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| Additionally, we're seeing gross margin growth in the Fossil brand continue thus far in 2024 in our core watch and jewelry categories |
| Lower freight costs also contributed to the year-over-year gross margin improvement |
| Most of the gross margin gains came from product margin improvement in our core categories, where initiatives from SKU rationalization, assortment architecture and reduced promotions in our direct-to-consumer channels drove better results |
| In Michele, our owned premium brand for women's watches sales were up double digits as wholesale customers took advantage of better spending dynamics in this consumer segment |
| Underlying performance was supported by strong execution of our Made For You campaign, digital enablement tools, and a sharper product assortment, which drove better results in our direct-to-consumer channels |
| We are fortunate to have incredible teams across the organization who are passionate about the Company, committed to our purpose and dedicated to winning as we continue to execute our TAG plan |
| The most important thing we want you to hear from us today is we're committed to improving performance and we're all hands-on deck to further advance our TAG plan and strengthen liquidity |
| We're acting quickly to leverage our core strengths in people, implement our TAG plans and improve our financial condition to make Fossil a leaner, stronger and more durable business |
| These actions are expected to drive gross margin expansion this year and help us return to historical gross margin levels, which were in the mid-50s over the next two years |
| We ended 2023 with inventory down 33%, better overall inventory composition and improved product margin architecture heading into 2024 |
| Additionally, our initiatives on SKU management, inventory management and price management, drove improvements to inventory productivity and traditional watch product margins |
| Regarding this reinvestment in core categories, note that the fourth quarter execution of our Revitalization Strategy for Fossil brand drove some of the best results within our portfolio |
| Our teams delivered solid execution in 2023, and we captured approximately $125 million in annualized benefits |
| Global traditional watch sales for the Fossil brand grew in Q4 of last year and our direct-to-consumer channels, comp sales in traditional watch and jewelry grew mid-single digits |
| Benefits from TAG are a critical component to driving improved financial performance in fiscal year 2024 and offset the underlying decline in revenue that we have forecast |
| Importantly, our guidance for fiscal year 2024 reflects our expectation that our TAG initiatives will help drive gross margin expansion and SG&A reduction versus the prior year |
| Gross margin improvement is primarily expected to be driven by sourcing benefits from our TAG initiatives, coupled with a continued focus on assortment architecture and SKU rationalization as well as product mix benefits resulting from minimal smartwatch sales in 2024 |
| As Sunil and I shared with you, we're working diligently and taking prudent actions to stabilize the business and maximize shareholder value, all of which is underpinned by our commitment to returning Fossil Group to profitable growth as quickly as possible |
| As a reminder, our plan to achieve these benefits is anchored by three core objectives; driving sales productivity, reengineering end-to-end operations and streamlining overhead costs and improving capital efficiency |
| Q4 gross margins were up 40 basis points versus last year |
| More importantly, these actions help us refocus the Company on our most profitable and productive core categories, enable us to further streamline our operations |
| First and foremost, we're taking steps to stabilize the business and improve our financial position |
| Together with our experienced leadership team, we're going to ensure continuity as we continue to advance our tag plan in order to lay the foundation for a profitable business model |
| In the Fossil brand, fourth quarter sales in traditional watches and jewelry were flat year-over-year and comparable retail sales in these categories were positive low single digits |
| As Interim CEO, I'm prioritizing the following: Stabilizing the business, advancing our TAG plan, strengthening our balance sheet and conducting a broader strategic review of our operating model |
| What we want to make clear today is that we're taking steps to maximize shareholder value, and we have sufficient liquidity to operate the business for the foreseeable future |
| I'm pleased to be taking on the role of interim CEO, having spent nearly 17 years with Fossil on both the Board of Directors and the executive leadership team, I have a deep working knowledge of the operating model, the organization and our underlying profitability potential |
| We are also focused on strengthening our balance sheet to provide additional cushion to our liquidity |
| While this will be a top line headwind to our fiscal year 2024 sales, we believe the reduced infrastructure costs and placing more inventory and higher-margin sales in traditional watch and jewelry will drive better longer-term financial outcomes for the Company |
| The largest area of savings is expected to come from our supply chain activities where we have successfully renegotiated a number of significant sourcing contracts |
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| This past year has been more challenging than we anticipated, reflecting three key factors: one, macro-driven economic conditions globally; two, wholesale channel dynamics; and three, persistent pressure on consumer spending in China, one of our most important markets |
| Fourth quarter net sales totaled $421 million, down 16% versus last year or down 17% in constant currency |
| Adjusted operating margin was negative 2% for the quarter and negative 6.5% for the fiscal year |
| Brand sales in leathers and smartwatches were down year-over-year |
| We anticipate that performance in our core traditional watch category will be down with comp growth in the Fossil brand, offset by declines in our largest license brands, in part due to brand repositioning, and also reflecting our expectation for softer consumer spending in our categories in Europe and in China |
| The majority of that 10-point sales headwind came from our largest license brands, where sales in traditional watch and jewelry were down versus the year ago period in both our wholesale and direct channels |
| In the fourth quarter, approximately 7 points of the overall 17-point constant currency sales decline came from store closures and lower smartwatch sales |
| Excluding the 7-point impact that primarily came from store closures and smartwatches, fourth quarter net sales declined about 10 points versus last year |
| While these actions contributed to our top line headwinds, they did not materially contribute to operating margins |
| Our outlook calls for worldwide net sales of approximately $1.2 billion, which includes about $100 million in year-over-year negative sales impact resulting from store closures and our exit from the smartwatch category |
| We expect that underlying business trends will continue to be challenged by macro-driven pressures affecting consumer spending, category and channel softness and brand dynamics among some of our key licensing partners |
| Underlying sell-out trends, however, remained negative in the quarter |
| Our net sales guidance of approximately $1.2 billion assumes approximately $100 million of negative impact from our store and concession closure plans and the lapping of last year's smartwatch sales |
| In Asia, licensed brand revenue in the wholesale channel was down modestly with declines in Mainland China and other distributor markets, offsetting double-digit growth in India, Japan and Korea |
| Partially offsetting these gains were declines in gross margin in our smartwatch category and anniversarying gains from the settlements of forward currency contracts in the prior year period |
| SG&A expenses in the fourth quarter were down $25 million year-over-year or 11% |
| Looking at the cadence of the year, we expect Q1 sales to be the softest, partly due to timing of wholesale shipments between quarter one and quarter two with sequential improvement for the remainder of the year |
| Against this difficult backdrop, we took aggressive actions to rationalize unprofitable segments of our business |
| In the wholesale channel, particularly in the Americas and Europe, Q4 sales declines did moderate from the very steep sales declines we saw earlier in the year, consistent with our retail customers reporting more balanced stock levels |
| Excluding these actions, we ended 2023 with core top line trends contracting approximately 10% |
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