Fossil Group Inc

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors contained in Item 1A. Risk Factors in Part I of our Annual Report on Form 10-K for the fiscal year ended December 28, 2024 and in other documents we file with the Securities and Exchange Commission, in evaluating the Company and its business. Except as set forth below, there have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 28, 2024.

Risks Related to our Indebtedness

We are highly leveraged. Our substantial indebtedness and the corresponding cash debt service obligations could adversely affect our competitiveness, our liquidity, our operations, and our ability to obtain additional financing if necessary.

As of AprilJuly 5, 2025, we had $182.31.4 million of outstanding indebtedness, not including $4.52 million of debt issuance costs, and we paid $23.8 million of interest during fiscal year 2024.

Our high level of indebtedness and corresponding high cash debt service obligations, could have important consequences, including the following:

they may limit our ability to obtain additional financing or sell stock to fund our working capital, capital expenditures, debt repayments and debt service requirements;

they may limit our flexibility in planning for, or reacting to, changes in our business and future business opportunities;

we are more highly leveraged than some of our competitors, which may place us at a competitive disadvantage;

they may make us more vulnerable to a downturn in our business or general adverse economic, regulatory and industry conditions, including rising tariffs;

they may increase our cost of borrowing;

they may limit our ability to reinvest in our business;

they may limit our ability to refinance our indebtedness;

they may require us to dedicate a substantial portion of our cash flow to service our debt; and

there would be a material adverse effect on our business and financial condition if we were unable to service our indebtedness or obtain additional financing as needed.

Our ability to meet our cash requirements, including our debt service obligations, is dependent upon our ability to maintain and improve our operating performance, which is subject to general economic and competitive conditions and to financial, business and other factors, many of which are beyond our control. Although we believe we have sufficient sources of liquidity to meet our anticipated requirements for working capital, debt service and capital expenditures through the next twelve months, if our operating results do not meet our expectations or if we experience adverse financial, business and other factors that we do not currently anticipate, we could face liquidity constraints.

If we are unable to meet our liquidity requirements, we could be forced to sell assets, restructure or refinance our debt or raise additional capital through sales of equity or debt. We may be unable to take any of these actions on satisfactory terms or in a timely manner or at all, due to many factors, including our high level of indebtedness. Any of these actions may not be sufficient to allow us to service our debt obligations or may have an adverse impact on our business. Our existing debt agreements limit our ability to take certain of these actions. Our failure to generate sufficient operating cash flow to pay our debt obligations could have a material adverse effect on us.

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TOn August 13, 2025, we entered into the New Revolving Credit Facility provides that the lenders thereunder may extend , replacing our previous revolving loans in an aggregate principcredit facility. See Part I.Item 1. Financial amount notStatements Notes to exceed $225.0 million at any time outstanding, subject to the borrowing base availability limitations. As of April 5, 2025, we had $20.0 million outstanding under the Revolving Facility and available borrowing capacity of $21.2 million. In May 2025, the administrative agent imposed a $5.0 million restructuring reserve that reduced the amouCondensed Consolidated Financial Statements17. Subsequent Events and Part I.Item 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesABL Credit Agreement we were able to borrow under the Revolving Facilityfor more details.

The maximum amount that we are permitted to borrow at any time under the New Revolving Facility is limited by a borrowing base that is recalculated monthly or, in some circumstances, more frequently. The borrowing base is a function of, among other things, our eligible accounts receivable, inventory and certain intellectual property. As a result, our access to credit under the New Revolving Facility fluctuates depending on the value of the borrowing base eligible assets as of any measurement date. Because our business is seasonal and generates higher net sales and accounts receivable in the third and fourth quarters, our borrowing base is also seasonal and is typically lower during our second and third quarters, which can adversely affect our liquidity during these quarters.

The New Revolving Facility provides the administrative agent considerable discretion to impose reserves and to determine that certain assets are not eligible for inclusion in our borrowing base, which could materially reduce the maximum amount that we are able to borrow at any one time under the Revolving Facility. The administrative agent has imposed reserves previously, including a $10.0 million restructuring reserve in June 2024 and a $5.0 million additional restructuring reserve in May 2025, that reduced the amount we were able to borrow under the New Revolving Facility. There can be no assurance that the administrative agent will not impose additional reserves or exclude other assets from our borrowing base. If they do so, such actions could materially reduce our availability under the Revolving Facility, which could materially and adversely impact our liquidity and our ability to operate our business.

Under the New Revolving Facility, if our unused Availability is less than a specified amount, which as of April 5, 2025, was $27.0 million, we must satisfy a fixed charge coverage ratio of at least 1.00 to 1.00 on certain specified dates. As of April 5, 2025, we wocould not have been in compliance with that fixed charge coverage ratio requirement if it had been applicable, so we could not have utilized our Revolving Facility to the extent that the remaining Availability under the Revolving Facility would have been less than $27.0 million. Unless our fixed charge coverage ratio improves, we will not be able to fully utilize all of the Availability under our Revolving Facility. This may further limit materially and adversely impact our liquidity and our ability to operate our business. There can be no assurance that our fixed charge coverage ratio will improve to the level necessary to allow us to fully utilize all of the Availability under our Revolving Facility.

Financial Risks

We have a recent history of net losses and negative cash flow and may not achieve consistent profitability or positive cash flow in the future.

We have incurred substantial losses and negative cash flow in recent periods. During the threesix months ended AprilJuly 5, 2025, fiscal years 2024 and 2023, we generated a net loss attributable to Fossil Group, Inc. of $17.69.9 million, $102.7 million, and $157.1 million, respectively. While our cash flow provided by operating activities was $46.7 million in fiscal year 2024, we used cash in operating activities of $60.450.9 million, $59.5 million and $110.9 million during the threesix months ended AprilJuly 5, 2025, fiscal year 2023 and fiscal year 2022, respectively. We will need to generate and sustain increased net sales levels in future periods and reduce expenses in order to become profitable and generate consistent positive cash flow, and even if we do, we may not be able to maintain or increase our level of profitability and cash flow. If we cannot become profitable or generate positive cash flow, our business, results of operations and financial condition could be materially and adversely affected.

A significant portion of our cash, cash equivalents and investments are held by our foreign subsidiaries, which could negatively affect future liquidity needs.

As of AprilJuly 5, 2025, $76.4104.6 million, or approximately 97.65.2% of our cash and cash equivalents were held by our foreign subsidiaries. While we intend to use some of the cash held outside the U.S. to fund our international operations, when we encounter a significant need for liquidity in the U.S. or other locations that we cannot fulfill through other internal or external sources, our liquidity requirements could necessitate transfers of existing cash balances between our subsidiaries or to the U.S.. Some of our subsidiaries are located in jurisdictions that require foreign government approval before a cash repatriation can occur. If we are unable to transfer existing cash balances in such a situation, our business, results of operations and financial condition could be materially and adversely affected.

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Operational Risks

Tariffs or other restrictions placed on imports from China and any retaliatory trade measures taken by China could materially harm our revenue and results of operations.

Beginning in July 2018, certain of our products have been subject to additional ad valorem duties imposed by the U.S. government on products of China under Section 301 of the Trade Act of 1974 (Section 301) and the International Emergency Economic Powers Act ("IEEPA").

The Section 301 tariffs, were imposed via four successive Lists and were first the result of an April 2018 determination by the Office of the U.S. Trade Representative (USTR) that Chinas acts, practices, and policies with respect to technology transfer, intellectual property, and innovation are unreasonable or discriminatory and burden or restrict U.S. commerce. Certain of our packaging and handbag products have been subject to an additional 25% ad valorem tariff since July 2018 (List 1). Certain of our handbag and wallet products were subject to an additional 10% ad valorem tariff beginning in September 2018, a rate that was then raised to 25% ad valorem from June 2019 to present (List 3). Finally, smartwatches, certain jewelry

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products, and several of our traditional watch products were subject to an additional 15% ad valorem tariff beginning in September 2019, a rate that was lowered to 7.5% ad valorem from February 2020 to present (List 4A).

The IEEPA tariffs on products of China currently take the form of two separate tariff actions, (1) an action relating to illicit drug supply chains as of February 2025, currently amounting to 20% ad valorem; and (2) reciprocal tariffs of 10% as of May 14, 2025. Our products sourced from China are subject to these IEEPA tariffs in addition to the Section 301 tariffs above.

We continue to monitor tariff developments that pose potential risks. In this fast-paced international trade environment, we also monitor developments for any negotiated resolutions to offset some of the tariff exposure. While certain trade deals have been publicly announced, little information has been released about the scope of the agreements, limiting the possibility of a full assessment of their impact on our operations at this time.

We have joined litigation before the U.S. Court of International Trade challenging the legality of the Section 301 List 3 and List 4A tariffs and seeking refunds of duties paid on imports that were subject to those tariffs. That litigation is ongoing in the appeal stages.

If the tariffs continue or increase, we may be required to raise our prices, which may result in the loss of customers and harm our operating performance. Alternatively, we may seek to shift production outside of China or otherwise change our sourcing strategy for these products, potentially resulting in significant costs and disruption to our operations. Even if the U.S. further modifies these tariffs, it is always possible that new products we introduce could be impacted by the changes, or that our business will be impacted by retaliatory trade measures taken by China or other countries in response to existing or future tariffs, causing us to raise prices or make changes to our operations, any of which could materially harm our revenue or operating results.

Our supply chain may be disrupted by changes in U.S. trade policy with China or as a result of a pandemic.

We rely on domestic and foreign suppliers to provide us with merchandise in a timely manner and at favorable prices. Among our foreign suppliers, China is the source of a substantial majority of our imports.

We experienced increased international transit times and increased shipping costs for a majority of our products, in association with and primarily as a result of the COVID-19 pandemic. Any future disruption in the flow of our imported merchandise from China or a material increase in the cost of those goods or transportation without any offsetting price increases may significantly decrease our profits.

The ongoing U.S. tariffs or other actions against China and any responses by China, couland a continued failure to implement a lasting agreement to more permanently lower tariff rates, could impair our ability to meet customer demand and could result in lost sales or an increase in our cost of merchandise. Additionally, the U.S. Trade Representative has also announced the imposition, starting in October 2025, of additional fees on Chinese vessels, and Chinese vessel owners/operators, that serve U.S. ports. These trade policies may have a material adverse impact on our business and results of operations.