Richardson-based Fossil shifted sales toward the internet during COVID-19. Online sales were up 150% in April and 200% in May compared to prior years. (Maria Halkias)


Pandemic forces Fossil to turn focus online
With stores closed for months, quick pivot to digital ‘dramatic’
Staff Writer

After closing a majority of its stores in mid-March, Richardson-based fashion watch and accessories maker Fossil is working on a phased plan to reopen them globally by the end of this month, CEO Kosta Kartsotis said Wednesday.

The COVID-19 pandemic tanked the company’s sales by 16% in the first three months of this year, and Fossil warned its second-quarter sales could drop as much as 70%. Its quarterly operating loss rose to $134 million, compared with $20 million a year ago.

Fossil started seeing the effects of the virus in February in its Asian operations. In the U.S., first-quarter sales were down to $153 million this year from $190 million a year ago. Globally, sales fell to $391 million from $465 million.

It operated 451 stores last year in North America, Europe and Asia, but expects to reduce that to between 350 to 400 this year because of growth in its e-commerce business.

The retailer shifted sales toward the internet during COVID-19, both for retail consumers and its wholesale business.

Kartsotis said the shift to digital has been “dramatic.” Online sales were up 150% in April and 200% in May compared with prior years.

“The investments we’ve been making in our digital capabilities prepare us to drive these significantly higher demand levels,” Kartsotis said.

Fossil expects online sales to make up about 60% of its worldwide sales in the second half of this year. Kartsotis said online sales accounted for only 10% of its first quarter business, but he expects that to rise above 30% in the current three-month cycle.

Like other companies, Fossil took aggressive cost-cutting steps when the pandemic shut down much of the global economy. It announced in May that it cut base salaries for “a substantial number” of its worldwide employees and its executive officers. Hourly employees’ work weeks were cut to 24 or 32 hours, reducing its costs nearly 40% for the first quarter, said Jeffrey Boyer, the company’s chief operating and financial officer.

Kartsotis said company leaders are closely watching the economic recovery.

“Our teams are much leaner today than several months ago, but are functioning well, even on a remote basis due to improved focus and efficiency throughout the organization,” Kartsotis said. “We believe Fossil will emerge from this crisis as a stronger, leaner, more efficient and more digitized organization.”

Twitter: @AshtonNichols_