Fossil Group, Inc.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Fossil Group, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Fossil Group, Inc. and subsidiaries (the "Company") as of January 3, 2026 and December 28, 2024, and the related consolidated statements of income (loss) and comprehensive income (loss), stockholders' equity, and cash flows for each of the three years in the period ended January 3, 2026, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 3, 2026 and December 28, 2024, and the results of its operations and its cash flows for each of the three years in the period ended January 3, 2026, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 3, 2026, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 12, 2026, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Inventories – Valuation —Refer to Notes 1 and 3 of the financial statements

Critical Audit Matter Description

Inventories are stated at the lower of cost and net realizable value, including any applicable duty and freight charges. The Company accounts for estimated obsolescence or unmarketable inventory equal to the difference between the average cost of inventory and the estimated net realizable value based upon assumptions about future demand, market conditions and available liquidation channels through the establishment of an inventory excess and obsolescence valuation adjustment. Changes in these assumptions could have a significant impact on the inventory excess and obsolescence valuation adjustment.

We identified inventory valuation as a critical audit matter because of the significant judgments made by management to estimate future demand, market conditions, and available liquidation channels which are used to arrive at the net realizable value. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions within the inventory excess and obsolescence allowance.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the inventory excess and obsolescence allowance included the following, among others:

•We tested the effectiveness of controls over the inventory excess and obsolescence valuation adjustment, specifically the control over the estimation of the net realizable value of inventory.

•We evaluated the method and assumptions used by management to estimate net realizable value by:

–Testing the underlying data that served as the basis for key assumptions.

–Evaluating the appropriateness of the inputs to the estimate, including market conditions, and available liquidation channels.

–Evaluating management's ability to accurately estimate net realizable value and predict market conditions by assessing the year-over-year change in the estimated inventory allowance by product-line

–Performing a trend analysis of net sales, margins, inventory turnover, and period-end inventory balances in order to assess the reasonableness of each product line’s inclusion or exclusion from the allowance.

•Tested the completeness of the inventory valuation adjustment by:

–Identifying slow-moving inventory with low turnover levels and comparing to management’s analysis.

–Inquiring of management and performing corroborative inquiry about returns, inventory that is under-performing, and anticipated trends based on market reaction and comparing to management’s analysis.

–Evaluating margins for a sample of sales to liquidators to evaluate the need for potential obsolescence allowance

–Analyzing inventory items by product-line to determine if the inventory excess and obsolescence allowance is reasonable through evaluations of historical margin data and other qualitative factors for each selection.

•Tested the mathematical accuracy of the inventory excess and obsolescence allowance by recalculating the net realizable value and comparing our recalculation to the recorded balance.

•Tested sales of certain inventory products that are identified as being at risk for obsolescence and evaluated sales margins earned on those transactions.

•Evaluated and performed extensive inquiries of management about planned sales channels against historical margins at the product level.

/s/Deloitte & Touche LLP

Dallas, Texas

March 12, 2026

We have served as the Company's auditor since 1988.

CONSOLIDATED BALANCE SHEETS

IN THOUSANDS

CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

IN THOUSANDS, EXCEPT PER SHARE DATA

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

AMOUNTS IN THOUSANDS

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

AMOUNTS IN THOUSANDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Significant Accounting Policies

Consolidated Financial Statements include the accounts of Fossil Group, Inc., a Delaware corporation, and its subsidiaries (the "Company"). The Company is a leader in the design, development, marketing and distribution of contemporary, high quality fashion accessories on a global basis. The Company's products are sold primarily through department stores, specialty retailers, Company-owned retail stores and commercial websites worldwide. The Company reports on a fiscal year reflecting the retail-based calendar (containing 4-4-5 week calendar quarters). References to fiscal years 2025, 2024 and 2023 are for the fiscal years ended January 3, 2026, December 28, 2024 and December 30, 2023, respectively. The Company's fiscal year periodically results in a 53-week year instead of a normal 52-week year. The fiscal year ended January 3, 2026 was a 53-week year, with the additional week included in the first quarter of the fiscal year. Accordingly, the information presented herein includes 53 weeks of operations for fiscal year 2025 as compared to 52 weeks in fiscal years 2024 and 2023. All intercompany balances and transactions are eliminated in consolidation.

Use of Estimates is required in the preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Management makes estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to product returns, bad debt, inventories, long-lived asset impairment, impairment of trade names, income taxes, warranty costs and litigation liabilities. Management bases its estimates and judgments on the information available at the time and various other assumptions believed to be reasonable under the circumstances. Management estimates form the basis for making judgments about the carrying value of the assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

Concentration of Risk involves financial instruments that potentially expose the Company to concentration of credit risk and consist primarily of cash investments and accounts receivable. The Company places its cash investments with high-credit quality financial institutions and currently invests primarily in corporate debt securities and money market funds with major banks and financial institutions. Accounts receivable are generally diversified due to the number of entities comprising the Company's customer base and their dispersion across many geographic regions. The Company believes no significant concentration of credit risk exists with respect to these cash investments and accounts receivable.

A significant portion of sales of the Company's products are supplied by manufacturers located outside of the U.S., primarily in Asia. While the Company is not dependent on any single manufacturer outside the U.S., the Company could be adversely affected by political, economic or other disruptions affecting the business or operations of third-party manufacturers located outside of the U.S.

The Company has entered into multi-year, worldwide exclusive license agreements for the manufacture, distribution and sale of products bearing the brand names of certain globally recognized fashion companies. Sales of the Company's licensed products amounted to 47.3%,44.5% and 44.7% of the consolidated net sales for fiscal years 2025, 2024 and 2023, respectively, of which MICHAEL KORS® product sales accounted for 19.2%,17.4% and 17.6% of the consolidated net sales for fiscal years 2025, 2024 and 2023, respectively, and EMPORIO ARMANI®product sales accounted for 10.1%,11.5% and 14.0% of the consolidated net sales for fiscal years 2025, 2024 and 2023, respectively.

Cash Equivalents are considered all highly liquid investments with original maturities of three months or less.

Restricted Cash was comprised primarily of pledged collateral to secure bank guarantees for the purpose of obtaining retail space. The following table provides a reconciliation of the cash, cash equivalents, and restricted cash balances as of January 3, 2026, December 28, 2024 and December 30, 2023 that are presented in the consolidated statement of cash flows (in thousands):

Accounts Receivable at the end of fiscal years 2025 and 2024 are stated net of doubtful accounts of approximately $13.0 million and $14.7 million, respectively.

Inventories are stated at the lower of cost and net realizable value, including any applicable duty and freight charges. Inventory held at consignment locations is included in the Company's finished goods inventory, and at the end of fiscal years 2025 and 2024, was $9.0 million and $15.1 million, respectively.

Lease assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are initially recognized based on the present value of lease payments over the lease term calculated using the Company's incremental borrowing rate, adjusted for the lease term and lease country, unless the implicit rate is readily determinable. Lease assets also include any upfront lease payments made and are reduced by lease incentives. Some lease terms include options to extend or terminate the lease and they are included in the measurement of the lease assets and lease liabilities if the Company is reasonably certain that those options will be exercised. Variable lease payments are expensed as incurred and include certain index-based changes in rent and certain non-lease components such as maintenance and other services provided by the lessor to the extent the charges are variable. The Company evaluates contractual arrangements at inception to determine if individual agreements are a lease or contain an identifiable lease component as defined by Accounting Standards Codification ("ASC") 842, Leases ("ASC 842"). When evaluating contracts to determine appropriate classification and recognition under ASC 842, judgment may be necessary to determine, among other criteria, if an embedded leasing arrangement exists, the length of the term, classification as either an operating or financing lease and whether renewal or termination options are reasonably certain to be exercised. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease agreements with lease and non-lease components are combined as a single lease component for all classes of underlying assets. The depreciable life of lease assets and leasehold improvements is limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

Lease assets are evaluated for impairment whenever events or conditions indicate that the carrying value of an asset may not be recoverable based on expected undiscounted cash flows related to the asset. Lease impairment losses of $0.6 million, $1.8 million and $1.7 million were recorded in long-lived asset impairments in fiscal years 2025, 2024 and 2023, respectively. Lease impairment losses of $5.4 million were recorded in restructuring charges in fiscal year 2024. No lease impairment losses were recorded in restructuring charges in fiscal years 2025 or 2023.

Property, Plant and Equipmentis stated at cost less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets of 30 years for buildings, generally five years for machinery and equipment and furniture and fixtures andtwo toseven years for computer equipment and software. Leasehold improvements are amortized over the shorter of the lease term or the asset's estimated useful life.

Property, plant and equipment is evaluated for impairment whenever events or conditions indicate that the carrying value of an asset may not be recoverable based on expected undiscounted cash flows related to the asset. Property, plant and equipment impairment losses of $0.4 million were recorded in long-lived asset impairments in each of fiscal years 2025, 2024 and 2023 . No impairment losses were recorded in restructuring charges in fiscal years 2025 and 2023, and impairment losses of $1.2 million were recorded in restructuring charges in fiscal year 2024.

Other Intangible Assets include trademarks, trade names and patents. Trademarks, trade names with finite lives, and patents are amortized using the straight-line method over their estimated useful lives, which are generally three to 20 years. Indefinite-lived trade names are evaluated for impairment annually as of the end of the fiscal year. Additionally, if events or conditions were to indicate an intangible asset may not be recoverable, the Company would evaluate the asset for impairment at that time. Impairment testing compares the carrying amount of an intangible asset with its fair value. When the carrying amount of an intangible asset exceeds its fair value, an impairment charge is recorded.

The fair value of the Company's MICHELE® trade name was estimated using the relief from royalty method. No impairment charges were recorded to the MICHELE trade name during fiscal years 2025, 2024 or 2023. The SKAGEN® trade name was being amortized over its estimated useful life. No impairment charges were recorded to the SKAGEN trade name during fiscal years 2025, 2024 or 2023. The Zodiac tradename was considered fully impaired, resulting in apre-tax impairment charge of $0.5 million for fiscal year 2025.

During fiscal year 2024, the Company committed to a plan to sell its MICHELE and SKAGEN trade names and recorded the assets to prepaid expenses and other current assets during fiscal year 2024 when the qualifications for assets held for sale were met. During fiscal year 2025, due to circumstances previously considered unlikely, the Company decided not to sell its trade names and reclassified the assets as held and used. The MICHELE trade name is recorded at its carrying amount before the asset was classified as held for sale. The SKAGEN trade name was recorded at its carrying amount before the asset was classified as held for sale adjusted for amortization that would have been recognized had the asset been continually classified as held and used, which resulted in the asset being fully amortized during fiscal year 2025.

Assets held for sale are assets that the Company has committed to a plan to sell within one year and is actively marketing the assets in their current condition for a price that is reasonable in comparison to their estimated fair value. Assets held for sale are reported at the lower of carrying amount or fair value less costs to sell. Long-lived assets classified as held for sale are not subject to depreciation or amortization. There wereno assets held for sale at the end of fiscal year 2025. The Company had assets held for sale of $17.5 million at the end of fiscal year 2024 related to trade names and property held for sale. Assets held for sale are included in prepaid expenses and other current assets in the Company's consolidated balance sheets.

Accrued Expenses includes liabilities relating to employee compensation, operating lease liabilities, royalties, warranties, duty, gift cards, foreign exchange forward contracts ("forward contracts") and other accrued liabilities which are current in nature.

Other Long-Term Liabilities includes obligations relating to asset retirements, forward contracts and defined benefits relating to certain international employees and other liabilities that are not current in nature.

Cumulative Translation Adjustment is included as a component of accumulated other comprehensive income (loss) and reflects the adjustments resulting from translating the financial statements of foreign subsidiaries into U.S. dollars. The functional currency of the Company's foreign subsidiaries is the currency of the primary economic environment in which the entity operates, which is generally the local currency of the country. Accordingly, assets and liabilities of the foreign subsidiaries are translated to U.S. dollars at fiscal year-end exchange rates. Income and expense items are translated at average monthly exchange rates. Cumulative translation adjustments remain in accumulated other comprehensive income (loss) and are reclassified into earnings in the event the related foreign subsidiary is sold or liquidated.

Foreign Transaction Gains and Lossesare those changes in exchange rates of currencies not considered the functional currency that affects cash flows and the related receivables or payables. The Company incurred net foreign currency transaction losses of $9.5 million and $1.3 million for fiscal years 2025 and 2024, respectively and a net foreign currency transaction gain of $3.0 million for fiscal year 2023. These net gains and losses have been included in other income (expense)—net in the Company's consolidated statements of income (loss) and comprehensive income (loss).

Revenues from sales of the Company's products are recognized when control of the product is transferred to the customer and in an amount that reflects the consideration the Company expects to be entitled in exchange for the product. The Company accepts limited returns from customers. The Company continually monitors returns and maintains a provision for estimated returns based upon historical experience and any specific issues identified. Product returns are accounted for as reductions to revenue and cost of sales and increases to customer liabilities and prepaid expenses and other current assets to the extent the returned product is resalable. The Company recorded an estimated returns provision of $26.6 million and $27.8 million in accrued expenses as of the end of fiscal years 2025 and 2024, respectively. Taxes imposed by governmental authorities on the Company's revenue-producing activities with customers, such as sales taxes and value added taxes, are excluded from net sales. See Note 2—Revenue, for more information regarding the Company's revenue recognition policy.

Cost of Sales includes raw material costs, assembly labor, assembly overhead including depreciation expense, assembly warehousing costs, shipping and handling costs related to the movement of finished goods from assembly locations to sales distribution centers and from sales distribution centers to customer locations and restructuring charges. Additionally, cost of sales includes customs duties, product packaging cost, royalty cost associated with sales of licensed products, the cost of molding and tooling and inventory shrinkage and damages.

Operating Expenses include selling, general and administrative ("SG&A"), long-lived asset impairments and restructuring charges. SG&A expenses include selling and distribution expenses primarily consisting of sales and distribution labor costs, sales distribution center and warehouse facility costs, depreciation expense related to sales distribution and warehouse facilities, the four-wall operating costs of the Company's retail stores, point-of-sale expenses, advertising expenses and art, design and product development labor costs. SG&A also includes general and administrative expenses primarily consisting of administrative support labor and support costs such as treasury, legal, information services, accounting, internal audit, human resources, executive management costs and costs associated with stock-based compensation. Restructuring charges include costs to reduce and optimize the Company’s infrastructure and store closures. See Note 20—Restructuring for additional information on the Company’s restructuring plan. The Company didnot receive any significant government subsidies in fiscal years 2025 and 2024, and recorded $3.6 million related to government assistance and subsidies during fiscal year 2023. These amounts mostly relate to payroll expense and were recorded as a reduction ofselling, general and administrative expenses.

Advertising Costs for digital marketing and in-store advertising as well as co-op advertising, product displays, show/exhibit costs, advertising royalties related to the sales of licensed brands, internet costs associated with affiliation fees and sample costs are expensed as incurred within SG&A. Advertising costs were $88.7 million, $123.1 million and $157.3 million for fiscal years 2025, 2024 and 2023, respectively.

Warranty Costs are included in SG&A. The Company records an estimate for future warranty costs based on historical repair costs and adjusts the liability as required. Warranty costs have historically been within the Company's expectations and the provisions established. If such costs were to substantially exceed estimates, this could have an adverse effect on the Company's operating results. See Note 4—Warranty Liabilities, for more information regarding warranties.

Research and Development Costsare incurred primarily through the Company's in-house engineering team as well as third party consulting and labor and consist primarily of personnel-related expenses, tooling and prototype materials and overhead costs. The Company’s research and development ("R&D") expenses are related to designing and developing new products and features and improving existing products. The Company's R&D expenses are recorded in SG&A and was $19.4 million in fiscal year 2023. There wereno significant R&D expenses recorded in fiscal years 2025 or 2024.

Noncontrolling Interest is recognized as equity in the Company's consolidated balance sheets, is reflected in net income attributable to noncontrolling interest in the consolidated statements of income (loss) and comprehensive income (loss) and is captured within the summary of changes in equity attributable to controlling and noncontrolling interests. Noncontrolling interests represent ownership interests in the Company's subsidiaries held by third parties.

Other Comprehensive Income (Loss) which is reported in the consolidated statements of income (loss) and comprehensive income (loss) and consolidated statements of stockholders' equity, consists of net income and other gains and losses affecting equity that are excluded from net income. The components of other comprehensive income (loss) primarily consist of foreign currency translation gains and losses and net realized and unrealized gains and losses on the following: (i) derivatives designated as cash flow hedges and (ii) the Company's defined benefit plans.

Earnings (Loss) Per Share ("EPS") is based on the weighted average number of common shares outstanding during each period. Diluted EPS adjusts basic EPS for the effects of dilutive common stock equivalents outstanding during each period using the treasury stock method.

The following table reconciles the numerators and denominators used in the computations of both basic and diluted EPS (in thousands except per share data):

Approximately 3.5 million,1.9 million and 2.1 million weighted average shares issuable under stock-based awards were not included in the diluted EPS calculation in fiscal years 2025, 2024 and 2023, respectively, because they were anti-dilutive, including approximately 0.9 million,0.2 million and 0.3 million weighted performance-based shares in fiscal years 2025, 2024 and 2023, respectively.

Income Taxes are provided for under the asset and liability method for temporary differences in assets and liabilities recognized for income tax and financial reporting purposes. Deferred tax assets are periodically assessed for the likelihood of whether they are more likely than not to be realized. Tax benefits associated with uncertain tax positions are recognized in the period in which one of the following conditions is satisfied: (i) the more likely than not recognition threshold is satisfied; (ii) the position is ultimately settled through negotiation or litigation; or (iii) the statute of limitations for the taxing authority to examine and challenge the position has expired. Tax benefits associated with an uncertain tax position are derecognized in the period in which the more likely than not recognition threshold is no longer satisfied.

The Global Intangible Low-Taxed Income (“GILTI”) provisions of the Tax Cuts and Jobs Act (the "Tax Act") requiring the inclusion of certain foreign earnings in U.S. taxable income first applied in fiscal year 2018. The GILTI tax was accounted for as incurred under the period cost method. The Company's valuation allowance analysis is affected by various aspects of the Tax Act, including the new limitation on the deductibility of interest expense and the impact of GILTI. Those adjustments may materially impact the provision for income taxes and the effective tax rate in the period in which the adjustments are made.

Recently Issued Accounting Standards

In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU"), 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires entities to disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. This guidance is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. The adoption of this standard will result in additional disclosure in the notes to the financial statements.

Under The Organization for Economic Cooperation and Development ("OECD") Inclusive Framework, 140 countries agreed to enact a two-pillar solution to reform the international tax rules to address the challenges arising from the globalization and digitalization of the economy. The Pillar Two Global Anti-Base Erosion ("GloBE") Rules provide a coordinated system to ensure that multinational enterprises with revenues above EUR 750 million pay a minimum effective tax rate of 15% tax on the income arising in each of the jurisdictions in which they operate. They will be liable to pay a top-up tax for the difference between their GloBE effective tax rate per jurisdiction and the 15% minimum rate. It is the ultimate parent entity of the multinational enterprise that is primarily liable for the GLoBE top-up tax in its jurisdiction’s territory. Therefore, some countries may engage in domestic tax policy reforms in anticipation of the GloBE rules becoming effective and enact their own domestic minimum tax rates to avoid “tax leakage”. Notwithstanding any new local minimum tax regime which may be designed to reduce or eliminate the GloBE top-up tax, additional top-up tax under GLoBE may still be due. This will depend on the local effective tax rate calculation according to the specific rules set out in the Pillar Two implementation guidance. Certain provisions of Pillar Two were effective for tax years beginning in January 2024 with other provisions effective for subsequent tax years. The technical aspects of the calculation are still being developed. However, on January 5, 2026, the OECD has introduced a permanent elective “Side-by-Side” safe harbor under which a multinational enterprise (“MNE”) may be exempt from the Pillar Two Income Inclusion Rule (“IIR”) and Undertaxed Profits Rule (“UTPR”) if it operates in a jurisdiction with qualifying domestic and worldwide minimum tax regimes that meet OECD standards. Based on current guidance, U.S. MNEs are expected to qualify for this safe harbor for fiscal years beginning on or after January 1, 2026, subject to final implementation and confirmation of regime eligibility. Pillar Two did not have a material impact on the Company's financial results, including its annual estimated effective tax rate or liquidity in 2024 and 2025. The Company does not expect any increase in corporate tax rates or rules regarding the calculation of taxable income for the top-up tax that could adversely affect the business, results of operations, financial condition or cash flow for the Company's future tax years.

On July 4, 2025, the United States Congress passed the budget reconciliation bill H.R. 1, commonly referred to as the One Big Beautiful Bill Act ("OBBBA"). The OBBBA makes permanent many of the provisions previously enacted as part of the 2017 Tax Cut and Jobs Act that were set to expire at the end of 2025 and includes other changes to certain U.S. corporate tax provisions. The changes to U.S. tax law that were enacted under the OBBBA include modifications to capitalization of research and development expenses, limitations on deductions for interest expense and accelerated fixed asset depreciation. Based on our current U.S. tax position, we note no material tax impacts as a result of the changes introduced under the OBBBA.

Recently Adopted Accounting Standards

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures through changes to the rate reconciliation and income taxes paid information. This guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted ASU 2023-09 in the first quarter of fiscal year 2025 on a prospective basis. The adoption of the updated guidance results in the additional disaggregation of certain tax information within the Company's income tax footnote disclosure.

2. Revenue

The Company’s revenue consists of sales of finished products to customers through wholesale and retail channels. Revenue from the sale of products, including those that are subject to inventory consignment agreements, is recognized when control of the product is transferred to the customer and in an amount that reflects the consideration the Company expects to be entitled in exchange for the product. The Company generally considers control to transfer either when products ship or when products are delivered depending on the shipping terms in the agreement or purchase order. The Company considers control to have transferred upon shipment or delivery because the Company has a present right to payment, the customer has legal title to the product, the Company has transferred physical possession of the product, and the customer has the significant risks and rewards of the product. Taxes imposed by governmental authorities on the Company's revenue-producing activities with customers, such as sales taxes and value added taxes, are excluded from net sales.

Markdowns. The Company provides markdowns to certain customers in order to facilitate sales of select styles. Markdowns are estimated at the time of sale using historical data and are recorded as a reduction to revenue. The Company's policy is to record its markdown allowance as a reduction of accounts receivable.

Returns. The Company accepts limited returns from customers. The Company continually monitors returns and maintains a provision for estimated returns based upon historical experience, any specific issues identified and current information. Product returns are accounted for as reductions to revenue, cost of sales and customer liabilities and an increase to other current assets to the extent the returned product is resalable.

Cooperative Advertising. The Company participates in cooperative advertising programs with its major retail customers, whereby the Company shares the cost of certain of their advertising and promotional expenses. Certain advertising expenses which are not considered separate performance obligations are recorded as sales discounts. All other cooperative advertising expenses are recorded in SG&A.

Multiple Performance Obligations. The Company enters into contracts with customers for its wearable technology that include multiple performance obligations. Each distinct performance obligation was determined by whether the customer could benefit from the good or service on its own or together with readily available resources. The Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company's process for determining standalone selling price considers multiple factors including the Company's internal pricing model and market trends that may vary depending upon the facts and circumstances related to each performance obligation. Revenue allocated to the hardware and software essential to the functionality of the product represents the majority of the arrangement consideration and is recognized at the time of product delivery, provided the other conditions for revenue recognition have been met. Revenue allocated to free software services provided through the Company's online dashboard and mobile apps as well as revenue allocated to the right to receive future unspecified software updates is deferred and recognized on a straight-line basis over the product's estimated usage period oftwo years.

Licensing Income. The Company previously had agreements with certain customers to provide smartwatch technology, design, support and procurement, which expired in fiscal year 2023.

Disaggregation of Revenue. The Company's revenue disaggregated by major product category and timing of revenue recognition was as follows (in thousands):

Contract Balances. As of January 3, 2026, the Company hadno material contract assets on the consolidated balance sheets andno deferred contract costs. The Company had contract liabilities of (i) $0.1 million and $0.7 million as of January 3, 2026 and December 28, 2024, respectively, primarily related to remaining performance obligations on wearable technology products and (ii) $1.7 million and $2.1 million as of January 3, 2026 and December 28, 2024, respectively, related to gift cards issued.

Shipping and Handling Fees. The Company accounts for shipping and handling activities that occur after control of the related good transfers as fulfillment activities instead of assessing such activities as performance obligations.

3. Inventories

Inventories consisted of the following (in thousands):

4. Warranty Liabilities

The Company's warranty liabilities are primarily related to watch products and are included in accrued expenses—other in the consolidated balance sheets. The Company's watch products are covered by limited warranties of various lengths against defects in materials or workmanship. The Company's warranty liability is estimated using historical warranty repair expense. As changes occur in sales volumes and warranty costs, the warranty accrual is adjusted as necessary. Due to the nature of smartwatch products, their warranty costs are usually more than traditional products. A shift in product mix from smartwatch to traditional products generally results in a decrease in the Company's warranty liabilities. Warranty liability activity consisted of the following (in thousands):

(1)Changes in cost estimates related to preexisting warranties are aggregated with accruals for new standard warranties issued and foreign currency changes.

5. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

6. Property, Plant and Equipment

Property, plant and equipment—net consisted of the following (in thousands):

7. Intangible and Other Assets

Intangible and other assets-net consisted of the following (in thousands):

During fiscal year 2024, the Company committed to a plan to sell its MICHELE and SKAGEN trade names and recorded the assets to prepaid expenses and other current assets during fiscal year 2024 when the qualifications for assets held for sale were met. During fiscal year 2025, due to circumstances previously considered unlikely, the Company decided not to sell its trade names and reclassified the assets as held and used. The MICHELE trade name is recorded at its carrying amount before the asset was classified as held for sale. The SKAGEN trade name was recorded at its carrying amount before the asset was classified as held for sale adjusted for amortization that would have been recognized had the asset been continually classified as held and used, which resulted in the asset being fully amortized.

Amortization expense for intangible assets was $0.7 million, $0.9 million, and $0.9 million for fiscal years 2025, 2024 and 2023. Estimated aggregate future amortization expense by fiscal year for intangible assets is as follows (in thousands):

8. Derivatives and Risk Management

Cash Flow Hedges. Historically, the Company entered into forward contracts to manage the risk of fluctuations in global currencies that were ultimately used by non-U.S. dollar functional currency subsidiaries to settle payments of intercompany inventory transactions denominated in U.S. dollars and fluctuations in Japanese yen exchange rates that were used to settle third-party inventory component purchases by a U.S. dollar functional currency subsidiary. Forward contracts represent agreements to exchange the currency of one country for the currency of another country at an agreed-upon settlement date and exchange rate. These forward contracts were designated as single cash flow hedges. Fluctuations in exchange rates will either increase or decrease the Company’s U.S. dollar equivalent cash flows from these inventory transactions, which will affect the Company’s U.S. dollar earnings. Gains or losses on the forward contracts were expected to offset these fluctuations to the extent the cash flows were hedged by the forward contracts.

For a derivative instrument that is designated and qualifies as a cash flow hedge, the gain or loss on the derivative is reported as a component of accumulated other comprehensive income (loss), net of taxes and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

As of January 3, 2026, the Company hadno outstanding forward contracts designated as cash flow hedges. As of December 28, 2024, the fair value amount on a gross basis for the Company's derivative instruments was $0.6 million and was included in prepaid expenses and other current assets in the condensed consolidated balance sheets.

Non-designated Hedges. The Company also periodically enters into forward contracts to manage exchange rate risks associated with certain intercompany transactions and for which the Company does not elect hedge accounting treatment. As of January 3, 2026 and December 28, 2024, the Company hadno outstanding non-designated forward contracts. Changes in the fair value of derivatives not designated as hedging instruments are recognized in earnings when they occur.

The effective portion of gains and losses on cash flow hedges that were recognized in other comprehensive income (loss), net of taxes during fiscal years 2025, 2024 and 2023 are set forth below (in thousands):

The following table illustrates the effective portion of gains and losses on derivative instruments recorded in other comprehensive income (loss), net of taxes during the term of the hedging relationship and reclassified into earnings, and gains and losses on derivatives not designated as hedging instruments recorded directly to earnings during fiscal years 2025, 2024 and 2023 (in thousands):

The following table summarizes the effects of the Company's derivative instruments on earnings (in thousands):

9. Fair Value Measurements

The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.

ASC 820, Fair Value Measurement and Disclosures ("ASC 820"), establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into three broad levels as follows:

•Level 1—Quoted prices in active markets for identical assets or liabilities.

•Level 2—Inputs, other than quoted prices in active markets, that are observable either directly or indirectly.

•Level 3—Unobservable inputs based on the Company's assumptions.

ASC 820 requires the use of observable market data if such data is available without undue cost and effort.

As of January 3, 2026, the Company did not have any assets or liabilities measured at fair value on a recurring basis.

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 28, 2024 (in thousands):

The fair values of the Company's forward contracts are based on published quotations of spot currency rates and forward points, which are converted into implied forward currency rates.

As of January 3, 2026, the Company's First-Out and Second-Out Notes (as defined in Note 10— Debt), excluding unamortized debt issuance costs and original issue discount, were recorded at cost and had a carrying value of $185.1 million and their fair value approximated their carrying value. The Company's New Revolving Credit Facility (as defined in Note 10—Debt) was recorded at cost and had a carrying value of $16.0 million and its fair value approximated its carrying value. The fair value of the Company's First-Out Notes, Second-Out Notes and New Revolving Credit Facility was based on Level 3 inputs.

Operating lease right-of-use assets with a carrying amount of $1.6 million were written down to a fair value of $1.0 million and property, plant and equipment—net with a carrying amount of $0.4 million related to fixturing were fully impaired, resulting in total pre-tax impairment charges of $1.0 million for fiscal year 2025.

The fair values of operating lease right-of-use ("ROU") assets and fixed assets related to retail stores were determined using Level 3 inputs, including forecasted cash flows and discount rates. Of the $1.0 million impairment expense, $0.7 million and $0.3 million were recorded in long-lived asset impairments in the Americas and Europe segments, respectively.

In fiscal year 2024, operating lease right-of-use assets with a carrying amount of $12.3 million and property, plant and equipment—net with a carrying amount of $1.9 million related to retail store leasehold improvements, and fixturing were written down to a fair value of $5.0 million and $0.4 million, respectively, resulting in total pre-tax impairment charges of $8.8 million. Of the $8.8 million impairment expense, $4.6 million and $2.0 million were recorded in restructuring charges in the Asia and Europe segments, respectively, and $1.0 million, $0.8 million and $0.4 million were recorded in long-lived asset impairments in the Asia, Europe and Americas segments, respectively.

The fair value of trade names are measured on a non-recurring basis using Level 3 inputs, including forecasted cash flows, discounts rates and implied royalty rates. No trade name impairment was recorded to the MICHELE or SKAGEN tradenames during fiscal years 2025 or 2024. The Zodiac tradename with a carrying amount of $0.5 million was considered fully impaired, resulting in a pre-tax impairment charge of $0.5 million for fiscal year 2025.

10. Debt

The Company's debt consisted of the following, excluding finance lease obligations, (in millions):

(1)Excludes debt issuance costs of $18.5 million and original issue discount of $8.8 million recorded in long-term debt at January 3, 2026 and excludes debt issuance costs of $3.3 million at December 28, 2024.

Prior Revolving Facility: On September 26, 2019, the Company and certain subsidiaries entered into a secured asset-based revolving credit agreement (the "Prior Revolving Facility”) with various lenders party thereto.

New Revolving Credit Facility: On August 13, 2025, the Company and certain of its subsidiaries identified therein as guarantors entered into a Credit Agreement, dated as of August 13, 2025 (the “Credit Agreement”), with the lenders from time to time party thereto (the “Lenders”), ACF FINCO I LP, as administrative agent on behalf of the Lenders (the “Administrative Agent”), and the Company as a borrower to refinance the Prior Revolving Facility. Pursuant to the Credit Agreement, the Lenders have provided new financing commitments to the Company under a new senior secured asset-based revolving credit facility (the “New Revolving Credit Facility”) in an aggregate principal amount of $150 million.

Contemporaneously with entering into the New Revolving Credit Facility, the proceeds of the New Revolving Credit Facility were used to pay off in full the $15.0 million outstanding as of August 13, 2025 under the Prior Revolving Facility.

Borrowings under the New Revolving Credit Facility bear interest at a rate of 5.00% plus the Adjusted Term SOFR Rate (as defined in the Credit Agreement) for term SOFR borrowings and 4.00% plus the Alternate Base Rate (as defined in the Credit Agreement), payable monthly in arrears. The Lenders received an upfront commitment fee equal to 2.00% of the aggregate commitments under the New Revolving Credit Facility. The Company’s obligations under the New Revolving Credit Facility are guaranteed by the guarantors, and those obligations and the guarantees are secured by substantially all of the assets of the Company and the guarantors. The Credit Agreement includes customary representations and warranties, covenants and events of default, in each case, applicable to the Company. The Credit Agreement also requires that Availability (as defined in the Credit Agreement) may at no time be less than the greater of 10% of the Line Cap (as defined in the Credit Agreement) and $12.5 million. If an event of default under the Credit Agreement occurs, the Required Lenders (as defined in the Credit Agreement) may, among other things, terminate the commitments and declare the outstanding obligations under the Credit Agreement to be immediately due and payable.

The New Revolving Credit Facility has a stated maturity date of August 13, 2030, but includes a springing maturity feature (the “Springing Maturity Feature”) that will cause the stated maturity date to spring ahead to the date that is 91 days prior to the maturity date of material indebtedness (defined as $15.0 million or more of indebtedness) if such material indebtedness remains outstanding on such 91st day.

The maturity date of the First-Out Notes is January 1, 2029. If more than $15.0 million of First-Out Notes and other indebtedness (other than under the Credit Agreement) is outstanding on October 2, 2028, the maturity date of the New Revolving Credit Facility will be October 2, 2028. The maturity date of the Second-Out Notes is June 30, 2029. If more than $15.0 million of Second-Out Notes and other indebtedness (other than under the Credit Agreement) is outstanding on March 31, 2029, the maturity date of the New Revolving Credit Facility will be March 31, 2029.

Prior Notes: In November 2021, the Company sold $150.0 million aggregate principal amount of 7.00% senior notes due November 2026 (the “Prior Notes”).

On November 13, 2025, as a result of the Restructuring Plan (as defined herein), all $150.0 million aggregate principal amount of the Prior Notes were cancelled.

Notes: On August 13, 2025, the Company, Fossil (UK) Global Services Ltd. ("Fossil UK”), and certain direct and indirect subsidiaries of the Company identified therein (collectively, the "Company Parties”) entered into a Transaction Support Agreement (the "Transaction Support Agreement”) with certain holders (the "Consenting Noteholders”), representing approximately 59% of the aggregate principal of the Prior Notes.

On November 13, 2025, the Company consummated the previously announced offer to exchange (the “Exchange Offer”) with respect to the Prior Notes and the concurrent rights offering (the “Rights Offering”) pursuant to a restructuring plan under Part 26A of the UK Companies Act 2006 (as amended) (the “Restructuring Plan” and together with the Exchange Offer and the Rights Offering, the “Transactions”) for First-Out Notes and Second-Out Notes (as defined herein, collectively the "Notes"). In connection with the consummation of the Transactions:

•Noteholders that participated in the Rights Offering and Exchange Offer (the “New Money Participants”) (i) provided an aggregate of $32.5 million of incremental, new money financing in exchange for (x) $32.5 million aggregate principal amount of 9.500% First-Out First Lien Secured Senior Notes due 2029 (the “First-Out Notes”) and (y)954,070 shares of Common Stock, (ii) exchanged $120.2 million aggregate principal amount of Prior Notes on a dollar-for-dollar basis for $120.2 million aggregate principal amount of First-Out Notes, and (iii) received $0.9 million aggregate principal amount of First-Out Notes as a consent premium pursuant to the terms of the Transactions (the “Consent Premium”).

•Noteholders that did not participate in the Rights Offering (the “Non-New Money Participants”) (i) received $29.8 million aggregate principal amount of 7.500% Second-Out Second Lien Secured Senior Notes due 2029 (the “Second-Out Notes” and together with the First-Out Notes, the "Notes") on a dollar-for-dollar basis for $29.8 million Prior Notes held by such Non-New Money Participants, and (ii) received $53,858 aggregate principal amount of Second-Out Notes as a Consent Premium. Only Non-New Money Participants that tendered their Prior Notes in the Exchange Offer and consented to the Restructuring Plan received the Consent Premium.

•Noteholders also received an aggregate total of approximately 3.0 million warrants (the “Warrants”), entitling the holders thereof to purchase either (i)one share of Common Stock for each Warrant held, or (ii)one pre-funded warrant (each, a “Pre-Funded Warrant”) for each Warrant held, each such Pre-Funded Warrant entitling the holder thereof to purchaseone share of Common Stock. The Warrants were exercisable at any time prior to 5:00 p.m., New York City time, on December 15, 2025. The number of Warrants exercised as of January 3, 2026 was 2.6 million with the remainder of the 3.0 million Warrants forfeited.

The Consenting Noteholders participated in the Transactions on a private placement basis. In accordance with the terms of the Transaction Support Agreement, the Consenting Noteholders received $1.6 million aggregate principal amount of First-Out Notes as a backstop premium as consideration for providing a backstop commitment for the Rights Offering.

The Notes are, respectively, subject to certain covenants (subject to certain exceptions and thresholds), including, without limitation, restrictions on the Company and the guarantors’ thereunder ability to:

•incur, assume or guarantee additional debt, or issue disqualified stock or preferred stock;

•pay dividends, make other distributions or repurchase equity;

•make certain investments and other restricted payments;

•enter into transactions with affiliates;

•create, incur, assume or suffer to exist liens;

•sell or otherwise dispose of certain assets to third parties;

•consolidate, merge or sell all or substantially all of their assets; and

•create restrictions on the ability of certain subsidiaries to pay dividends and make other payments to the Company or the guarantors.

The Notes are, respectively, subject to certain events of default (subject to certain exceptions and thresholds), including, without limitation:

•default in the payment of interest, principal or premium thereunder;

•breach of covenants or other agreements under the Notes;

•default under any mortgage, indenture or instrument securing indebtedness for borrowed money and such indebtedness is in the aggregate principal amount of at least $10.0 million;

•judgments exceeding $15.0 million;

•entry into bankruptcy or insolvency proceedings;

•nullification of certain guarantees;

•invalidity of a lien with respect to collateral with a fair market value exceeding $10.0 million; and

•solely with respect to the First-Out Notes, an event of default under the Credit Agreement or the invalidity of an intercreditor agreement.

The Company's net borrowings approximated the net payments made under the Prior Revolving Facility and New Revolving Facility. The Company had net borrowings of $35.1 million under the Notes during fiscal year 2025. As of January 3, 2026, the Company had available borrowing capacity of approximately $66.9 million under the New Revolving Credit Facility. Such amount is less than the $150 million total revolving commitments under the New Revolving Credit Facility due to a reduction of borrowing capacity pursuant to the borrowing base. As of January 3, 2026, the Company had unamortized debt issuance costs of $18.5 million and original issue discount of $8.8 million recorded in long-term debt, and unamortized debt issuance costs of $22.5 million recorded in intangible and other assets-net on the Company's consolidated balance sheets. The Company incurred $11.6 million of interest expense related to the Prior Notes and New Notes and incurred $1.8 million of interest expense related to the Prior Revolving Facility and New Revolving Facility during fiscal year 2025. The Company incurred approximately $4.6 million of interest expense related to the amortization of debt issuance costs and original issue discount during fiscal year 2025. The Company recorded a loss of $3.2 million in other income (expense) - net during fiscal 2025 for debt issuance costs and other fees associated with the Prior Revolving Facility and Prior Notes. At January 3, 2026, the Company was in compliance with all debt covenants related to its credit facilities. The First-Out Notes bear interest at a rate of 9.50% per annum. Interest on the First-Out Notes is payable quarterly in arrears on March 15, June 15, September 15, and December 15 of each year, beginning on March 15, 2026. The First-Out Notes mature on January 1, 2029. The Second-Out Notes bear interest at a rate of 7.50% per annum. Interest on the Second-Out Notes is payable quarterly in arrears on March 15, June 15, September 15, and December 15 of each year, beginning on March 15, 2026. The Second-Out Notes mature on June 30, 2029.

The Company may redeem the First-Out Notes at any time at a redemption price of 107.500%. The Company may redeem the Second-Out Notes at any time at a redemption price of 100.000%.

Foreign-Based. Fossil India Private Ltd. entered into 150 million Indian Rupee receivables buyout facilities with Kotak Mihindra Bank (the "Fossil India Facilities") that it uses for working capital purposes. Indian Rupee borrowings, in U.S. dollars, under the Fossil India Facilities were approximately $4.0 million as of January 3, 2026.

The Company's debt as of January 3, 2026, excluding finance lease obligations, matures as follows (in millions):

11. Other Income (Expense)—Net

Other income (expense)—net consisted of the following (in thousands):

12. Taxes

Income Taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the consolidated deferred tax assets and liabilities were (in thousands):

Operating Loss Carryforwards. At January 3, 2026, the consolidated balance sheets included $79.9 million of deferred tax assets for net operating losses of foreign subsidiaries. The amounts and the fiscal year of expiration of the loss carryforwards are (in thousands):

At January 3, 2026, the consolidated balance sheets included $22.0 million of deferred tax assets for state income tax net operating losses. The state apportioned amounts and the fiscal year of expiration of the loss carryforwards are (in thousands):

At January 3, 2026, the consolidated balance sheets included $88.1 million of deferred tax assets for federal income tax net operating losses. In the U.S., federal income tax net operating losses can be carried forward indefinitely, but are limited to 80% of taxable income.

The following table identifies income (loss) before income taxes for the Company's U.S. and non-U.S. based operations for the fiscal years indicated (in thousands):

The Company's provision for income taxes consisted of the following for the fiscal years indicated (in thousands):

A reconciliation of the Company's income tax rate by percentage and amount paid is as follows (dollars in thousands):

The fiscal year 2025 effective tax rate was unfavorably impacted by tax on income from certain foreign jurisdiction, cancellation of debt income and increased valuation allowances on deferred tax assets. Income taxes paid by the Company was as follows (in thousands):

(1) Texas comprises more than 50% of State income taxes

A reconciliation of the fiscal year 2024 and fiscal year 2023 U.S. federal statutory income tax rates to the Company's effective tax rate is as follows:

The Company records a valuation allowance against its deferred tax assets when recovery of those amounts on a jurisdictional basis is not more likely than not. The Company's U.S. valuation allowance analysis was increased by $32.1 million and the foreign valuation allowance on NOL's and deferred tax assets increased by $14.6 million as compared to December 28, 2024. The total valuation allowance of $273.2 million at January 3, 2026 was comprised of $181.8 million and $91.4 million attributable to the U.S. and foreign operations, respectively.

The Company will not indefinitely reinvest $155.3 million of previously taxed and undistributed earnings and profits of its foreign subsidiaries as of January 3, 2026. Since there will be no additional federal income tax when these amounts are repatriated, the Company has only accrued tax on foreign exchange gains with an offsetting valuation allowance. Deferred U.S. federal and state income taxes and foreign taxes are not recorded on the remaining $285.0 million of undistributed earnings and profits of foreign subsidiaries where management plans to continue reinvesting these earnings outside the U.S. As the majority of these earnings have previously been taxed in the U.S., the distribution of the earnings considered indefinitely reinvested would generally be subject only to local country withholding and U.S. state income taxes when distributed, the amount of which is not material.

The total amount of unrecognized tax benefits, excluding interest and penalties that would favorably impact the effective tax rate in future periods if recognized, was $6.8 million, $6.8 million and $23.6 million for fiscal years 2025, 2024 and 2023, respectively. Fiscal years 2022-2024 remain open for federal income tax examination. The Company is also subject to examinations in various state and foreign jurisdictions for its 2014-2024 tax years, none of which the Company believes are significant, individually or in the aggregate. Tax audit outcomes and timing of tax audit settlements are subject to significant uncertainty.

The Company has classified uncertain tax positions as long-term income taxes payable, unless such amounts are expected to be paid within twelve months from January 3, 2026. As of January 3, 2026, the Company had recorded $2.1 million of unrecognized tax benefits, excluding interest and penalties, for positions that could be settled or not assessed within the next twelve months. Consistent with its past practice, the Company recognizes interest and/or penalties related to income tax overpayments and income tax underpayments in income tax expense and income taxes receivable/payable, respectively. The total amount of accrued income tax-related interest expense in the Company's consolidated balance sheets was $1.6 million compared to $0.5 million of interest expense at December 28, 2024. The Company accruedno income tax-related penalties in the Company's consolidated balance sheets at January 3, 2026. The Company accrued income tax-related interest expense (income) of $0.3 million, $(8.5) million and $(4.0) million in fiscal years 2025, 2024 and 2023, respectively.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for the fiscal years indicated (in thousands):

13. Leases

The Company's leases consist primarily of retail space, offices, warehouses, distribution centers, equipment and vehicles. The Company determines if an agreement contains a lease at inception based on the Company's right to the economic benefits of the leased asset and its right to direct the use of the leased asset. Right of use ("ROU") assets represent the Company's right to use an underlying asset, and ROU liabilities represent the Company's obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term. As the Company's leases do not provide an implicit rate, the Company uses its estimated collateralized incremental borrowing rate, which is based on the yield curve for the respective lease terms and adjusted for each lease country to determine the present value of the lease payments.

Some leases includeone or more options to renew at the Company's discretion, with renewal terms that can extend the lease fromone toten additional years. The renewal options are not included in the measurement of ROU assets and ROU liabilities unless the Company is reasonably certain to exercise the optional renewal periods. Short-term leases are leases having a term of twelve months or less at inception. The Company does not record a related lease asset or liability for short-term leases. The Company has certain leases containing lease and non-lease components which are accounted for as a single lease component. The Company has certain lease agreements where lease payments are based on a percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation. The variable portion of these lease payments is not included in the Company's lease liabilities. The Company's lease agreements do not contain any significant restrictions or covenants other than those that are customary in such arrangements.

The components of lease expense were as follows (in thousands):

(1)Includes sublease income, which was immaterial.

The following table discloses supplemental balance sheet information for the Company’s leases (in thousands):

The following table discloses the weighted-average remaining lease term and weighted-average discount rate for the Company's leases:

Future minimum lease payments by year as of January 3, 2026 were as follows (in thousands):

Supplemental cash flow information related to leases was as follows (in thousands):

As of January 3, 2026, the Company did not have any material operating or finance leases that have been signed but not commenced.

14. Commitments and Contingencies

License Agreements. The Company has various license agreements to market watches and jewelry bearing certain trademarks or incorporating certain technology owned by third parties. In accordance with these agreements, the Company incurred royalty expense of $112.5 million, $119.1 million and $129.5 million in fiscal years 2025, 2024 and 2023, respectively. These amounts are included in the Company's cost of sales or, if advertising-related, in SG&A. These license agreements have expiration dates between fiscal years 2026 and 2029 and require the Company to pay royalties ranging from 3% to 22% of defined net sales. The Company has future minimum royalty commitments through fiscal year 2028 under these license agreements as follows by fiscal year (in thousands):

These minimum royalty commitments do not include amounts owed under these license agreements for obligations of the Company to pay the licensors a percentage of net sales of these licensed products.

Purchase Obligations. As of January 3, 2026, the Company had purchase obligations totaling $140.6 million that consisted primarily of open non-cancelable purchase orders.

Asset Retirement Obligations. ASC 410, Asset Retirement and Environmental Obligations requires (i) that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made and (ii) that the associated asset retirement costs be capitalized as part of the carrying amount of the long-lived asset. The Company's asset retirement obligations relate to costs associated with the retirement of leasehold improvements under office leases and retail store leases within the Americas, Europe and Asia segments.

The following table summarizes the changes in the Company's asset retirement obligations (in thousands):

Litigation. The Company is occasionally subject to litigation or other legal proceedings in the normal course of its business. In addition, from time to time, the Company receives communications from government or regulatory agencies concerning investigations or allegations of noncompliance with laws or regulations in jurisdictions in which the Company operates. The Company does not believe the outcome of any currently pending legal matters, individually or collectively, will have a material effect on the business or financial condition of the Company.

15. Stockholders' Equity

Common and Preferred Stock. The Company has 100,000,000 shares of common stock, par value $0.01 per share ("Common Stock"), authorized, with 58,354,014 and 53,253,974 shares issued and outstanding at fiscal year end 2025 and 2024, respectively. The Company has 1,000,000 shares of preferred stock, par value $0.01 per share, authorized, with none issued or outstanding at fiscal year end 2025 and 2024. Rights, preferences and other terms of preferred stock will be determined by the Board of Directors at the time of issuance. On November 13, 2025, the Company, in connection with the exchange of its Prior Notes for Notes (as defined in Note 10—Debt), issued 954,070 shares of Common Stock to certain Consenting Noteholders (as defined in Note 10—Debt).

Warrant Agreements and Common Stock Repurchase Programs. Purchases of the Company's common stock have been made from time to time pursuant to its repurchase programs, subject to market conditions and at prevailing market prices, through the open market. Repurchased shares of common stock are recorded at cost and become authorized but unissued shares which may be issued in the future for general corporate or other purposes. In the event the repurchased shares are canceled, the Company accounts for retirements by allocating the repurchase price to common stock, additional paid‑in capital and retained earnings. The repurchase price allocation is based upon the equity contribution associated with historical issuances. The repurchase programs have been conducted pursuant to Rule 10b‑18 of the Securities Exchange Act of 1934.

In August 2010, the Board of Directors approved a common stock repurchase program pursuant to which up to $30 million could be used to repurchase outstanding shares of our common stock. The $30 million repurchase program has no termination date.

On August 13, 2025, the Company entered into a securities exchange agreement with certain institutional stockholders (the "Exchanging Stockholders”), pursuant to which the Company agreed to exchange an aggregate of 2.5 million shares of the Company’s common stock, par value $0.01 per share (the "Surrendered Shares”), owned by the Exchanging Stockholders for 2.5 million pre-funded warrants (the "Exchange Warrants”) to purchase an aggregate of 2.5 million shares of common stock with an exercise price of $0.01 per share. The Exchange Warrants will not expire prior to exercise. The Company also agreed to pay the Exchanging Stockholders an amount of $0.01 per share for the Surrendered Shares. The Exchange Warrants are exercisable at any time, except that the Exchange Warrants cannot be exercised by the Exchanging Stockholders if, after giving effect thereto, the Exchanging Stockholders would beneficially own more than 9.99% of the Company’s common stock, subject to certain exceptions. The Exchange Warrants were determined to be equity classified in accordance with ASC 815. As of January 3, 2026,2.5 million Exchange Warrants were outstanding.

On November 13, 2025, the Company, in connection with the exchange of its Prior Notes for New Notes (as defined in Note 10—Debt), issued 3.0 million warrants to Noteholders ("Noteholder Warrants") entitling the holder to either (i)one share of common stock for each Noteholder Warrant held for an exercise price of $0.50 per share or (ii)one pre-funded warrant for each Noteholder Warrant held for an exercise price of $0.49 per share. The Noteholder Warrants were exercisable at any time prior to 5:00 p.m., New York City time, on December 15, 2025. The Noteholder Warrants and subsequent pre-funded warrants were determined to be equity classified in accordance with ASC 815. Each pre-funded warrant entitles the holder to purchaseone share of common stock for an exercise price of $.01 per share. The pre-funded warrants can be exercised at any time and do not have an expiration date. The number of Noteholder Warrants exercised as of January 3, 2026 was 2.6 million and approximately 0.4 million Noteholder Warrants were forfeited. The exercise of Noteholder Warrants resulted in the issuance of 2.6 million shares of Common Stock and 10,085 pre-funded warrants. As of January 3, 2026, no Noteholder Warrants remain outstanding and 10,085 pre-funded warrants were outstanding.

The following table reflects the Company’s common stock repurchase activity for the period indicated (in millions):

As of January 3, 2026, the Company had $15.5 million of repurchase authorizations remaining under its repurchase plan.

16. Employee Benefit Plans

Savings Plans. The Company has a defined contribution savings plan (the "401(k) Plan") for substantially all U.S.-based full-time employees of the Company, which includes a Roth 401(k) option. The Company's common stock is one of several investment alternatives available under the 401(k) Plan. The Company has a discretionary match for the 401(k) Plan. Matching contributions made by the Company to the 401(k) Plan totaled approximately $1.9 million, $2.1 million and $2.5 million for fiscal years 2025, 2024 and 2023, respectively. The Company also has the right to make additional matching contributions not to exceed 15% of employee compensation. The Company didnot make any additional matching contributions during fiscal years 2025, 2024 and 2023.

Stock-Based Compensation Plans. The Company’s grants under its current stock-based compensation plans generally include: (i) stock options, restricted stock units, and performance restricted stock units for its international employees, (ii) restricted stock units for its nonemployee directors, and (iii) stock appreciation rights, performance stock appreciation rights, restricted stock, restricted stock units, and performance restricted stock units for its U.S.-based employees. As of January 3, 2026, the Company had approximately $3.1 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Company's stock-based compensation plans. This cost is expected to be recognized over a weighted-average period of 1.3 years. All time-based or performance-based stock appreciation rights and restricted stock units are settled in shares of the Company's common stock.

Long-Term Incentive Plans. On April 29, 2024, the Company's Board of Directors adopted the 2024 Long-Term Incentive Plan ("2024 Plan"), which was approved by the Company’s stockholders at the Company’s Annual Shareholder Meeting on June 21, 2024. The 2024 Plan replaces and supersedes the previously adopted 2016 Long-Term Incentive Plan. An aggregate of 7,000,000 shares of the Company's common stock were reserved for issuance pursuant to the Company's 2024 Plan.

Under the 2024 Plan, designated employees of the Company, including officers, certain contractors, and non-employee directors of the Company, are eligible to receive (i) stock options, (ii) stock appreciation rights, (iii) restricted or non-restricted stock awards, (iv) restricted stock units, (v) performance awards, (vi) cash awards, or (vii) any combination of the foregoing. The 2024 Plan is administered by The Compensation and Talent Management Committee (the "Compensation Committee"). Each award issued under the 2024 Plan terminates at the time designated by the Compensation Committee, not to exceedten years. The current outstanding stock options, stock appreciation rights, performance stock appreciation rights, restricted stock, restricted stock units and performance restricted stock units issued under the 2024 Plan predominantly have original vesting periods ofthree years. Time-based or performance-based stock appreciation rights and restricted stock units are predominately settled in shares of the Company's common stock. On the date of the Company’s annual stockholders meeting, each non-employee director shall be eligible to receive a grant of restricted stock units, in such amount as determined by the Board, in its sole discretion, provided that such grant shall not exceed more than the number of shares of Common Stock having an aggregate fair market value of $130,000. Any such grant shall vest 100% on the earlier of one year from the date of grant or the date of the Company's next annual stockholders meeting, provided such director is providing services to the Company or a subsidiary of the Company on that date.

Inducement Grants. On September 1, 2024, the Company's Board of Directors approved the grant of an employee inducement award consisting of 1,500,000 restricted stock units to its new Chief Executive Officer. The restricted stock units vested 50% on October 15, 2025 and will vest 50% on October 15, 2026, subject to continuous employment with the Company through the vesting date.

During fiscal year 2025, the Company's Board of Directors approved the following grants of employee inducement awards:150,000 shares of restricted stock units to the Company's new Chief Financial Officer,129,581 shares of restricted stock units to the Company's new Chief Commercial Officer and 100,000 shares of restricted stock units to the Company's new Chief Digital Information Officer/General Manager EMEA. Each of these grants has athree-year vesting schedule, subject to the continuous employment with the Company by each new respective employee through each vesting date.

Restricted Stock Units and Performance Restricted Stock Units. The following table summarizes restricted stock unit and performance restricted stock unit activity:

The total fair value of shares/units vested during fiscal years 2025, 2024 and 2023 was $4.0 million, $0.9 million and $2.6 million, respectively.

Other Retirement Plans. The Company maintains a defined benefit plan for its employees located in Switzerland. The plan is funded through payments to an insurance company. The payments are determined by periodic actuarial calculations. During fiscal years 2025, 2024 and 2023, the Company recorded pension gains of $2.8 million, $1.1 million and $5.5 million, respectively, related to this plan. The liability for the Company's defined benefit plan was $4.1 million and $5.5 million at the end of fiscal years 2025 and 2024, respectively. This liability is recorded in other long-term liabilities on the Company's consolidated balance sheets.

Under French law, the Company is required to maintain a defined benefit plan for its employees located in France, which is referred to as a "retirement indemnity." The amount of the retirement indemnity is based on the employee's last salary and duration of employment with the Company. The employee's right to receive the retirement indemnity is subject to the employee remaining with the Company until retirement. During fiscal years 2025, 2024 and 2023, the Company recorded pension gains (expenses) of $0.1 million, $0.1 million, and $0.1 million, respectively, for its retirement indemnity obligations. The liability for the Company's retirement indemnity was $0.7 million and $0.7 million at the end of fiscal years 2025 and 2024, respectively. This liability is recorded in other long-term liabilities on the Company's consolidated balance sheets.

Under India's Payment of Gratuity Act, the Company is required to provide a one time gratuity to its employees located in India upon retirement or resignation after continuous service of at least five years. The gratuity is calculated as 15 days' wages for each completed year of service. The Company's balance for the payment of the gratuity was a liability of $0.3 million recorded in other long-term liabilities at the end of fiscal year 2025 and an asset of $0.1 million recorded in intangible and other assets at the end of fiscal year 2024 on the Company's consolidated balance sheets.

17. Supplemental Cash Flow Information

The following table summarizes supplemental cash flow information (in thousands):

18. Supplemental Disclosure for Accumulated Other Comprehensive Income (Loss)

The following table illustrates changes in the balances of each component of accumulated other comprehensive income (loss), net of taxes (in thousands):

19. Major Customer, Segment and Geographic Information

Major Customer

Wholesale customers of the Company consist principally of major department stores and specialty retail stores located throughout the world. No individual customer accounts for 10% or more of the Company's net sales.

Segment Information

The Company reports segment information based on the "management approach". The management approach designates the internal reporting used by management, specifically its chief operating decision maker ("CODM") for making decisions and assessing performance as the source of the Company's reportable segments. The Company's CODM is its Chief Executive Officer.

The Company manages its 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, China (including Hong Kong SAR, Macau SAR and Taiwan), India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea and Thailand. Each reportable operating segment provides similar products and services.

The Company evaluates the performance of its reportable segments based on net sales and operating income (loss). Net sales for geographic segments are based on the location of the selling entity. Operating income (loss) for each segment includes net sales to third parties, related cost of sales and operating expenses directly attributable to the segment. Corporate includes peripheral revenue generating activities from factories and intellectual property and general corporate expenses, including certain administrative, legal, accounting, technology support costs, equity compensation costs, payroll costs attributable to executive management, brand management, product development, art, creative/product design, marketing, strategy, compliance and back office supply chain expenses that are not allocated to the various segments because they are managed at the corporate level internally. The Company does not include intercompany transfers between segments for management reporting purposes.

The CODM uses net sales and operating income for each segment predominantly in the annual budget and forecasting process. The CODM considers budget-to-actual variances on a quarterly basis for both profit measures when making decisions about the allocation of operating and capital resources to each segment. The CODM also uses segment gross profit for evaluating pricing strategy and segment operating income to assess the performance of each segment by comparing the results of each segment with one another. The CODM does not review disaggregated assets by segment, therefore it is not presented below.

Summary information by operating segment was as follows (in thousands):

(1)Other segment items for each reportable segment include long-lived asset impairments, restructuring charges, facility costs, overhead expenses and other operating costs.

The following table shows revenue for each class of similar products for fiscal years 2025, 2024 and 2023 (in thousands):

Geographic Information

Net sales and long-term assets related to the Company's operations in the U.S., Europe, Asia and all other international markets were as follows (in thousands):

(1)Net sales are based on the location of the selling entity (including exports).

(2)Net sales from Germany (including exports) accounted for more than 10% of the Company's consolidated net sales and were approximately $123.0 million, $137.9 million and $173.3 million in fiscal years 2025, 2024 and 2023, respectively. Additionally, net sales from Switzerland accounted for more than 10% of the Company's consolidated net sales and were approximately $109.2 million, $100.9 million, and $111.1 million in fiscal years 2025, 2024 and 2023, respectively.

(3)Net sales from India accounted for more than 10% of the Company's consolidated net sales and were approximately $117.6 million, $108.7 million, and $100.9 million in fiscal years 2025, 2024 and 2023, respectively.

20. Restructuring

In fiscal 2024, the Company announced a plan to return to profitable growth (the "Turnaround Plan"). The Turnaround Plan was originally centered on three key areas: (i) refocusing on the core, (ii) rightsizing the cost structure, and (iii) strengthening the balance sheet. The Company achieved selling, general and administrative ("SG&A") cost savings of approximately $100 million in fiscal 2025 as compared to fiscal 2024 through a series of initiatives including a strategic reduction in force which occurred in late February 2025, the reduction in costs associated with the transition of smaller international markets to a distributor model, and the closing of 49 FOSSIL retail stores. Beginning in fiscal year 2026, the Company is moving forward to a new chapter in its Turnaround Plan, with a focus on three new strategic pillars: (i) driving profitable growth, (ii) optimizing our operating model, and (iii) building shareholder value. The Company incurred $41 million and $7 million in charges under the Turnaround Plan in fiscal years 2025 and 2024, respectively, and expects to incur approximately $15 million in charges in fiscal year 2026 as it completes the plan.

The following table shows a summary of the Turnaround Plan charges (in thousands):

The following table shows a rollforward of the accrued liability related to the Company’s Turnaround Plan (in thousands):

Turnaround Plan restructuring charges by operating segment were as follows (in thousands):

In fiscal year 2024, the Company concluded its Transform and Grow plan ("TAG") as it has transitioned to initiatives under the Turnaround Plan. TAG was launched in early 2023 to reduce operating costs, improve operating margins, and advance the Company’s commitment to profitable growth. The Company had expanded the scope and duration of TAG to focus on a more comprehensive review of its global business operations. The expansion of TAG put greater emphasis on initiatives aimed at restructuring or optimizing operations, exiting or minimizing certain product offerings, brands and distribution channels, strengthening gross margins through improvements in sourcing and improving working capital efficiency. Under the expanded TAG plan, the Company achieved annualized operating income benefits of $280 million over the two year period.

The following table shows a summary of TAG plan charges (in thousands):

The following table shows a rollforward of the accrued liability related to the Company’s TAG plan (in thousands):

TAG plan restructuring charges by operating segment were as follows (in thousands):

In fiscal year 2022, the Company completed its New World Fossil 2.0 (“NWF 2.0”) restructuring program it launched in 2019. The following tables show a rollforward of the accrued liability related to the Company’s NWF 2.0 restructuring plan (in thousands):