liquidity conditions. Long-term debt has been reduced to $173.4 million, down from $255.9 million in the previous year, which may help improve the overall financial stability in the long run.
| Metric | 2024 | 2023 |
|---|---|---|
| Current Ratio | 1.17 | 1.35 |
| Quick Ratio | 0.76 | 0.89 |
| Net Working Capital | $258.3 million | $436.4 million |
| Cash Flow from Operating Activities | $16.2 million | ($108.0 million) |
| Cash and Cash Equivalents | $106.3 million | $116.1 million |
| Long-term Debt | $173.4 million | $255.9 million |
Is Fossil Group, Inc. (FOSL) Overvalued or Undervalued?
Valuation Analysis
In evaluating the financial health of the company, understanding its valuation metrics is crucial. This includes analyzing the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is approximately – (negative due to net losses). In comparison, the average P/E ratio for the industry is around 15.0.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 0.6, indicating the stock is trading below its book value, which is a potential indicator of undervaluation.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently – (negative due to EBITDA losses), contrasting with an industry average of 10.0.
Stock Price Trends
Over the past 12 months, the stock price has experienced significant volatility, ranging from a high of $5.00 to a low of $1.50. As of the latest update, the stock is priced at $2.00.
Dividend Yield and Payout Ratios
The company does not currently pay dividends, leading to a dividend yield of 0%. The payout ratio is also 0% as no earnings are distributed as dividends.
Analyst Consensus
Analyst consensus on the stock valuation is predominantly a hold, with some analysts suggesting it may be a buy at these undervalued levels. The average target price set by analysts is approximately $3.00.
| Valuation Metric | Current Value | Industry Average |
|---|---|---|
| P/E Ratio | – | 15.0 |
| P/B Ratio | 0.6 | 1.5 |
| EV/EBITDA Ratio | – | 10.0 |
| Current Stock Price | $2.00 | $3.00 (target) |
| Dividend Yield | 0% | 2.5% |
| Payout Ratio | 0% | 30% |
These metrics provide a clearer picture of the company's valuation status in the market context, highlighting areas that may be of interest to potential investors.
Key Risks Facing Fossil Group, Inc. (FOSL)
Key Risks Facing Fossil Group, Inc. (FOSL)
Overview of Internal and External Risks
The company faces significant risks that could impact its financial health. These include:
- Increased competition from both established brands and new entrants in the watch and accessories market.
- Adverse regulatory changes affecting manufacturing and distribution practices.
- Fluctuations in market conditions, particularly in consumer spending trends.
Operational, Financial, or Strategic Risks
Recent earnings reports highlight several operational and financial risks:
- Operating loss of $87.7 million for the Year To Date Period ended September 28, 2024, compared to $119.0 million in the prior year.
- Interest expense decreased to $14.1 million from $16.1 million, indicating some financial relief but still representing a notable cost.
- Net income (loss) attributable to the company was $(95.1 million), or $(1.80) per diluted share, compared to $(128.9 million), or $(2.47) per diluted share in the prior year.
Mitigation Strategies
The company has implemented several strategies to mitigate risks:
- Focus on cost reduction through restructuring activities, which incurred costs of $31.6 million in the Year To Date Period.
- Exit from the smartwatch category, which had previously seen a decline of 76.9% in sales.
- Improvement in product margins due to initiatives under the TAG Plan, resulting in a gross profit margin increase to 51.4% for the Year To Date Period.
| Financial Metric | 2024 (YTD) | 2023 (YTD) | Change |
|---|---|---|---|
| Operating Loss | $(87.7 million) | $(119.0 million) | $31.3 million improvement |
| Interest Expense | $14.1 million | $16.1 million | $2.0 million decrease |
| Net Income (Loss) | $(95.1 million) | $(128.9 million) | $33.8 million improvement |
| Diluted EPS | $(1.80) | $(2.47) | $0.67 improvement |
Cash and cash equivalents at the end of the Third Quarter were $106.3 million, compared to $116.1 million in the prior year. The company also reported net working capital of $258.3 million, down from $436.4 million at the end of the prior year quarter.
Future Growth Prospects for Fossil Group, Inc. (FOSL)
Future Growth Prospects for Fossil Group, Inc. (FOSL)
Analysis of Key Growth Drivers
The company is focusing on several key growth drivers to enhance its market position and financial performance. These include:
- Product Innovations: The company is shifting its focus back to traditional watches, which accounted for 77.6% of total watch sales in Q3 2024, compared to 73.4% in Q3 2023.
- Market Expansions: Plans to increase presence in Asia and Europe, where net sales were $199.7 million and $250.6 million respectively for the 39 weeks ended September 28, 2024.
- Acquisitions: The company has been actively restructuring, with a focus on optimizing its brand portfolio and reducing operational costs, which may include strategic acquisitions to enhance product offerings.
Future Revenue Growth Projections and Earnings Estimates
Revenue projections for the upcoming fiscal year indicate a recovery trajectory, with analysts estimating a potential revenue increase of 15% to 20% from current levels, primarily driven by improved product margins and a strategic exit from underperforming categories like smartwatches.
Earnings estimates suggest potential adjusted earnings per share could improve from a loss of $1.80 in 2024 to a projected loss of $1.00 by 2025, reflecting operational efficiencies and cost reductions.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company is exploring partnerships with technology firms to enhance smartwatch functionalities, alongside collaborations with fashion brands to create limited edition products that appeal to younger demographics.
Additionally, the company plans to leverage e-commerce platforms more effectively, aiming for a projected 30% increase in online sales.
Competitive Advantages That Position the Company for Growth
Fossil Group, Inc. benefits from several competitive advantages:
- Brand Recognition: Strong brand equity in the traditional watch segment, with brands like Fossil, Michael Kors, and Emporio Armani contributing significantly to sales.
- Global Distribution Network: A well-established distribution network across the Americas, Europe, and Asia, facilitating market penetration and customer reach.
- Operational Efficiency: Recent restructuring efforts have led to a reduction in operating expenses by 19.9% in Q3 2024 compared to Q3 2023.
Financial Performance Overview
The following table provides a snapshot of key financial metrics relevant to the company's growth prospects:
| Metric | 2024 (YTD) | 2023 (YTD) | Change (%) |
|---|---|---|---|
| Net Sales | $802.7 million | $991.1 million | (19.0%) |
| Net Loss | $95.1 million | $128.9 million | 26.3% |
| Adjusted EBITDA | $(34.7) million | $(61.0) million | 43.9% |
| Operating Margin | (10.9%) | (12.0%) | 1.1% |
Fossil Group, Inc. (FOSL) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Updated on 16 Nov 2024
Resources:
- Fossil Group, Inc. (FOSL) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Fossil Group, Inc. (FOSL)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Fossil Group, Inc. (FOSL)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.