FOSL - Earnings call transcript Q3 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon ladies and gentlemen and welcome to the Fossil Group Third Quarter 2020 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 permission from the company.

Now I'll turn the call over to Christine Greany of The Blueshirt Group to begin.

Christine Greany

Hello, everyone, and thank you for joining us. Officer. the Chief Kosta and Operating EVP Chief on CEO; Chairman Greg today and Boyer, Jeff Officer Commercial us call Kartsotis, are and McKelvey, With and CFO; information I made contains would information, results that from actual differ and remind during will like you be forward-looking available this discussed conference to during call materially those could that this call. could is materially forward-looking statements company's and a available factors that concerning from the and number differ to statements information on cause additional policy Form results Group's XX-Q readily with Fossil in reports such actual the of X-K filed SEC.

find Fossil was turn All as X-K the publicly a this that update section information over Fossil's on a references today's call remarks. other the to will addition, as in currency With events in or whether new earnings of Kosta to non-GAAP to no of except today call statements, future sales formal unless note discussed information, during forward-looking measures Investors fossilgroup.com. filed In that, Please obligation constant otherwise indicated. regarding financial reconciliation result or is available you reflect assumes law. revise results by and I to release, the on can otherwise, which any call begin and Form required

Kosta Kartsotis

organization safe. the entire Good and the like would We expressing third you everyone joining for gratitude quarter. and start to is afternoon to strong thank everyone staying delivering us today. healthy execution our hope by for We in

our and Our financial strategic to four exceeded priorities. we make continue on expectations our performance progress

growth third market to prioritize of to adjusted expenses. and health ability and and reduce have $XX teams achieved reported their we'll EBITDA enabled continue the us our ongoing eight ago. safety million, we China perspective, while e-commerce of fairly a to year the commitment XX% we Notably, and During demonstrated Fossil, owned months, our appreciate the the modest constant regions, and sales currency a navigate Sales gross across digital million Europe and our $XXX a employees, a wholesale Asia. deliver were three a Mainland strong This and In to our acceleration globally quarter, dynamic extremely We increased consistent net X% Americas, resilience operating and strong basis continued on which customers, of third-party an increase conditions. a we trends in versus the margins, serve. our in saw the third-party sales up and improvement to includes XX% the quarter. communities tremendous majority continuing among on our global across were e-commerce on basis past of owned From partners. all our sites channels, business

essentially brick-and-mortar meet were closed represented XX% expected QX and As the tempered our demand. sales from sites importance Core of somewhat growth when mix locations our digital increasing sales rates across this channel the the third-party of quarter through marketplaces nearly in consumer demonstrating our e-commerce ability globe. to own digital and

continued growth own reflecting China. Asia growth China and to Our in of over strongest represented in sites. increased online XX% due our and Asia third-party basis sales was QX regional performance e-commerce In a XX% in both on Mainland region

are stores traffic being quarter traffic by store. in offset Globally in by approximately COVID last trends with conversion to fairly in rates Our India. and store from and conversion felt up commercial XX%. pickup and In performance were China was the XX% by significantly helped down ship and our impacts buy most Korea U.S., similar about related online, in

in similar e-commerce traffic in Europe stores, businesses. Americas conversion by and and the mitigated their Our the wholesale partners partly indicating trends in are strength

offset by XX% by driven Our channel. XX% segment, partly in globally third-party down our contraction the was growth sales channel primarily of year-over-year, revenue wholesale indirect e-commerce in

We strategic planning out are the we conservatively and we as at environment laid execute remain four against the navigating XXXX. priorities uncertain by the agile global beginning of

Let me our update initiatives. on you

is our the product consumer merchandise are consumers heart. Fossil, and and excitement First keeps energized innovators to engaged. at product and we Delivering is teams At our storytelling innovation. and what

As appears with we Kors' for jewelry demand Emporio delivering Americas traditional and and sales watches jewelry Armani approach in of are watches consumer high be growth watches Asia. holiday, single-digit Notably improving our in rebounding. jewelry and to Michael region

and X leveraging new Gen a with strong that In introduction XE connected product addition Gen offering. demand of the we're for our remains

looks smaller styles app Our new XE are Both a the with love consumer smartwatch, our response. offering, connected XE best which of HR the response traditional want to launched in most. delivers and expanded which positive the and meeting been option. customers features We've our smartwatch size in assortment features Hybrid October, also watches Fossil extremely has with expanded consumers this the positive. combines Initial our

positioning market into As roadmap the this a upgrade to look leading be year, product we include feel will which of and great and highlighted we by ahead XXXX, spring. launch about software LTE product our an next

second Moving strategic priority, commercial now transformation. our to

marketing At capabilities, our from that yielding in An particular programs. the our sophisticated more are are BOPUS our this which during is which distinction important demand. serving robust own strong seeing platform on and years profile built on e-commerce over in capabilities, the digital very same efficiency ROIs time, We margin us strong accelerated heightened digital store marketing model business including we're capabilities accretive. within investments we driving implementing results channel, have are of our profit consumer and is e-commerce online digital the current a well and We few ship the strong period and environment. past fulfillment

and a to our expect increased expand overall becomes margin larger business, of gross drive we our profitability. percentage digital segment overall As

in continue and markets We have digital, long-term around invest a opportunity significant additional in capabilities the to we'll world. and

quarter been India China, in strict however, double-digit restrictions. consumer by priority The in momentum as under characterized our China have well interrupted the In those India. underway by pandemic. were earlier. XXXX strategic recovery we Fossil's Mainland growth we Today, first the opportunity Our mentioned expanding in COVID in increased is and is experiencing and the markets by sales remains XX%

Our fourth Fossil savings we expense World area X.X remain $XXX Under achieve XXXX. initiative. focus on is program, million our our of track in New to of

While there our this year, quarter, particularly we temporary reductions costs expense some COVID-related have in been have marketing structural second rent. and payroll, across removed

over store we ahead, see exits the two With Fossil’s lease also additional and both We next we on lease three good years. negotiations opportunities the natural operationally. come holiday to productivity positioning, about our strategically of or increase through just portfolio expirations very to as feel both up

We have product innovation in the market.

robust digital and inventories We've a we're a our been carefully sheet by focus and capabilities. managing strong substantial We have a managing liquidity. maintaining presence balance supported on

innovation Notwithstanding we're Looking of regional opportunities the top categories. both uncertainty, happy the safe positioning a to of positive growth and traditional the and wish appreciate partners be view in everyone our we'll the pandemic line to deliver further holiday a total ongoing ahead, connected XXXX. we the bringing channel We support the season. addressable and watch have and the shareholders market, and and business the

to performance. Now provide additional financial around colour our some I'll ask Jeff

Jeff Boyer

Kosta. Thanks,

quarter, declined and we sales operating While the margins net strengthened expenses. gross in third reduced

reported constant in strong channels, primarily lens, Top due line Fossil a sales us and improve year globally. e-commerce our than profitability, totalled approximately was down and million, high improvement sales on double-digit XX% regional were liquidity were strength expected, currency allowed basis, $XXX XX% five down and a contracting modest in points growth increase to results better and within consistent than QX quarter. a Europe Americas channel mid-teens On total in ago. that to the actions in Asia. From about position Trends Mainland maintain trends, China wholesale net softer the flow versus a throughout performance with within basis. the third-party Our cash a

our delivered basis. Within e-commerce consecutive Sales China the reduction of expanding the stores increased year demonstrated on XX%. of XX% prior sales year-over-year All constant XX%, ended owned in global with Mainland a courtesy the sales in five China quarter and a a we Asia with of channels direct-to-consumer growth. XXX region, from sales growth business, our growth sequential comp channel while XX%. Within a Mainland decreased e-commerce stores, generated quarter, ago XX% third versus In quarter. third Fossil

watches sales improved of watch Turning decreased connected declined XX% represented connected to sales XX% watch sales mix and trends watch category XX% board. in declined Traditional quarter. sales the currency. sequentially constant Total the total across perspective, X%. performance, in From a

trade and points as region increase a Looking mix basis prior ago. at us channel about pressures. well gross name but expanded driven Asia product more higher year. partially a sales margin, third quarter than to Total XX%. those expenses gross believe anticipating margin year and as XX.X% a compared which operating favourable promotional by We're fairly million includes fourth mix help or offset was costs, around our and restructuring to quarter, markdowns fewer primarily $XX initiatives assortment XXX of versus The decreased and impairment e-commerce we will

track Excluding structural X.X reflects marketing, and and result payroll, which Structural on contract down services, million to reductions cost across for labour. costs. achieve targeted trade travel, and third the New $XXX $XXX $XXX This compared was name year million a quarter World reductions remains SG&A full our our XXXX. of fees program, buckets, in ago. substantially impairment the a several expense million including year restructuring to professional savings of Fossil of cost generally are

impairment EBITDA $XX diluted a on XXXX. million million in closures XX savings $X.XX advantage taking prior within expirations an quarter an ago, improvement XX $X.XX to versus Fossil while non-cash real diluted as for approximately From estate both the expenses of adjusted year. year ahead, EPS in quarter, income. share. per asset of in total operating restructuring income portfolio. charges included per a versus operating $X $XX additional per charges basis. $X.XX included in of of Kosta came we was further and in in of to locations fourth our year, share EBITDA a to loss full Looking improvement up perspective, loss last $X.XX Diluted Adjusted earnings which compared $X.XX, $XX intangible we the diluted capture expense restructuring That's we're at a In lease generate close share increased approximately the and a expect to year of significant mentioned, million New and million QX World

consisting year Quarter of cash of availability cash inventory year. levels balance totalled Total under to cash million with million, down the third $XXX at quarter Moving equivalents debt was $XXX $XX of last connected $XXX flow, revolver. and a end quarter Gen inventory of million that's million and we XX% end X million. total from high watch ago, our reflecting sheet primarily liquidity ended $XXX and the of

far moved year thus X clear end. XXXX, the and goods We remaining inventory in expect by have through our to majority Gen of through

maintaining to are in conservative anticipate the current we range As plan reported basis posture. measures most Europe, on we a in season the lockdown net enter XXXX, XX% sales the the quarter of decline fourth XX% would holiday and last for recent versus year. landscape, including Considering a we that

We which will cash million, are $XXX of to manage requirements expect year. end to capital leave our us the to for liquidity next and balance meet million first upcoming QX between with positioned in $XXX quarter a and continuing well

some Now through us turn back call I'll the to to take Christine questions.

Christine Greany

questions I Jeff. few a investors for a mind turn that are for Thanks, to like top moment. that of to I'd have

front The Kosta. rapidly what's feel heat? for of new terms you product is overall first season? do said, on the Fossil’s for about you brand holiday How positioning this And as is and one innovation in Kosta, approaching.

Kosta Kartsotis

and put pretty handbags, a product in market, we're think just Michael And all look shape brands, in shape. we holiday and the you Diesel, the with if so smartwatches, all great actually feel the these Fossil, to offerings season Armani jewelry we including we're our good traditional a in along and few, the we gifts different Kors, environment. are pretty like for at considering Well, good watches, name

and Our been portfolio across they drive to everything teams watch can especially doing brands in have our and categories, the traditional innovation connected categories.

holidays. So overall well very we we're positioned during the feel

supported customers HR watch, strongly but sleep enhanced and watch Gen XE XE front, like these serves our of in by hybrids, to course of should a new traditional fitness feature our love Gen On watches, Gen which a the then for our is the have life, are capabilities look-up and always functionality battery on consumers. the unique want product extended Hybrid that really and Smartwatches size display, tracking, who very smaller new connected X be connected bill. And a

tracking, time So is including notifications and other has monitoring activity smartwatch thing heart a two week of sleep it and the sensor, life features, is the best periods. battery a all rate

in consumers it in are strong Armani interest seeing And traditional States. trends, new in trends Fossil, the we're up watch and In should add their comes elements. signature charge in we're the product, market. product holiday. would to athletic also don't both colors, respond holiday In our shapes, I to to to we returning of for especially China our looks category in positioned logos employer, a well continuing it well improving increasing speaking, very and be sizes in I strong every like our a seeing the United lot have which we and the So in are you in chorus to night. diver product with seeing and classic Broadly seller to China. particularly brands sports season, watch, have great strong different are for that while and response

all sales. that to of cause shift in product a any our regarding during great and posture well-prepared We to issues online the globally critical will The this case, are and safe help health are to a keep are shopping. holiday and everyone expect to But we season. deliver us to safety we retaining conservative customers

Christine Greany

Great. year? you fourth the in quarter us understand and for can and next thinking about Thanks, liquidity cash your Jeff, how outlook liquidity early help you're also Kosta.

Jeff Boyer

the liquidity in goals our given in of uncertainty ongoing important near-term. the environment, is one strong now absolutely a concern Christine, Sure. maintaining most the position

fourth we our fairly quarter, look As at to we liquidity position stable our overall. expect remain

solid quarter, use cash fund the We we'll which our operating in are expecting flow capital fourth needs. working to

have term next amortization, due capital the our levels in year. as inventory some revolver due as As year, loan our structure well required we move as some in will to lower to reductions we into we exit contraction

So some these in working expect closer to balances the fund first to historical of to we structural as well half of some next to year, of utilize as levels. available our changes capital bring liquidity our

we expect throughout current adequate year. our next outlook, have Given liquidity to

Christine Greany

you level, Greg granularity digital. a some sales then for and you, agenda? digital around would At now Thank Jeff. can should digital A be And around think if Fossil' question we high how about that marketing, provide great?

Greg McKelvey

growth our digital We've to pillars strategy. developed three

The near complete salesforce. global and first cloud-based to is our platform partnership one with e-commerce migration

gives in year to we're increase order efficiencies XX% the has increases improved or resulted features addition a greater experience providing our an sustained in prior teams seeing meaningful which rate value targeted and content journey; serves driven intelligence throughout customer and overall, and sell average wallet conversion and have In versus that the and implemented, flexible recommendations digital our which cross easy up include artificial customer sell, our a customers personalized up and transaction. an online suite

interest is who augmented also of customer free enjoy experience, selling virtual own use fulfill Now Not is personalization really option our on their only but powered a watch of of only on infrastructure show can right unforecasted us in an see also the flawlessly capability. our the results track. throughout up expert camera definitely a on online store, near customers pilot, PayPal, to button sales this capabilities, our risk that so sales e-commerce, store can inventory ship to and is curbside using teams in in-store also modern also, mobile team from year. The online by quickly to to only in inspiring, virtually customers a our the right and the our a work tells associates, peaks but assets. rapidly try offer including and efficient pickup, on the including advice, lastly, click implement we're tool but installment reality where partnered IT advice an And store capacity logistics ship warehouses the and the demand pickup truly in fulfillment done associate there our their expand not handle and using have day a an have e-commerce order store scale to and device; at not allows great from that sustained buy it our significantly

major the category watch be second globally. is leader to marketplaces e-commerce Our the party pillar with third

as average are So few. learning's just and leveraging T-ball, unlock practices we've fully quickly Flipkart are started Myntra on given with growth our customer onto acquisition their in teams to of data sustained great leader e-commerce then Amazon, a the is and aggressively But a ROI and increase and emphasis partnering across value, profitably value daily marketing a is then digital telling far to us and global lifetime jd.com, to globally heart digital and to high and of customer increase, in data that Zalando, delivering offer high our success our business advanced this these on post-purchase customer third channel economics this we order getting they salesforce and significant The acquisition, applying purchase. investment And strategies our dramatically the increases uncover generating category, marketing be and the best strategy journeys math automated year, marketplaces rate and of have and name online use had in opportunity is relatively strategies more in by accelerate platforms. consumers pillar to online we aggregate our dynamic analytics capabilities an to basis. our create and sales creative tactics, repeat

years and excited extremely holidays are our the and continued digital in this in the so a our teams see for making progress far strong business We over expect year growth sales to are the number about future. of

Christine Greany

Thanks, that. Greg. Appreciate

Now some call for closing I'll turn Kosta comments. the back to

Kosta Kartsotis

safe for appreciate and wish today. and support Well, holiday. joining ongoing the greatly investors our thanks We a everyone everyone to healthy us of

Operator

call. this Thank gentlemen, you concludes conference and today's Ladies participating. for

disconnect. now may You

Fossil (FOSL) 11 Nov 202020 Q3 Earnings call transcript