Fossil Group Inc

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K ("Annual Report"), including the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors” and “Business,” contains forward-looking statements based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include all statements that are not historical facts and generally may be identified by terms such as “believe,” “may,” “will,” “should,” “seek,” “forecast,” “outlook,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “predict,” “potential,” “plan,” “expect” or the negative or plural of these words or similar expressions. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, and these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in this Annual Report under the section entitled “Risk Factors” in Item 1A of Part I and elsewhere, and in other reports we file with the U.S. Securities and Exchange Commission (the "SEC"). In addition, many of the foregoing risks and uncertainties are, and could be, exacerbated by pandemics and any worsening of the global business and economic environment. While forward-looking statements are based on reasonable expectations of our management at the time that they are made, you should not rely on them. We undertake no obligation to revise or update publicly any forward-looking statements for any reason, except as required by applicable law.

Summary Risk Factors

Our business is subject to a number of risks and uncertainties that may affect our business, results of operations and financial condition, or the trading price of our common stock. These risk factors may not be exhaustive. We operate in a continually changing business environment, and new risks and uncertainties emerge from time to time. Management cannot predict such new risks and uncertainties, nor can it assess the extent to which any of the risk factors below or any such new risks and uncertainties, or any combination thereof, may impact our business. These risks are more fully described in Part I, Item 1A. "Risk Factors". These risks include, among others, the following:

Pandemic and Public Health Risks

•any impacts from pandemics and actions taken by governments, businesses, and individuals in response to pandemics.

Strategic Risks

•our restructuring program may not be successful or we may not fully realize the expected cost savings and/or operating efficiencies from our restructuring plans;

•our ability to anticipate and respond to changing fashion, functionality and product trends;

•our ability to continue to develop innovative products;

•our ability to execute our e-commerce business;

•consumer acceptance of new products, features or technology;

•our ability to grow our sales is dependent on our business strategy;

•the cost and stakeholder approval of our sustainability practices;

•climate change and other environmental impacts.

Operational Risks

•supply chain disruptions resulting from changes in U.S. trade policy with China or as a result of a pandemic;

•loss of any of our license agreements for globally recognized fashion brand names;

•effectively managing our retail store operations;

•supply shortages for certain key components in our products;

•seasonality of our business;

•the success of the shopping malls and retail centers in which our stores are located;

•loss of key facilities;

•fluctuations in the price, availability and quality of raw materials and any impact of inflation;

•problems with, or loss of, our assembly factories or manufacturing sources;

•we do not maintain long-term contracts with our customers;

•we face intense competition in the specialty retail and e-commerce industries and some competitors are substantially larger than us;

•we face competition from traditional competitors as well as competitors in the wearable technology category;

•any material disruption of our information systems;

•factors affecting international commerce and our international operations;

•changes in economic and social conditions in Asia, particularly China, and disruptions in international travel and shipping;

•loss of key senior management or failure to attract and retain key employees.

Risks related to our Indebtedness

•we are highly leveraged;

•our failure to comply with the covenants contained in our debt agreements;

•our borrowings may fluctuate significantly;

•our indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations;

•our ability to generate sufficient cash flows to meet our debt service obligations;

•we may incur significantly more debt, including secured debt;

•we could face a downgrade in our debt ratings;

•our indebtedness exposes us to interest rate risk;

•we have restrictive covenants in our secured asset-based revolving credit agreement.

Financial Risks

•we may not achieve consistent profitability or positive cash flows;

•a significant portion of our cash, cash equivalents and investments are held by our foreign subsidiaries;

•changes in the mix of product sales demand;

•impact of potential changes to international tax rules;

•incurring impairment charges;

•increased competition from online only retailers and a highly promotional retail environment;

•our license agreements may require minimum royalty commitments, regardless of the level of product sales under these agreements;

•foreign currency fluctuations;

Legal, Compliance and Reputational Risks

•a data security or privacy breach;

•violations of laws and regulations, or changes to existing laws or regulations in the U.S. or internationally;

•tariffs or other restrictions placed on imports from China and any retaliatory trade measures taken by China;

•loss of our intellectual property rights;

•infringing the intellectual property rights of others;

•failure by an independent manufacturer or license partner to use acceptable labor practices, otherwise comply with laws or suffer reputation harm.

Risks Relating to our Common Stock

•failure to meet the continued listing requirements of Nasdaq could result in a delisting of our securities;

•activist shareholders could negatively affect our business;

•rapid and substantial increases or decreases in our stock price, regardless of developments in our business;

•our organizational documents contain anti-takeover provisions;

•failure to meet our financial guidance or achieve other forward-looking statements we have provided to the public.

General Risks

•any deterioration in the global economic environment, and any resulting declines in consumer confidence and spending;

•the effects of economic cycles, terrorism, acts of war and retail industry conditions;

•foreign government regulations and U.S. trade policy;

•inherent limitations in control systems could lead to error or fraud that is not detected.

Trademarks, service marks, trade names and copyrights

We use our FOSSIL, MICHELE, RELIC, SKAGEN and ZODIAC trademarks, as well as other trademarks, on watches, our FOSSIL and SKAGEN trademarks on jewelry, and our FOSSIL trademark on leather goods and other fashion accessories in the U.S. and in a significant number of foreign countries. We also use FOSSIL, WATCH STATION INTERNATIONAL and WSI as trademarks on retail stores and FOSSIL, SKAGEN, WATCH STATION INTERNATIONAL, WSI, ZODIAC and MICHELE as trademarks on online e-commerce sites. This Annual Report may also contain other trademarks, service marks, trade names and copyrights of ours or of other companies with whom we have, for example, licensing agreements to produce, market and distribute products. Solely for convenience, the trademarks, service marks, trade names and copyrights referred to in this Annual Report may be listed without the TM, SM, © and ® symbols, as applicable, but we will assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors, if any, to these trademarks, service marks, trade names and copyrights.

PART I

Item 1. Business

Company

We are a design, innovation and distribution company specializing in consumer fashion accessories. Our products include watches, jewelry, handbags, small leather goods, belts and sunglasses. We design, develop, market and distribute products under our owned brands FOSSIL, SKAGEN, MICHELE, RELIC and ZODIAC and licensed brands ARMANI EXCHANGE, DIESEL, DKNY, EMPORIO ARMANI, KATE SPADE NEW YORK, MICHAEL KORS, and TORY BURCH. Based on our range of accessory products, brands, distribution channels and price points, we are able to target style-conscious consumers across a wide age spectrum on a global basis.

Operating Strategy

Our goal is to drive shareholder value and make a positive impact on our people, planet and communities. We continue to operate in a very challenging business environment for our product offerings. In early 2023, we initiated our Transform and Grow plan (“TAG”), which was initially designed to reduce operating expenses, improve operating margins and advance our path to profitable growth. In August 2023, as a result of a more comprehensive business review, we expanded TAG to address a broader transformation and capture a greater level of benefits.

Under the expanded program, the “Transform” aspect of TAG focuses on optimizing our core categories, brands, geographies and channels. Through this wider lens, we intend to restructure our operations to achieve improved gross margins, lower operating expenses and to reduce our working capital requirements. This comprehensive initiative encompasses various domains such as:

•organization and operating model optimization;

•sourcing and cost of goods sold opportunities;

•pricing, promotion, and markdown improvements;

•end-to-end product planning and inventory management enhancements;

•indirect procurement efficiencies, including marketing and information technology areas;

•logistics and distribution center operations efficiencies;

•store rationalization and optimization programs.

Under TAG, the Company is targeting approximately $300 million of annualized operating income benefits by the end of 2025. In addition to the economic benefits of TAG, the Company expects to significantly improve its operating model, moving from a decentralized, regional focused organization to a global brand and commercial model. We expect these changes will enable us to:

•adapt our operations to more effectively address challenges through enhanced global focus, top-down alignment, and decision-making rigor;

•instigate an ongoing, sustainable operating model, underscored by a culture of enhanced accountability;

•establish a more effective and efficient leadership structure.

The “Growth” aspect of TAG consists of investing in three key growth pillars to drive sustained and profitable revenue growth. These growth pillars are: (1) revitalizing the FOSSIL brand, (2) maximizing our licensed brand portfolio in watches and jewelry and (3) growing our premium watch offerings. We believe that these growth pillars are best enabled by our digital transformation, marketing capabilities and technology investments.

To execute TAG, we have established a Transformation Office. The Transformation Office is composed of members of our senior management supported by a leading management consulting firm specializing in assisting companies in complex reorganizations. Additionally, the Board of Directors has established a Special Board Committee to provide primary board oversight of the Transformation Office and drive accountability, timeliness and results of the program.

As we execute against the entire scope of TAG, we have an opportunity to improve our operating fundamentals, right size our cost structure, and return to sales growth. Aided by these measures, our long-term goal is to achieve adjusted gross margins above 50% and adjusted operating margins of approximately 10%.

Segments

We report segment information based on the “management approach”. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company's reportable segments.

We manage our business primarily on a geographic basis. The Company's reportable operating segments are comprised of (i) Americas, (ii) Europe and (iii) Asia. Each reportable operating segment includes sales to wholesale and distributor customers, and sales through Company-owned retail stores and e-commerce activities based on the location of the selling entity. The Americas segment primarily includes sales to customers based in Canada, Latin America and the United States. The Europe segment primarily includes sales to customers based in European countries, the Middle East and Africa. The Asia segment primarily includes sales to customers based in Australia, Greater China, India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea and Thailand. Each reportable operating segment provides similar products and services.

Brands

We are home to a collection of world-class owned and licensed brands that share our passion for design, innovation and doing good. We make distinctive watches and lifestyle accessories, bringing each brand to life through an extensive global channel and distribution network. We believe that the way we use our time matters, and we’ve made it our goal to create lasting change at the intersection of fashion and technology, while investing in the communities around the world where we live, work and play.

Our consumer-first mindset drives every decision we make. By capitalizing on fashion trends and leveraging proprietary data and insights, we are able to deliver relevant, high-value products and experiences to consumers across a diverse range of price points, style preferences and geographies.

Brand Building

Our ambition is to capture a greater share of the growing global accessories market with a collection of the world's most distinctive brands. We are investing in and strengthening each brand within our diverse owned and licensed portfolio, connecting with customers across price point, channel, geography and styles.

The ability to build and activate strong lifestyle brands is key to our success. Our multi–channel model delivers engaging experiences directly to our consumers through our owned channels of distribution, direct 1P marketplaces and via third party distributors. Being consumer-first means we walk in their shoes, learning from first party data, as well as fashion and style trends, to deliver relevant and memorable brand experiences.

Proprietary Brands

Our owned brands include FOSSIL, SKAGEN, MICHELE, RELIC and ZODIAC.

FOSSIL

FOSSIL is a leading global lifestyle accessories brand inspired by creativity and ingenuity, dedicated to connecting people to what matters most: time. FOSSIL takes pride in creating timeless and exceptionally crafted watches, leather goods and jewelry designed to accompany you on every journey life presents. Today, we are on a mission, continuing our decade-long commitment to "Make Time For Good," while building a dynamic, multi-channel organization connecting with customers all over the world.

SKAGEN

Since 1989, SKAGEN has been inspired by the city of Skagen and the Danish coastline. SKAGEN embraced Danish minimalism, creating slim styles and color combinations that reflect coastal living—an understated style that’s still authentic to the brand today. Denmark has much to celebrate. As SKAGEN honors its heritage, the brand is expanding its range of influence to include areas of relevance that are of the moment.

MICHELE

MICHELE timepieces are an extension and reflection of the women who wear them. Every MICHELE watch is built to celebrate feminine ambition and boldness—a reminder of all a woman has accomplished as she builds her legacy. MICHELE's beautifully-feminine timepieces use precise Swiss movements, genuine gemstones and diamonds, and premium finishes. Each luxury timepiece is distinctly and recognizably MICHELE with signature elements and bold art deco-inspired details.

RELIC

RELIC by Fossil is an American watch and lifestyle brand creatively delivering accessible, updated casual designs. With each of our signature watches and accessories, we create styles that fit your everyday lifestyle.

ZODIAC

With a rich legacy dating back to 1882, ZODIAC is dedicated to excellence in precision, bold design and craftsmanship with authentic Swiss horology. Today, ZODIAC creates exclusive watches that maintain historical authenticity to vintage models while incorporating contemporary updates, proprietary movements and always-improving functionality.

Licensed Brands

Our main licensed brands include ARMANI EXCHANGE, DIESEL, DKNY, EMPORIO ARMANI, KATE SPADE NEW YORK, MICHAEL KORS, and TORY BURCH. As a result of our vertical integration, we are uniquely positioned to launch an accessory category, such as watches, in partnership with a licensor in a timely and consistent manner. All of our major licensing relationships are exclusive for the brands we license and include traditional watches, and for certain other brands, smartwatches and/or jewelry.

Products

We design, develop, market and distribute accessories across a variety of product categories: traditional watches, jewelry, handbags, small leather goods, belts and sunglasses. Additionally, we manufacture and/or distribute private label brands, as well as branded products purchased for resale in certain of our other branded retail stores. The following table sets forth certain information with respect to the breakdown of our net sales and percentage change among proprietary, licensed and other brands for the fiscal years indicated (in millions, except for percentage data):

Traditional Watches

Watches are our core global business. Sales of watches for fiscal years 2023, 2022 and 2021 accounted for approximately 77.6%, 77.9% and 80.9%, respectively, of our consolidated net sales.

Licensed Brands

We have entered into multi-year, worldwide exclusive license agreements for the manufacture, distribution and sale of watches bearing the brand names of certain globally recognized fashion brands. The following table sets forth information with respect to our primary watch licenses:

(1) Subject to early termination in certain circumstances

We also license certain internationally known brand names, such as Skechers, for limited distribution in select markets. Our license agreement with DKNY expires at the end of 2024, and we do not plan to renew the license.

Fashion Accessories

In addition to our core watch business, we also design and create handbags, small leather goods, and belts across certain of our owned brands and jewelry under our owned brands and certain licensed brands. In the U.S. and certain international markets, we generally market our fashion accessory lines through the same distribution channels as our watches using similar marketing approaches. Our fashion accessories are typically sold in locations adjacent to watch departments, in store or online, which may lead to purchases by persons who are familiar with our watch brands. Sales of our accessory lines accounted for 20.5%, 19.8% and 16.9% of our consolidated net sales in fiscal years 2023, 2022 and 2021, respectively.

The following table sets forth information about our fashion accessories:

Licensed Eyewear

We have a license agreement with the Safilo Group for both FOSSIL branded sunglasses and optical frames worldwide, which expires on December 31, 2028. The license agreement provides for royalties to be paid to us based on a percentage of net sales and includes certain guaranteed minimum royalties. Sales of licensed eyewear accounted for approximately 0.6%, 0.5% and 0.4% of our consolidated net sales for fiscal years 2023, 2022 and 2021, respectively.

Stores

Our products are sold across approximately 150 countries worldwide through 23 Company-owned sales subsidiaries and through a network of 65 independent distributors. Our network of Company-owned stores included 130 retail stores and 172 outlet stores as of December 30, 2023. In certain international markets, our products are also sold through licensed and franchised FOSSIL retail stores, retail concessions operated by us and kiosks.

We also operate stores under the WATCH STATION and WSI brands, in which we partner with some of the world's most iconic brands to curate a unique collection of designer watches and jewelry for women and men. We offer a robust online and in-store experience in the United States, Europe and Asia that connects our customers to the stories, trends and latest innovations in the world of watches.

Marketing

Our marketing approach meets the consumer wherever they are, both online and offline. We create the best possible brand experience through a blend of art and science, which means that we prioritize both data-driven decision-making and creativity in our marketing approach. At our core, we are storytellers and demand generators and have the ability to craft beautiful products and deliver brand experiences worth talking about.

We have an in-house global marketing team with representation across our regions serving both our owned and licensed brands, to better connect with consumers and drive sustained engagement and awareness. This capability works across channels, including digital marketing, social media, social commerce, email marketing, Customer Relationship Management, partner marketing and brand and performance media. We are also experienced brand builders, with in-house brand development, PR, content and integrated marketing teams, in addition to a dynamic global creative studio.

We have built proprietary algorithms to support the profitable flow-through of marketing investment, optimized across channels, brands and countries. We deliver increasingly better personalization through ongoing test-and-learn methods as well as through consumer insights and predictive analytics capabilities we have built over the past few years.

We are strategically increasing our marketing investment and are telling fewer stories better so that our consumers understand the enduring role our brands play in their lives.

Distribution

We distribute our products globally through regional warehouses with our warehouse in Dallas, Texas serving the Americas, our warehouse in Eggstätt, Germany serving Europe and our warehouse in Hong Kong serving Asia. For those countries in which our products are distributed, but where we don’t have a physical presence, we use third-party distributors. From our regional warehouses, our products are shipped to subsidiary warehouses, distributors, wholesale accounts or directly to customers in selected markets. Our extensive distribution network allows us to reach a diverse global customer base. We sell our products through a range of channels including e-commerce, Company-owned retail stores, department and specialty retail stores, airlines, mass markets and concessions.

Digital

Our holistic e-commerce efforts include three forms of digital channels. First, our owned global e-commerce websites for our brands deliver mobile-friendly experiences, personalized content, and seamless omni-channel integration with retail stores, including buy online pick up in store, curbside pickup and ship from store. Second, we sell our products to leading third-party online retailers and our wholesalers’ e-commerce websites. Third, we directly sell to consumers on major third-party platforms.

Our e-commerce capabilities and total revenue contribution continue to grow as a part of our total business. In fiscal year 2023, our digital sales comprised 38% of consolidated net sales. This included sustained positive comps on our owned e-commerce channels year-over-year. We will continue to invest in growing our e-commerce capabilities in fiscal year 2024, with a focus on improving the end-to-end consumer experience, creating stronger CRM journeys via first party data and bringing more engaging and accessible experiences across our channels.

Manufacturing and Sourcing

The vast majority of our products are sourced internationally. Most watch product sourcing is coordinated through our Hong Kong subsidiary, Fossil (East) Limited (“Fossil East”). We have some limited watch assembly operations through owned facilities in India and Switzerland. Although we do not have long-term contracts with our unrelated watch and accessory manufacturers, we maintain long-term relationships with several manufacturers. These relationships developed due to the significant length of time we have conducted business with the same manufacturers. We believe that we are able to exert some operational control with regard to our principal watch assemblers because of our long-standing relationships. In addition, we believe that the relative size of our business with watch manufacturers gives us priority within their production schedules. Furthermore, the manufacturers understand our quality standards, which allow us to produce quality products supporting overall operating margins.

Our quality control program attempts to ensure that our products meet the standards established by our product development and quality staff. Development samples of products are inspected by us prior to placing orders with factories to ensure compliance with our designs. We also typically inspect or audit inspections of "top of production" samples of each product for compliance before or at the start of commencing production. The operations of the Hong Kong and Chinese factories that produce our products are monitored on a periodic basis by Fossil East, and the operations of our Swiss factories are monitored on a periodic basis by Montres Antima SA, one of our foreign operating subsidiaries.

Intellectual Property

We use our FOSSIL, MICHELE, RELIC, SKAGEN and ZODIAC trademarks, as well as other trademarks, on watches, our FOSSIL and SKAGEN trademarks on jewelry, and our FOSSIL trademark on leather goods and other fashion accessories in the U.S. and in a significant number of foreign countries. We also use FOSSIL, WATCH STATION INTERNATIONAL, and WSI as trademarks on retail stores and FOSSIL, SKAGEN, WATCH STATION INTERNATIONAL, WSI, ZODIAC and MICHELE as trademarks on online e-commerce sites. We have taken steps to establish or provide additional protection for our trademarks by registering or applying to register our trademarks for relevant classes of products in each country where our products are sold in addition to certain foreign countries where it is our intent to market our products in the future. We also have rights in certain copyrights and designs both in the United States and in other countries where our products are principally sold.

We continue to explore innovations in the design and assembly of our products. As a result, we have been granted, and have pending, various U.S. and international design and utility patents related to certain product designs, features, and technologies. As of December 30, 2023, none of our patents were material to our business.

We rely upon unpatented trade secrets, know-how, and continuing technological innovation to develop and maintain our competitive position. We strive to protect our trade secrets and other proprietary information through agreements with current and prospective product development partners, confidentiality agreements with employees, consultants and others that may have access to our proprietary information and through the use of other security measures.

We aggressively protect our trademarks and trade dress and pursue infringement claims both domestically and internationally. We also pursue counterfeiters both domestically and internationally through third-party online monitoring tools and through leads generated internally, as well as through our business partners worldwide.

Seasonality

Our business has a seasonal pattern, with a significant portion of our sales occurring during the end-of-year holiday period.

Significant Customer

No customer accounted for 10% or more of our consolidated net sales in fiscal years 2023, 2022 or 2021.

Competition

The businesses in which we compete are highly competitive and fragmented. Our traditional watch business generally competes with a number of established manufacturers, importers and distributors, including Armitron, Citizen, Gucci, Guess?, Kenneth Cole, LVMH Group, Movado, Raymond Weil, Seiko, Swatch, Swiss Army, TAG Heuer and Timex. In addition, our leather goods, sunglasses, and jewelry businesses compete with a large number of established companies that have significant experience developing, marketing and distributing such products. Our competitors include distributors that import watches and accessories from abroad, U.S. companies that have established foreign manufacturing relationships and companies that produce accessories domestically.

In addition, we face intense competition in the watch market from smartwatches from technology brands such as Apple, Garmin and Samsung, and from fitness brands such as Fitbit. Many of these brands have significantly more resources than we do in areas such as product development and marketing. While we did compete in the smartwatch category for a number of years, we recently decided to exit this category to focus our resources on our traditional watch offerings. We believe our design and branding are strong competitive advantages in the traditional watch market.

Although the level and nature of competition varies among our product categories and geographic regions, we compete on the basis of style and technical features, price, value, quality, brand name, advertising, marketing, distribution and customer service. Our ability to identify and respond to changing fashion trends and consumer preferences, to maintain existing relationships and develop new relationships with manufacturing sources, to deliver quality merchandise in a timely manner, to manage the retail sales process, and to continue to integrate technology into our business model are important factors in our ability to compete. Our distinctive business model of owning the distribution in many key markets and offering a globally recognized portfolio of proprietary and licensed products allows for many competitive advantages over smaller, regional or local competitors. This allows us to bypass a local distributor's cost structure in certain countries, resulting in more competitively priced products, while also generating higher product and operating margins.

Governmental Regulation

Imports and Import Restrictions

Most of our products are assembled or manufactured overseas. As a result, the U.S. and countries in which our products are sourced or sold may from time to time modify existing or impose new quotas, duties (including anti-dumping or countervailing duties), tariffs or other restrictions in a manner that adversely affects us. For example, our products imported for distribution in the U.S. are subject to U.S. customs duties, and in the ordinary course of our business, we may from time to time be subject to claims by the U.S. Customs Service for duties and other charges. Factors that may influence the modification or imposition of these restrictions include the determination by the U.S. Trade Representative that a country has denied adequate intellectual property rights or fair and equitable market access to U.S. firms that rely on intellectual property, trade disputes between the U.S. and a country that leads to withdrawal of "most favored nation" status for that country and economic and political changes within a country that are viewed unfavorably by the U.S. government. We cannot predict the effect these events would have on our operations, if any, especially in light of the concentration of our assembly and manufacturing operations in Hong Kong, and mainland China.

General

We are subject to laws regarding customs, tax, employment, privacy, truth-in-advertising, consumer product safety, zoning and occupancy and other laws and regulations that regulate and/or govern the importation, promotion and sale of consumer products and our corporate, retail and distribution operations.

Compliance and Trade

Code of Conduct for Manufacturers ("Manufacturer Code")

We are committed to ethical and responsible conduct in all of our operations and respect for the rights of all individuals. We strive to ensure that human rights are upheld for all workers involved in our supply chain, and that individuals experience safe, fair and non-discriminatory working conditions. In 2021, we launched the Fossil Group Human Rights Policy. This further supports our commitment to human rights within our entire supply chain.

In addition, we are committed to compliance with applicable environmental requirements and are committed to seeing that all of our products are manufactured and distributed in compliance with applicable environmental laws and regulations. We expect that our business partners will share these commitments, which we enforce through our Manufacturer Code.

Our Manufacturer Code specifically requires our manufacturers to not use child, forced or involuntary labor and to comply with applicable environmental laws and regulations. We provide training to our factories related to our Manufacturer Code and the applicable laws in the country in which the factory is located. The training provides the factories with a more in-depth explanation of our Manufacturer Code.

In addition to the contractual obligation, we evaluate our suppliers' compliance with our Manufacturer Code through audits conducted both by our employees and third-party compliance auditing firms. In most cases, the audits are announced. If we believe that a supplier is failing to live up to the standards of our Manufacturer Code, we may terminate the supplier or provide the supplier with an opportunity to remedy the non-compliance through the implementation of a corrective action plan.

Trade

Our warehouse and distribution facility in Dallas, Texas operates in a special purpose sub-zone established by the U.S. Department of Commerce Foreign Trade Zone Board. This sub-zone provides the following economic and operational advantages to us: (i) we do not have to pay duty on imported merchandise until it leaves the sub-zone and enters the U.S. market; (ii) we do not have to pay any U.S. duty on merchandise if the imported merchandise is subsequently shipped to locations outside the U.S.; and (iii) we do not have to pay local property tax on inventory located within the sub-zone.

Information Systems

Enterprise Resource Planning

We utilize SAP ERP in our U.S. operations and throughout most of our European operations to support our human resources, sales and distribution, inventory planning, retail merchandising and operational and financial reporting systems of our business, and Navision in our Asian operations to support many of the same functions on a local country level. We also use tools provided by salesforce.com, inc. to globally support our brand websites, marketing and customer initiatives.

Enterprise Performance Management Systems

We have implemented customized Hyperion financial reporting software from Oracle Corporation. The software increases the efficiency of our consolidation and reporting process and provides a more dynamic way to view and analyze data. The Hyperion planning tool also provides more dynamic and robust budgeting and forecasting capabilities.

Point-of-Sale System

We began the global implementation of a new point-of-sale system in 2023 at our retail stores beginning in Europe with additional implementation in the Americas and Asia planned in 2024. This point-of-sale system will significantly enhance our omni-channel capabilities allowing us to better serve our customers across channels with inventory and fulfillment.

Customer Data Platform

We utilize a next generation, cloud-based Customer Data Platform (CDP) to better capture, identify, and manage our customer narrative and further enable our sales programs and interactive marketing initiatives in a more personalized, secure and dynamic manner.

Customer Master Data Migration

We transitioned our master customer data from an on-premise, proprietary data repository to a cloud native, industry standard design based on the Google Cloud Platform (GCP) architecture, in order to better secure and improve the long-term performance and integration for future key marketing, analytics, AI, and sales systems.

Human Capital Resources

As of December 30, 2023, our global team consisted of approximately 6,100 people, with 4,300 based in our international subsidiaries.

None of our domestic or foreign-based employees are represented by a trade union. However, certain European-based employees are represented by work councils, which include a number of our current employees who negotiate with management on behalf of all the applicable employees.

Our Commitment

We pride ourselves on being a purpose driven consumer-centric organization where our employees have the opportunity to thrive. We aim to attract, develop and retain top talent through compelling employment opportunities, competitive compensation, and benefits, and fostering personal development within a purposeful work environment.

Workforce Composition

Our global presence spans the Americas (38%), Europe (30%), and Asia-Pacific (32%), with a diverse workforce where 62% are women and 38% are men. In the U.S., including corporate, retail, and distribution employees, 59% of employees identify as black and indigenous people of color (“BIPOC”), 40% identify as white, and 1% did not self-identify.

We're dedicated to fostering an environment where diversity, equity, and inclusion (DE&I) propel both our employees and the company forward. Our commitment to DE&I is guided by our five key objectives:

1. Growing our knowledge. We understand DE&I is a continuous journey, centralizing our efforts on education through various platforms like online communities, Employee Resource Groups (ERGs), and mandatory training on unconscious bias and inclusion. Celebrating cultural moments and fostering open discussions on DE&I issues are also pivotal.

2. Increasing our Diversity. Our aim to increase BIPOC and female representation has led to nearly 50% of our external hires being BIPOC the past year, a 4% increase over the previous year. Initiatives like the WINGEd!(Women Inspired to Network and Grow through Education) program, which focuses on growing skills around self-awareness, confidence, the value of risk, and career ownership, is one of the key items that has helped us to have 54% of our global leaders and 46% of senior leadership being female.

3. Creating a more inclusive and equitable environment for all employees. For four years, the Human Rights Campaign has recognized us as a top employer for LGBTQ+ employees. We've seen a 30% increase in ERG participation, emphasizing support across diverse employee groups. Our ERGs have organized over 71 events, engaging more than 12,000 participants.

4. Driving accountability. We've linked executive compensation to DE&I achievements and integrated DE&I into our leadership programs, aiming for transparency in our DE&I goals.

5. Leveraging our diversity to benefit external stakeholders. Our influence extends beyond our company. We actively participate in industry DE&I councils and initiatives like the Black in Fashion Council and CEO Action for Diversity and Inclusion. Our efforts include creating products supporting causes like the HBCU 20x20 program and organizing career development events for students.

Through these efforts, we're not just promoting diversity and inclusion internally but also making a meaningful impact in the community and industry.

Engaging the Fossil Group Workforce

We are committed to fostering a vibrant workplace where engagement thrives. Our aim is to cultivate a high-performance culture enriched with individuals possessing the necessary skills and behaviors to drive company success and achieve personal excellence daily.

By regularly surveying our employees, we gain valuable insights into their viewpoints, motivations, and the areas where we, as an organization, can enhance our operations. This process is crucial for building and maintaining genuine engagement. Our findings consistently highlight the importance of career growth and development, effective communication, recognition, a clear understanding of the company's future, attractive compensation and benefits, and the chance to contribute to something greater.

To align our employees' aspirations with our business objectives, we have developed a workplace culture that includes:

•Comprehensive health and wellness benefits;

•Dynamic two-way communication strategies;

•Employee development programs that foster value creation;

•A performance management system that encourages growth opportunities through company support;

•Meaningful recognition mechanisms;

•A values-driven culture and workplace environment.

To maintain our status as a competitive and fair employer where every individual feels esteemed, we employ a standardized compensation framework. This system ensures equitable pay by defining, documenting, and benchmarking positions against local market standards, utilizing third-party, leading-edge salary data to establish fair pay ranges for each role.

The Future of the Fossil Group Workforce

In our journey toward shaping the future of work, this past year has been pivotal for us in listening and learning how to craft the optimal employee experience while propelling our business forward. We have continued with a hybrid working model, thoughtfully balancing the demand for flexibility with the necessity of face-to-face interactions that spur creativity, efficient execution, and personal development. Additionally, we have streamlined our operational framework, transitioning from a regionally dispersed model to a more unified structure, enhancing our overall efficiency.

In line with our commitment to a direct-to-consumer strategy, we have significantly increased our digital investments, achieving notable strides in assembling a worldwide team and substantially boosting our technical ability. Our ongoing investment in our Digital U program underscores our dedication to equipping our employees with advanced digital skills, ensuring they are well-versed in the latest digital practices.

Oversight

Our Board of Directors and related board committees are actively involved in areas associated with excellence in human resource management and related oversight of certain policies, practices, and outcomes – including compensation, DE&I, employee development, engagement, and succession planning. We share our employee survey results with our Board of Directors to keep them apprised of related sentiments, interests, and concerns. The Nominating and Corporate Governance

Committee helps to oversee ESG matters. The Audit Committee regularly participates in discussions with our leadership team to ensure oversight of enterprise-level risks and mitigation plans on various topics, including those associated with human capital risk. The Audit Committee also engages in regular review of the Company’s monitoring and enforcement of our Code of Conduct and Ethics and compliance. The Compensation and Talent Management Committee reviews and approves matters associated with compensation, benefits, and equity awards for qualifying employees. This work includes oversight of executive compensation and company goals that are part of executives’ annual performance reviews. These same goals serve as the foundation for the Company’s employee annual cash bonus plan. Our Board of Directors also established in 2023 a Special Committee of the Board to oversee the Company's strategic transformation initiatives, including those relating to our organizational structure.

We take pride in the strides we have made toward creating a work environment that is not only rewarding, but also deeply engaging and inspiring for our team members. In a world that evolves rapidly, our commitment to cultivating our culture remains steadfast. To surpass our goals and realize our ambitions, we are dedicated to a cycle of listening, learning, and collaboration. We aim to set impactful objectives, foster innovation, and maintain transparency about our journey, including both our achievements and the challenges we face. This approach solidifies our position as a prime choice for talented individuals who are both high-performing and highly engaged.

Corporate Social Responsibility

As a global business, we are aware of our environmental and social impact. Our corporate social responsibility (CSR) strategy, "Make Time for Good," aims to drive positive change across our operations and beyond. It sets measurable objectives in key areas of environmental and social sustainability.

"Make Time for Good" focuses on three pillars:

a. Good for Planet: Reducing our environmental footprint through sustainable design and operations.

b. Good for Communities: Supporting empowerment initiatives and improving community well-being.

c. Good for People: Promoting inclusion within our workforce.

Our latest CSR report, also serving as our UN Global Compact Communication on Progress, outlines our achievements and future goals. Access the report at https://www.fossilgroup.com/sustainability/ to see how we are making a difference.

Available Information

Our website address iswww.fossilgroup.com. The information on our website (including the CSR report) is not, and shall not be deemed to be, a part of this Annual Report on Form 10-K or incorporated into any other filings we make with the SEC. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), are available free of charge on our website as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC. In addition, the SEC maintains a website atwww.sec.gov that contains reports, proxy and information statements, and other information regarding issuers, including Fossil Group, that are electronically filed with the SEC.

General

We are a Delaware corporation formed in 1991 and are the successor to a Texas corporation formed in 1984. Our principal executive offices are located at 901 S. Central Expressway, Richardson, Texas 75080, and our telephone number at that address is (972) 234-2525. Our common stock is traded on the NASDAQ Global Select Market under the trading symbol FOSL.