S&P lowers Fossil

S&P said it lowered its ratings on Fossil Group Inc. and its senior unsecured notes to B- from B. The recovery rating on the notes remains 4. The agency also revised the outlook to negative from stable.

“The downgrade and outlook revision reflect our view that Fossil's market share has notably weakened, as illustrated with an ongoing deterioration in operating performance. Fossil's fiscal 2022 performance was weaker than expected, including a decrease in global sales of 10% on a reported basis and 5% on a constant currency basis. Moreover, company-adjusted operating margins were approximately 0.4%, compared with the company's guidance of 2%-3%,” the agency said in a press release.

However, S&P noted Fossil has relatively low leverage and adequate liquidity, which includes nearly $200 million in cash on its balance sheet and access to about $141 million on its unrated revolver as of Dec. 31.

“We expect adjusted leverage of mid-3x in fiscal 2022 (compared with 1.7x in fiscal 2021) will modestly improve in 2023 as the company's focus on streamlining operations and cost-reduction initiatives offset continued weak operating conditions,” S&P said.

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