Fossil Group 7% noteholder accuses board, management of lacking urgency

By Wendy Van Sickle

Columbus, Ohio, April 18 – Fossil Group, Inc. was accused by an owner of some of its 7% $25-par senior notes due 2026 of being “unacceptably slow” in its restructuring efforts.

David Kanen, president and chief executive officer of Kanen Wealth Management, which claims to hold just less than 7% of the debt due in 2026, wrote an open letter to Fossil’s board of director, in which he accused the company’s board of directors of lacking urgency in executing 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,” the letter states.

“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.”

Kanen wrote that the three-year implementation period for the TAG plan is too long and creates anxiety within Fossil, and potentially among customers, vendors and partners.

“Instead of ‘ripping the band-aid off,’ you have opted for ‘death by a thousand cuts,’” the letter charges, adding that the company has the liquidity to “fix the business.”

“The total being potentially $177 million of gross cash. You have hired two prominent advisors to assist you, which likely is expensive. ... You can potentially buy back your baby bonds that have a face value of $150 million. They are currently trading in the market for less than $63 million. You have a shot on goal to retire $150 million 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!” the letter states. It concludes by suggesting Kanen Wealth be given representation on Fossil’s board.

Fossil is a fashion accessories designer and marketer based in Richardson, Tex.

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