FOSL - Earnings call transcript Q4 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 Fourth Quarter 2020 Earnings Call. [Operator Instructions]. 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 Greany of The Blueshirt Group to begin.

Christine Greany

Hello, everyone, and thanks 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.

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

Kosta Kartsotis

for of for year of a all us Good hope everyone Fossil, today. unprecedented year was XXXX thanks us also afternoon, is and safe. We and joining an staying healthy was and transformation. it for

strategic will across the near-term organization challenges, to top operational sustainable execute the are continuing to We team priorities position growth. working for while extremely grateful that the through for our longer-term the business line all also members against

share few on I fourth a take our we results, quarter moments our wanted Before perspective to XXXX. review to

significant our efforts. the disruption it was and in the validated our accelerated regards, already particularly digital transformation underway. that to pandemic business, acceleration many created While

in on doubled on impact strategies. in retail XXXX from arose loss down the our traffic, we sales digital With that the pandemic's

XXXX XX% our focusing approximately coming of versus with completing XXXX. by U.S. platform, year digital channels e-commerce the in ended we XX% on marketing from revenues early new We other our this sales awareness. in outcomes digital result, a size As grew testing the global targeted accomplished with We beyond U.S. to implementation the conversion, significantly positive extending and our more and on markets. and began file it

We compete third-party also platforms Tmall Amazon. improved greatly our capabilities on to e-commerce and like

a made we operations progress addition, last World transforming New change. tremendous company's our In as year, the platform in Fossil X.X utilizing for initiative

includes and in greater streamlining World work New organization streams. generating the efficiency Fossil processes and our

the include store unfolded, reduction expanded pandemic the store our the this count we of our to operating program As and optimization costs. of

for level XXXX. Our and the X.X least of Fossil on savings $XXX track million before from capture expense the million was $XXX end target original to expanded at operating currently is New of World

footing XXXX concluded have financial and to pleased a are the We stronger ongoing on despite macro uncertainty. operational

$XX million than Our fourth adjusted $XX reflecting tough expected, in margins, by exercised back gross in cost delivered quarter sales came quarter execution EBITDA environment. in and million more We the solid we strong teams better than and in of careful maintained control a half. the our

Our than $XXX the cash at when were higher started year-end year. million balances we

the growth on related day sequential was which and lens, and the Asia global perspective, and year. growth reflecting Notably, a November. our driven on continued strong shutdowns Michael demonstrated by From in of improvement primarily watch both a we impacted with our Fossil sales in in in Armani sales business brand share traditional pandemic China, restrictions in the by During region. Armani one Americas total Americas EMEA quarter, QX, last both growth mix, and brands. seller own brands number India. our strong XX/XX a as among watch regional the were our that China from From Performance fourth coming had revenue delivered to digital the websites, performance XX% Kors and return luxury XX% grew Pacific regions in began the grew strong in versus

Turning now XXXX. to

focused driving a priorities, strategic innovation. capabilities, digital number accelerating of China teams product Our in India our streamlining growth driving our on are and and operations,

continues critical accelerating most basis. priority to Our growth our capabilities global this on year digital be a

for the scale that the to digital resources, digitization term. investing We of have will exceed years, tools our in our mix platform. further in the by and been and we'll migration and own sales In long few of digital anticipate teams the we investing complete our XX% Fossil the of footprint. the over this XXXX, Salesforce accelerate to websites past We advance will

AI-driven teams advanced tool as cross-sell more AR a and virtual virtual try-on assistant. digital utilizing to Our have upsell an already enable sales such capabilities and begun

purchasing. analytics element Another our digital out building more and which capabilities, us important repeat expected increase drive digital and of agenda is is customer advanced data acquisition help marketing to

own our our reach our wholesale.com we our and regions see significant leveraging to on new with and drive platform build to partners. foundation websites, to to strong sales to addition e-commerce extend the In robust on partners opportunity third-party a and

through our we will our our New to the Fossil also final operations drive X.X agenda, continue streamline efficient. asset-light XXXX, will more to we program. we As be World leg In and be digital moving of

reduce represents take by of year inventory company. processes necessary provides count to this opportunity and expect to We agile, store and Refining as XX store improve to XX% to Fossil upcoming to chain XX supply Indian globally. expirations we steps our approximately strengthen more management also closures our own make count a our XX%. profitable and an have nimble our an advantage lease opportunity This

opportunities we build and expect As in China focus also to priorities, India. upon major these our on we growth

in for finally, regions for innovation always aspirational traditional like and focus opportunity remains is Kors see product a and And The Fossil. strong been in in additional has infrastructure affinity creating digitally growth. continue class we category, Asia have watch We an management middle and for a these the Armani, to established growing Fossil and rapidly an major important savvy, an runway where brands teams. great has

will Our teams a are to passionate map the we road continue that excite product and customer. about innovation, have robust

is to mission management key watches, on data stories and communities markets down flagship digital that and of Hybrid new In well. Fossil, product which brand a continue LTE we distribution. we're by strong to earlier doubling also to includes which in in and new brands analytic have Our and watches, perform year traditional X of And our compelling our and new and using tools. build our Kors, our Armani platform, HR Gen opened product connected this feature-rich channels launched foundation the craft

our including and launches connected, software both future innovation Importantly, we're map on excited product updates. about road

the digitally of think we innovation be fueled about of we company our by strength focus the relentless category As being a will line anticipate growth long-term on favorable and trends. on led our trajectory and business, that geographic top by

the we capture still are to better pandemic XXXX. uncertainty growth of and positioned there's because its in revenue effects, While

sales We to the increase in XX% mid EBITDA range. XX% expect total to with by single-digit from XXXX, margins

believe positioned the growth to we business coming line top years. deliver is in sustainable Importantly, the

We continues are the we're executing connected market, traditional against category, a grow. the large addressable segment watch in seeing to watch and stabilization

our and increasing Financial announce opportunity who years In for XX Jeff Fossil This committed prior opportunity. as expertise, This the on for creates team we relentless Operating will profitability. associates an financial be our ongoing position be the Chief knowledge Sunil focus and continue helping that profoundly important to been of Boyer also which particularly reach have of closing, to including inflection in transform natural role his we Officer. growth Doshi to us deep point. on this focused to an afternoon, has it Officer, pleased our Chief we CFO to and are promotion progression as are Additionally, grateful Fossil experienced we of organization roles. company institutional all Sunil is have and the

us, of to years. there surely is to done, coming While to the excited and profitability the And turn improve transformation growth lifting and over opportunity heavy discuss energized now financials. to our I'll about the to work the are the the be is call our and in Jeff restore teams behind more

Jeffrey Boyer

a our flow Globally, consistent retail sales stores. both EMEA third-party came quarter and margins, by channels from year-over-year digits which growth single in define in expected, sales restrictions with than store pandemic count. XX% strength improvement significant performance positive expenses, by growth reflecting operations. and sales and QX in e-commerce in in reflects partially recent than our offset a on operating traffic better channels of remains strong In continued a return EBITDA pandemic European net softer trends, constant due in partially in ongoing remained adjusted tough third-party was teams principally strong increasing on and own Americas basis. conversion continued execution Fossil sales direct-to-consumer in Net disruptions gross and traffic China XX% wholesale currency, net totaled we countries. our we global reduced which Fossil our within maintained high of trends key or offset sales XX%, impacts channels, and Within growth in our India. $XXX XX/XX From in primarily heightened generated in to our Thanks, declined total primarily Digital headwinds growth e-commerce regional lower The XX% a strong, reflecting delivered e-commerce million, sales, decline we and including segment, the China reflecting notable pandemic perspective, performance Kosta. a dot-com brick-and-mortar sales and own environment. declines quarters. strong stores in Mainland Despite day. Asia, cash e-commerce fourth to as declined Mainland our and XX%

recent in at were year, display sales and performance. connected declines Americas APAC in last partially outpacing Watches XX% category older most products. growth the we generation Fourth to offset our which X net in In our watches, achieved quarter Turning margin in region came XX.X%. performance down gross watches, versus EMEA. Gen with

restructuring a to year expenses, of $XX inventory maintained mix, XX%, XX as fourth region quarter write-down represents of impairment year-over-year of million fewer year. Excluding primarily driven prior channel an the we markdowns favorable basis performance was includes or as in decreased Total on operating improvement This cost this focus by as control. which and name by on XXXX, points our increase trade well compared QX basis. strict and costs, our

structural cost restructuring million impairment professional travel, terminations. to and fees was SG&A ago. in included services and reductions $XXX areas including across a This of related year contract name costs, $XX reflects expense lease XX% marketing, QX, in payroll, down noncash several gain compared and million early labor business, to a trade Excluding

year. last earnings As operating a $XX income an million XXXX. reminder, program, From QX for EBITDA increased year key of versus delivered savings cost at full adjusted actions and have X.X operating an million, our Fossil which million component in to New of came World loss been perspective, of a $XXX in $XX

Our provision diluted a tax and QX a to periods against the primarily net driven assets. charges World year share, XXXX $X.XX net the to of Both Diluted diluted per and prior compared million million compared valuation ago. year XXXX Fossil was in share period, tax income of $X.XX by $X.XX loss $XX.X allowances $X.X included was respectively. restructuring loss deferred New $X.XX per

Moving $XXX during XXXX, the through ending carefully past and We the due last our million. teams with meet down the We're Heading liquidity Total year availability ended to flow. anticipated million and Gen better total navigate flow positioned cash $XXX to debt to million. we inventory at of manage $XXX with million. equivalents through our are cash $XXX we managed year demand balance flow cash successfully was our of QX, pandemic year. cleared with revolver the pleased And $XX of $XXX as XXXX inventory million, and into ability approximately In total inventory. generated our liquidity X to year-end XXXX, under XX%. the in and we million, of versus sheet Cash operating year and the move year. inventories totaled in improvements we was for this

our capital uses term We revolving we seasonal our credit our perspective. amortization a our of loan. quarterly pay from strong of pattern. will facility to portion are cash XXXX, a normal and normal expect that QX subsequent liquidity that the down cash of quarters, discipline normal In needs, maintaining working of we use will include anticipate a course In in addition follow

requirements continue capital expect term. we to XXXX, and In from planned we in at expenditure CapEx away near light is pivot $XX store million. remain rationalize approximately portfolio, As growth to our the the to look

believe returning we strategic, we from As well continue financial is operational digital work, XXXX. transformation positioned and our perspective the to line look and growth forward business top in a to

XX% in to to expect gross basis reported anticipate in resulting to and on operating approximately of range expenses, the a leverage For a On we the full year XX%. year, adjusted EBITDA X% net we basis, will sales margins that margins strengthen of increase X%. full

will first sales the range the period. year's in we last compared to at Looking the that XX-week net the period quarter, for XX% decline XX-week to anticipate XX% of

In week in of reflects of the addition second of March. and by pandemic the to the lapping EMEA and persistence Americas for the offset half the headwinds easier the QX decline most extra of XXXX, in partially in year-over-year only comparisons both quarter,

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

Christine Greany

Jeff. start digital importance Kosta, accelerate with further that Thanks, business the Kosta. to channel. I'll your and talked about initiatives you of

strategies the stressed How innovation. also of importance of about interrelated? importance product how should You think the those driving we and they're

Kosta Kartsotis

to key it giving Great that consumers is Christine. them. more question, customized communications are to relevant The

to consumers. to innovation greater a us and stories our tell gives platform digital capacity Our show

the enables do mind customers we're they to watches It to us the personalize changer engaged also online larger us gives for has more data new and which technology are as on a into conversion store. that significant impact regular accessories. our our can about keep With of community speak is business. consumer. our in already - to capabilities, and basis, a ideas much we on us analytic So The a as gives go consumer. game audience communications, we a that significant of value again shopped larger stores well for how a a that and in lifetime build that XX% And before which able

Christine Greany

Could us understand XXXX? flow capital help the allocation now. what in priorities? expectations you you your to are moving cash Jeff, for Terrific. And

Jeffrey Boyer

we Sure, our balance our to in also net financial of and material will year. cash allow reduce this amortize to year-end expect a our continue to this impact debt approximately credit all decline in like loan did and us This million expected a This increase revolving overall Christine. flow past we in flexibility year, generate our to us solid $XX The to position, will improve cash liquidity allow and be level is term by our XXXX. modest much outstanding. also

make come as operations. go strengthen and continue throughout core we financial As as year in position to important pandemic, of we'll our out the we this investments we our

Specifically, inventory, we'll a our digital with about expense and as you've critical capital resources. of fund that today heard business as some normal part initiative well our

$XX XXXX XXXX. plan investments in budget digital CapEx our planned current within Our are operating and our approximately of million

Christine Greany

over about Jeff. company digital led your what you digitally could to agenda Greg, make of become in Great, talked talk investments more that to type you about? plan time, the near-term Kosta that and

Gregory McKelvey

Sure.

Salesforce accelerating to Number interactions serve platform us will marketing Number CRM e-commerce this e-commerce capability, whatever and areas. leverage commerce, and drive artificial to which media cross-sell number finally, omnichannel experiences the opportunities, build key offline and and aggressive and marketing first-party that advanced short-term two, hyper-personalized in unlock we've and ratio powerhouse, allows high which to an in investments community engagement; Our including as business. momentum, goal wave by our are we're we storytelling, year; a combined are growth. capabilities capabilities in our growth and seeing leading top which brand focused with our Together, a three, across a number that customers well. created industry-leading targeted new experience for us right markets. in the accelerated digital investment to as seeing, pure-play is than an performance our in that our been AI-driven customers digital unlock of that e-commerce our platform and driving and or to underlying customer includes significant world and through behind. believe X a of in them, stores digital category CRM to which our the made based campaigns customer online that upsell are intelligence-driven And highly one, our community with will sales heat, our marketing shopping metrics e-commerce personalized results across our creating to on post-purchase analytics, brick-and-mortar and direct-to-consumer plan personalized investing value engagement, concept, these personalization allow And order two, of our capture own with most conversion one best establishing installing become e-commerce e-mail, innovation our on case cost sites. Michele, year-over-year Skagen database where and the successful value for allow our combination top companies store million a despite accelerated a capabilities To campaigns our a brand to the personalized we've Station that impacted XX% all of more an indirect social, ensure the sales also wholesale date. across digital-first deliver online and brands where we're as search, in In channel, we average us deliver geographic experience on on product meaningful such deliver a acquisition customer being of marketing well materially of X leadership growth long-term multiyear number which activation, Number methodology helps and have unlocked and traffic. increasing platform and and our customer text closed in doubling our value multi-brand rate increased four, footprint number engaged of growth post-purchase as customers share lifetime Fossil, investments business build expand for and three, engaging and data Watch more compelling getting In and we're channels, also has much and drive business. digital further has

Christine Greany

closing back team. Kosta, Thanks, just you to Great. comments. for

Kosta Kartsotis

you call. day. next We our to talking us. a joining to forward for Have everyone, look on thanks, Well, good

Operator

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

You may now disconnect.

Fossil (FOSL) 11 Mar 212020 Q4 Earnings call transcript