A maker of fashion accessories and traditional watches, Fossil designs its own brands—FOSSIL, SKAGEN, MICHELE, and RELIC—alongside licensed lines like MICHAEL KORS and TORY BURCH, sold in roughly 132 countries. Founder Tom Kartsotis launched the company in 1984 in Dallas, Texas, after his brother spotted a market for stylish, affordable imported watches. The name comes from a playful childhood nickname the brothers gave their father, and the brand grew into one of the world's largest watch companies.
Fossil's gross margin hit 62.4% as tariff refunds and a full-price model reshaped profitability, but revenue fell 4.9%.
reached 62.4%, the highest quarterly rate in the data shown, as the company's shift to a full-price selling model and $5.9 million in IEEPA tariff refunds lifted profitability. fell 4.9% to $209.7 million, driven by a 14.6% drop in direct-to-consumer sales and an 8.0% decline in , while SG&A rose as a share of sales because a prior-year building-sale gain did not repeat. The core traditional watch business is now growing, but the company is still shrinking.
Key takeaways
expanded 4.9 points to 62.4%, driven by improved product margins from the full-price selling model, Turnaround Plan sourcing initiatives, and $5.9 million in IEEPA tariff refund claims, partially offset by accelerated licensed-brand minimum royalty recognition.
fell 4.9% to $209.7 million, with a 14.6% decline in direct-to-consumer sales and an 8.0% drop in global ; the smartwatch exit and store closures continued to weigh on the top line.
Section summaries
Management's Discussion and Analysis
Fossil Group Q2 2026 net sales fell 4.9% to $209.7M, with gross margin improving to 62.4% driven by a full-price selling model and reduced tariffs.
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Consolidated decreased 4.9% (4.4% ) to $209.7M, driven by a 14.6% decline in direct-to-consumer sales and an 8.0% drop in global .
SG&A expenses rose to 58.9% of from 50.3% a year ago, because the prior-year quarter included an $11 million gain on the sale of a European warehouse; restructuring expenses declined to $3.4 million from $7.3 million.
fell 62.3% to $3.2 million, as the gain was more than offset by the absence of the prior-year building-sale gain and the decline.
Total liquidity stood at $96.6 million, with $79.0 million in cash and $17.6 million available under the , and rose 22.6% to $203.0 million.
The company recorded $5.9 million in IEEPA tariff refund claims, with $3.6 million related to prior-year tariffs adjusted out of metrics, and noted additional potential refunds could be material but are not yet recognized.
What changed
The prior quarter flagged whether traditional watch sales would continue to grow after posting a 2.3% increase in Q1 FY2026: the filing does not break out traditional watch growth this quarter, but overall fell 4.9% and direct-to-consumer sales dropped 14.6%, suggesting the growth trend did not hold.
The prior quarter flagged whether the 10% Section 122 tariff would further erode : the tariff was in effect from February to July 2026 and was then replaced by new of 10% or 12.5% on imports from 60 economies including China, but gross margin still rose to 62.4%, aided by $5.9 million in IEEPA refund claims.
The Michael Kors and Armani license renewals, flagged for several quarters with agreements now expiring between 2027 and 2029, received no update in this filing.
remained negative at -$9.2 million, though this was an improvement from -$21.8 million in Q1 FY2026, as the Turnaround Plan's restructuring charges wind down.
What to watch
Whether the $5.9 million in IEEPA tariff refund claims are collected and whether additional material refunds are recognized, or whether the new of 10% to 12.5% on imports from 60 economies offset the benefit.
Whether traditional watch sales can sustain growth after the Q1 FY2026 increase, or whether the 4.9% overall decline this quarter signals that the core business is still contracting.
The outcome of the Michael Kors and Armani license renewals, which together represented 29.3% of FY2025 sales and have agreements expiring between 2027 and 2029, with no update disclosed for several quarters.
Whether total liquidity, now at $96.6 million, can fund operations through the Turnaround Plan to profitability, or whether the company will need to draw further on its $17.6 million in remaining availability.
expanded 490 to 62.4%, reflecting improved product margins from the full-price selling model, sourcing initiatives, and reduced tariffs, partially offset by accelerated licensed brand minimum royalty recognition.
Europe sales fell 17.0% (18.2% ) to $55.8M, primarily due to the challenging geopolitical environment in the Middle East, while Americas sales were roughly flat and Asia sales declined 1.0% as reported.
SG&A expenses rose to 58.9% of from 50.3% a year ago, largely because the prior-year quarter included an $11M gain on the sale of a European warehouse; restructuring expenses declined to $3.4M from $7.3M.
The company recorded $5.9M in IEEPA tariff refund claims, with $3.6M related to prior-year tariffs adjusted out of metrics, and noted additional potential refunds could be material but are not yet recognized.
Total liquidity stood at $96.6M, with $79.0M in cash and $17.6M available under the , as the company continues to execute its Turnaround Plan focused on profitable growth, operating model optimization, and shareholder value.
There are no legal proceedings to which we are a party or to which our properties are subject, other than routine matters incidental to our business that are not material to our consolidated financial condition, results of operations or cash flows.
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There are no legal proceedings to which we are a party or to which our properties are subject, other than routine matters incidental to our business that are not material to our consolidated financial condition, results of operations or cash flows.
Escalating U.S. tariffs on Chinese imports and retaliatory trade measures pose a material threat to revenue and operating results.
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U.S. Section 301 tariffs of 7.5% to 25% continue to apply to key product categories including handbags, wallets, smartwatches, and jewelry.
A 10% ad valorem duty on all imports from China was in effect from February to July 2026 under Section 122, followed by new Section 301 tariffs of 10% or 12.5% on imports from 60 economies including China.
The Company warns that further tariff actions or retaliatory trade measures by China could force price increases or operational changes that materially harm .
The Company is participating in an administrative refund process to recover duties paid under IEEPA tariffs that were terminated after a Supreme Court ruling in February 2026.