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Get filing alertsFossil raises FY26 outlook on margin expansion, expects Q4 return to sales growth
Filed August 12, 2026 · Period ending August 12, 2026 · ~1 min read
Key Changes
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high
Raised full-year guidance: sales to decline 3-5% (vs. prior worse outlook), adjusted operating margin 4-6%, and positive free cash flow. Expects return to sales growth in Q4.
Exhibit 99.1 view on EDGAR → -
high
Q2 gross margin expanded 490 bps to 62.4% on improved product margins from full-price selling, sourcing initiatives, and reduced tariffs. Constant currency adjusted operating margin doubled to 4.1% from 2.0% prior year.
Exhibit 99.1 view on EDGAR → -
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Q2 sales declined 4.9% to $209.7M, with direct-to-consumer down 14.6% (comp retail sales -8%) while wholesale grew 0.9%. Europe fell 18.2%, Asia grew 3.7%, Americas flat at +0.2%.
Exhibit 99.1 view on EDGAR → -
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Interest expense nearly doubled to $8.3M from $4.3M prior year on higher debt balances ($203M total debt), increased rates, and debt issuance cost amortization. Total liquidity $96.6M.
Exhibit 99.1 view on EDGAR →
Summary
Fossil reported Q2 2026 results that beat internal expectations and raised full-year guidance, signaling progress in its turnaround. Sales declined 4.9% to $209.7 million, but gross margin expanded 490 basis points to 62.4% as the company shifted toward full-price selling and benefited from sourcing improvements and lower tariffs.
Constant currency adjusted operating margin doubled to 4.1% from 2.0% in the prior year quarter, demonstrating meaningful operational leverage despite the top-line headwind. The raised outlook is the key takeaway for investors: management now expects full-year sales to decline only 3-5% (an improvement from prior guidance) with a return to growth in Q4, adjusted operating margin of 4-6%, and positive free cash flow.
The guidance lift reflects strong first-half execution and confidence in the business trajectory. Channel performance was mixed—wholesale grew modestly while direct-to-consumer fell 14.6%, partly due to store rationalization—but the margin story and forward outlook suggest the company is stabilizing. Watch for Q4 sales inflection and whether the margin gains prove sustainable as the turnaround continues.
Section-by-Section Diff
Event · Exhibit 99.1
Added in current filing · view on EDGAR →
Net sales totaled $209.7 million, a decrease of 4.9% on a reported basis and 4.4% in constant currency, compared to $220.4 million in the second quarter of fiscal 2025. ... Gross profit totaled $130.8 million compared to $126.7 million in the second quarter of 2025. Gross margin increased 490 basis points to 62.4% versus 57.5% in the second quarter of 2025. ... Operating income (loss) was $3.2 million compared to $8.5 million in the second quarter of 2025. Operating margin was 1.5% in the second quarter of 2026 compared to 3.9% in the prior year second quarter. Constant currency adjusted operating income totaled $8.6 million compared to adjusted operating income of $4.3 million in the second quarter of 2025. Constant currency adjusted operating margin was 4.1% in the second quarter of 2026 compared to adjusted operating margin of 2.0% in the prior year second quarter.
Fossil reported Q2 2026 net sales of $209.7 million, down 4.9% year-over-year, driven by direct-to-consumer channel declines and store rationalization initiatives. Gross margin expanded 490 basis points to 62.4%, reflecting improved product margins from full-price selling, sourcing initiatives, and reduced tariffs. Constant currency adjusted operating income doubled to $8.6 million (4.1% margin) from $4.3 million (2.0% margin) in the prior year quarter, demonstrating progress under the company's turnaround plan.
Added in current filing · view on EDGAR →
Operating expenses totaled $127.6 million, an increase of 7.9% compared to $118.2 million a year ago. As a percentage of net sales, operating expenses were 60.8% in the second quarter of 2026 compared to 53.7% in the prior year second quarter. Operating expenses in the second quarter of 2026 included $3.4 million of restructuring costs, primarily related to professional services and employee costs, while operating expenses in the second quarter of 2025 included $7.3 million of restructuring costs. SG&A expenses were $123.5 million, an increase of 11.3% compared to the second quarter of 2025, primarily due to an $11 million gain on the sale of our European warehouse in the prior year second quarter.
Operating expenses increased 7.9% to $127.6 million, representing 60.8% of net sales versus 53.7% in the prior year. The increase was primarily due to a prior-year $11 million gain on the sale of a European warehouse. Current quarter restructuring costs were $3.4 million, down from $7.3 million in the prior year quarter.
Added in current filing · view on EDGAR →
Interest expense was $8.3 million compared to $4.3 million in the second quarter of 2025 due to increased debt issuance cost amortization, higher debt balances and increased interest rates. ... Total debt was $203.0 million.
Interest expense nearly doubled to $8.3 million from $4.3 million in the prior year quarter, driven by increased debt issuance cost amortization, higher debt balances, and increased interest rates. Total debt stood at $203.0 million at quarter end, with total liquidity of $96.6 million including $79.0 million in cash and $17.6 million of availability under the company's asset-based revolving credit facility.
Added in current filing · view on EDGAR →
The Company is raising financial guidance for the full year 2026 to reflect the strength of year-to-date results and continuing progress under its turnaround plan. •Worldwide net sales to decline 3% to 5%, with a return to growth in the fourth quarter •Adjusted operating margin(1) in the range of 4% to 6% •Positive free cash flow(2)
Fossil raised its full-year 2026 guidance, now expecting worldwide net sales to decline 3% to 5% (with a return to growth in Q4), adjusted operating margin of 4% to 6%, and positive free cash flow. The improved outlook reflects strong first-half performance and ongoing business momentum under the company's turnaround plan.
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Figures/quotes linked to EDGAR · Narrative written by AI · Aug 13, 2026 · How we verify