Kanen Wealth Management Excoriates Fossil Board of Directors and Management for Unacceptably Slow Restructuring Plan
April 18 2024 - 3:26PM
Kanen Wealth Management, LLC, (“KWM”) owner of approximately 4% of
the Fossil Group, Inc.'s (Nasdaq: FOSL) 7% Senior Notes due 2026
(Nasdaq: FOSLL), issues the following open letter to the Company’s
Directors:
Dear FOSL Directors,
Fossil is a $1 bill + co., and a solid brand with ample
opportunity, one that enjoys high gross margins in excess of 50%.
Judging by the actions of the board and management, there is a lack
of urgency in executing its strategic initiatives and returning to
profitability.
To date, we have little to show as a result of the Transform and
Grow plan (TAG). Fossil shares are down approximately 80% since the
plan was announced in February 2023. Despite closing stores and
slashing headcount, the company still reported a loss for the year.
You routinely miss your own guidance. In our opinion, closing 50
additional stores in 2024 via lease expirations simply isn’t going
to move the needle. We are concerned that narrowing losses and
subsequent profits will continue to be elusive. Management needs to
take a faster approach in reducing expenses, identify profitable
segments, and implement these measures in a rapid cadence. I
question the lack of wisdom in your 3-year implementation of TAG.
It’s way too long, creates anxiety within the organization and
potentially outside the organization (customers, vendors, partners,
etc.)… not to mention the long delay in profitability starting in
2025. Instead of “ripping the band-aid off”, you have opted for
“death by a thousand cuts”.
We ended the year with $117M of cash, a $56M tax refund
forthcoming in 1H 2024, and roughly $20M of non-core property up
for sale by our estimation. We have the liquidity to fix the
business! The total being potentially $177M of gross cash. You have
hired 2 prominent advisors to assist you which likely is expensive.
Why haven’t you done the obvious??? You can potentially buy back
your baby bonds that have a face value of $150M. They are currently
trading in the market for less than $63M. You have a shot on goal
to retire $150M of debt at a 40-50% discount yet you behave like a
deer staring into the headlights of a truck about to run you over!
This is consistent with your decision to implement a painfully slow
and long implementation of TAG. You are clearly sluggish and not
moving fast enough. We need quick, decisive, and bold actions! The
message of your “non-action” is that you do not understand capital
allocation.
KWM owns just under 4% of your 7% debt due in 2026. Given the
track record and lack of rapid remediation, we believe that KWM can
assist the company by having board representation. Sadly, you are
likely spending millions of dollars on outside advisors that have
little to no skin in the game and have not delivered results yet.
We look forward to your response and working with you in a
constructive fashion going forward.
Sincerely,
David Kanen
President/CEO
Kanen Wealth Management
dkanen@kanenadvisory.com
Fossil (NASDAQ:FOSL)
Historical Stock Chart
From Nov 2024 to Dec 2024
Fossil (NASDAQ:FOSL)
Historical Stock Chart
From Dec 2023 to Dec 2024