Dive Brief:
- After nearly 24 years at the helm, Kosta Kartsotis is stepping down as CEO and board member of Fossil, effective immediately.
- Current chief operating officer Jeffrey Boyer has been named interim CEO and been added to Fossil’s board of directors, according to a company press release.
- Former Kohl’s CEO Kevin Mansell, who has served on Fossil’s board since 2019, has been appointed chairman, effective immediately.
Dive Insight:
After more than two decades, Fossil is seeking out a new leader as it faces financial challenges.
Kartsotis became CEO in October 2000 and chairman of the board in 2010. He first joined Fossil in 1988. Kartsotis will stay on in a transitional role through September and then will provide consulting services to the company through September 2025. A search firm has been retained to find the brand’s next permanent CEO.
“On behalf of the entire board, I thank Kosta for his unwavering commitment and leadership to Fossil,” Mansell said in a statement. “We have great confidence in Jeff to guide the company through this period of transition as we undergo a strategic review, continue to advance our Transform and Grow Plan and pursue our search for the company’s next CEO in our effort to create long-term value for our stockholders.”
The Transform and Grow Plan, or TAG Plan, was introduced last year with the objective to reduce operating expenses, improve operating margins and drive profitable growth. Boyer has helped lead key initiatives within this plan.
The CEO change came as Fossil reported disappointing earnings results and announced a strategic review of its business, with Evercore serving as a financial adviser.
The company on Wednesday reported Q4 net sales fell 15.6% year over year to $421.3 million, driven by weakness in its wholesale channel, store rationalization efforts and lower smartwatch sales — a category the brand is exiting. Operating loss was $24 million compared to an operating profit of $1.3 million last year, while net loss widened to $28.2 million from $9.4 million in the year-ago period.
For the full year, net sales fell 16% year over year to $1.4 billion from $1.7 billion in 2022. Operating loss swelled to $143 million from $1.5 million last year, while net loss was $157 million from $44.2 million.
In its outlook for 2024, Fossil expects worldwide net sales to be about $1.2 billion, which includes a $100 million hit as a result of exiting its smartwatch business, closing stoes and experiencing weakened consumer demand.
Fossil has faced challenges in recent months. In September, S&P Global Ratings downgraded the company’s issuer credit rating from “B-” to “CCC+” and gave the retailer a negative outlook. The firm said the downgrade was because it views Fossil's “capital structure as potentially unsustainable given its challenging business prospects, weak free cash flow, and elevated leverage.”
Fossil carries a FRISK score of 2, indicating it has a 4% to 9.99% chance of filing for bankruptcy in the next 12 months, according to CreditRiskMonitor.
