Q: What would it take for traditional watches to consistently and sustainably grow revenue year over year in the future? A: Franco Fogliato, CEO, stated that the 12% global growth in traditional watches during Q2 was driven by innovation, design, creativity, storytelling, and technology. He emphasized that the company is ahead of its original plan and that continued success depends on building the best products in the world, creating emotional connections with consumers, and maintaining the brand's 40-year heritage. He expressed excitement about the product pipeline for the second half of 2026 and into 2027.

Q: The 490 basis points of gross margin expansion was impressive, but you called out some accelerated license brand minimum royalty recognition as a partial offset. How should we think about the cadence of that royalty headwind in the back half of the year, and is the 62% plus gross margin level sustainable? A: Randy Grevivin, CFO, explained that the royalty shortfall impact on the quarter was approximately 1.5%, not super meaningful. The real story continues to be the power of the full-price selling model, which drives margin accretion for Fossil Group and translates directly to operating partners and wholesale partners. The company is pleased with the healthy gross margin profile and now anticipates full-year gross margins in the upper 50s, assuming no additional tariff refunds in 2026.

Q: What are the specific drivers that get you to that year-over-year growth in 4Q, and how much visibility do you have into that today? A: Franco Fogliato, CEO, said the return to growth in Q4 is a combination of new product launches, wholesale door expansion, easier comps, and better visibility with partners. He noted that the company is working closely with partners to build visibility and presenting products better in stores. He expressed confidence in the innovation, product pipeline, marketing, and storytelling, citing the excitement from the global sales meeting in Dallas and positive feedback from partners who see the Fossil Group coming back.

Q: It was great to see the Americas and Asia up year over year in terms of net sales. Can you walk us through the primary drivers of the weakness in the European region and what specific actions are you taking to stabilize that business? A: Franco Fogliato, CEO, attributed the European weakness to the geopolitical climate in the Middle East impacting travel retail and consumer behavior. He also mentioned significant changes to the business model, moving some direct territories into subsidiaries, which improved and simplified the company but caused short-term pain. He noted that Europe was the best-performing market last year and that the company is taking a long-term view without chasing short-term sales, believing the market will come back.

Q: Last year you had a big marketing effort with Nick Jonas in the back half of 2025. This year, marketing efforts seem more spread out. Can you contrast your marketing efforts for 2026 versus 2025 and discuss future marketing and spending plans? A: Franco Fogliato, CEO, explained that the company has downsized and simplified its structure to invest more in demand creation, which was evident in Q2. He highlighted the success of the Big Tech Y2K campaign, nominated for best marketing campaign of the year. He stated that Nick Jonas remains a great partner and that the company is creating more stories focused on each media channel to drive additional consumers into the funnel, moving investment from performance to upper funnel to drive stronger brand awareness.

Q: Can you provide more detail on the strength in the US and India markets and the drivers behind the double-digit growth in India? A: Franco Fogliato, CEO, noted that the Americas region stabilized with mid single-digit growth in the US, while Asia increased 4% with strong double-digit growth in India. In India, the company delivered double-digit growth across the Fossil, Armani, Diesel, and Kors brands, driven by product newness, disciplined full-price selling, and great storytelling. The India factory has been delivering increased throughput and recently achieved ISO certification, and the company believes there is still tremendous runway to unlock additional growth in India.

Q: Can you elaborate on the operational initiatives and cost-saving measures implemented during the quarter? A: Randy Grevivin, CFO, highlighted several tactical advancements: the deployment of AI to supercharge automation and productivity in back-office functions, the transition of the South Africa subsidiary to a distributor model to lower operating costs, and the transition of Malaysia-Singapore markets to a new hybrid operating model for synergies and SG&A reduction. Additionally, the company executed lease extensions on more than 25 of its best-performing stores in the Americas and signed a lease for a new North American fulfillment and distribution center in Sunnyvale, Texas, which will come online later this year at a lower cost.

Q: Can you provide more color on the store closure program and the expected store count at the end of the year? A: Randy Grevivin, CFO, stated that the company ended Q2 with 17 fewer stores, including 6 closures and 11 stores transitioned to a distributor in South Africa. There are another 2 closures planned for this year, and the company expects to end the year with approximately 178 locations globally. He noted that the hard work of optimizing the store portfolio is largely behind them, and going forward, the company will continue to deploy its successful store-of-the-future strategy and evaluate longer-term opportunities to drive growth and productivity.

Q: Can you discuss the balance sheet position and the tariff refund collection? A: Randy Grevivin, CFO, reported that the company ended the quarter with $79 million in cash and cash equivalents and $18 million of availability under its ABL. During the quarter, the company collected $4.9 million of the $5.9 million tariff refund recognized in Q1, with no utilization under its ATM program. Inventory at quarter end totaled $178 million, approximately flat compared to Q2 of last year and in line with seasonal expectations, leaving the business well positioned to support the anticipated return to growth in Q4.

Q: Can you provide more details on the raised full-year guidance and the expected return to top-line growth? A: Randy Grevivin, CFO, stated that given the strong first-half performance and business momentum, the company is raising its full-year outlook. Worldwide net sales are now expected to decline in the range of 3% to 5%, compared to the prior expectation of a 4% to 6% decline. About 360 basis points of the decline can be traced to the net

For the complete transcript of the earnings call, please refer to the full earnings call transcript .