American retail has suffered in the past few years, and many retailers are experiencing an enormous shift. As brick-and-mortar locations struggle to keep pace with digital-first rivals and evolving shopper expectations, closing these stores helps them adapt to the rapidly changing marketplace and ensure they come out on top.
This company recently announced the closure of 28 stores in the first quarter of 2025, with plans to shutter 50 locations by year’s end as part of a broader restructuring strategy.
Who’s Closing Off Stores?
Fossil Group, Inc. is a Texas-based company renowned for its watches, handbags, jewelry, and other fashion accessories. The brand was founded in 1984 by Tom Kartsotis and quickly rose to be a much-loved brand with its vintage-inspired designs and accessible price points. Over the decades, the company expanded its product line to include leather goods, eyewear, and apparel.
Fossil has historically been recognized for its innovative approach to design and technology, introducing features like the Big Tic watch and later venturing into smartwatches. They have launched an aggressive turnaround plan, including significant cost-cutting measures, store closures, and a renewed focus on digital transformation.
The Scale of Store Closures
These closures seem like a drastic step by the company. Still, this strategic move is part of a broader restructuring effort aimed at streamlining operations, reducing costs, and shifting focus toward e-commerce. This wave of closures comes as the company faces a 19% drop in worldwide net sales, with declines reported across all regions and sales channels.
The initial 28 closures are just the beginning, as they have confirmed that the total number of shuttered stores will reach 50 by the end of 2025. “When analyzing our direct-to-consumer business, we believe there is a significant opportunity to strengthen our model by reducing our presence, but significantly increasing profitability. We are implementing a dual approach: prioritizing the wholesale channel and transforming our direct-to-consumer business model,” said CEO Franco Fogliato.
Shifting Consumer Preferences
How people shop has changed drastically in the past few years, and it’s still evolving. Shoppers are increasingly value-driven, looking for affordable prices and switching to less expensive brands or private label alternatives, often prioritizing cost over traditional brand loyalty. Social media now plays a big role in the choices consumers make.
At the same time, there is a growing emphasis on sustainability, personalization, and digital convenience. Consumers want brands to offer eco-friendly options, tailored recommendations, and seamless online shopping experiences.
Financial Pressures Influencing The Choice
The company reported a significant 19% decline in global net sales, with losses spanning all regions and sales channels. Rising operational costs, shifting consumer spending habits, and increased competition from online retailers and lower-priced brands have compounded this downturn.
Fossil has been forced to implement aggressive cost-cutting measures, including closing underperforming stores, as part of a broader strategy to stabilize its finances and refocus on digital growth and product innovation.
Financial Outlook and Risk
Despite its efforts to reduce costs and focus on its successful stores, Fossil remains at moderate to high risk of bankruptcy. Recent analysis gives the company a 4.4% probability of bankruptcy and a 35% chance of late credit payments. Despite these stats, the company expanded its gross margin to 61.3% thanks to reduced promotions and a focus on higher-margin offerings.
The company’s moderate-to-high bankruptcy risk and high probability of late payments underscore the urgency of its turnaround efforts. While management is optimistic about cost-saving measures and operational efficiencies, the outlook for 2025 anticipates further sales declines in the mid-to-high teens and an adjusted operating margin in the negative low single digits.
Modernizing Remaining Stores
The company is turning its focus to modernizing its remaining retail locations to better align with current consumer expectations and industry trends. It wants to restructure store layouts, streamline the shopping experience, and integrate a digital aspect to its brand to match current fashion and consumer trends.
The company’s strategy also emphasizes blending in-store and online experiences, ensuring shoppers seamlessly transition between physical and digital channels.
Exit from the Smartwatch Market
In early 2024, Fossil decided to exit the smartwatch market despite the potential growth it could bring for the company. Despite early investments and partnerships to capture a share of the booming wearable tech sector, Fossil struggled to compete with dominant players like Apple and Samsung, who consistently outpaced rivals in innovation and market reach.
By stepping away from this market, Fossil is reallocating resources toward its core strengths in traditional watches and accessories.
Impact on Employees and Communities
The sad reality of these closures is that hundreds of workers face job losses, creating uncertainty for families and contributing to broader economic challenges in affected areas. Communities, especially those anchored by shopping malls or retail centers, are also taking a big knock, as more and more stores are closing their doors.
The ripple effects extend to neighboring small businesses relying on foot traffic generated by anchor retailers, potentially threatening their viability.
What’s Next for Fossil?
Looking ahead, Fossil Group is doubling down on its turnaround strategy to secure long-term profitable growth despite ongoing industry headwinds. Fossil plans to continue streamlining operations by closing additional underperforming stores and shifting some international markets to a distributor model while targeting $100 million in SG&A savings for 2025.
“The organization is energized by the opportunity ahead,” Fogliato said. “Importantly, we have a strong combination of seasoned Fossil Group team members and newly appointed leaders to advance our strategy and build lasting shareholder value.”
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