LE T TE R TO STOCK H O LD E R S

Dear Stockholders,

It was a difficult year for Fossil Group as we were faced with many challenges. We are not pleased with our
overall results, but we feel we made significant progress toward our objectives, including driving growth in
wearables across our portfolio of brands, leveraging our scale to lower supply chain costs, increasing our
digital capabilities and transforming our business model. In the process, we delivered almost $2.8 billion in
sales and generated strong operating cash flows.

Notably, our New World Fossil initiative—the organization-wide program designed to improve financial performance and drive long-term
shareholder value—is already paying off in a big way as we build a more nimble, efficient and responsive operating platform. The initiative
improved profits by $80 million in 2017, positioning us to achieve our multi-year $200 million profit improvement goal.

Our Strategy

Building on the momentum we established in 2017, we are focused 44 percent compared to the fourth quarter of 2016. This focus on
on achieving our 2018 goals by driving increased efficiency gains wearables, combined with the innovation we’re introducing across
and addressing nine strategic priorities: our traditional watch styles, sets us up for sustained and stable
growth over time.

Becoming a smaller, more focused company

Stabilizing our traditional watch business
In our business, it’s critical to evolve with consumer needs. Our
ability to recognize and respond to changing consumer dynamics We sell more than 30 million total watches each year, and this
has helped us focus on growing—and investing in—the right market remains central to our long-term success. Although
parts of our business. We’re focused on the areas where we see this business remains difficult due to the dramatic growth
long-term growth potential, rather than opportunities for short- of wearables in the overall wrist market, we are continuing to
term gain. This has enabled us to improve our margins across innovate with differentiated new ideas and materials in watches
the entirety of our business—all categories, brands, customers, that we feel will resonate strongly with consumers this year.
geographies and operations. It has also enabled us to significantly Therefore, we will continue to focus on fashion-forward traditional
reduce our overhead cost structure as we focus our efforts on our watches to meet customer demand, even as we place a major
most significant opportunities. emphasis on advancing our wearables business.

Growing wearables Slowing the decline in leathers and jewelry

We’re experiencing outstanding demand for wearables that merge Our leathers and jewelry products declined last year. We expect
the worlds of tech and fashion. We’re bringing a fashion-first to slow these declines by taking advantage of the distinct market
focus and a never-before-seen variety to the wearables industry, opportunities we continue to see in these categories and focus on
infusing robust technology into beautiful designs that have broad the areas that drive healthy growth. Great brands and products
appeal. It’s proving to be a winning formula— more design, more continue to command significant market share, even in this
diversity, more brands and more fashion. No other company in the disruptive retail environment.
world is as well positioned as we are to do this.
Generating owned brand growth and efficiencies
In 2017, we nearly doubled our wearables business to more than
$300 million—about 14 percent of our total watch sales. In the In 2017, the overall numbers don’t tell the entire Fossil brand story.
process, we introduced new hybrid and display smartwatches While total brand sales declined in the fourth quarter, driven by
across 14 brands. leathers and jewelry, Fossil brand watch sales increased by two
percent. In our direct-to-consumer channel, comparative sales for
The fourth quarter—which encompasses the holiday season—is
our retail stores and e-commerce sites increased two percent—
our most important, and wearables delivered $142 million in watch
our first positive comp sales since 2015, with watch sales up five
sales, accounting for 20 percent of total watch sales, a growth of
percent in this channel.
By closing unprofitable retail store locations in 2018 and further the tone for our innovation efforts, as we work to design products
refining our wholesale and concession distribution in select with the future in mind.
geographies while investing in our retail experience, we believe
We’re looking for ways we can repurpose, recycle, and identify
our team will be able to focus on the most significant growth
new sustainable materials, as well as rethinking our manufacturing
opportunities while improving profitability.
processes. This also involves managing our product lifecycles
and giving our products a second life where it will make the most
Speeding licensed brand growth impact. We’re committed to challenging the norms of the watch
and accessory industry as we develop a more sustainable product
From kate spade new york and Marc Jacobs to Michael Kors and
design process. And, through this effort, we aspire to bring
Emporio Armani, the breadth of our 10 licensed brands remains
sustainable design elements to more than half of our global
an important advantage for Fossil Group. We will continue to find
product assortment by 2025.
strategic opportunities to partner with the right brands to attract
new, brand-loyal customers to the watches and wearables category. Beyond product design, our team is also developing measureable
goals for reducing waste, creating more leadership opportunities
And, thanks to wearables launches ahead of the holiday season,
for women, bringing positive change to our communities, and
we significantly improved the trajectory for Michael Kors watches
preparing our global workforce to meet the needs of tomorrow’s
and drove a double-digit increase in Armani watch sales in the
customer today.
fourth quarter.

Looking Ahead
Reducing costs
Taken all together, the strategy I’ve just outlined, aligned with our
A 20 percent reduction in wearables product costs helped drive
New World Fossil initiative, will improve long-term performance and
meaningful improvements in our core wearables margin, setting the
create shareholder value.
stage for gross margin improvement in 2018. We’re also continuing
the successful expense reduction initiatives we began in 2017 by Going forward, we’re focused on delivering innovative wearable
reducing our spend in less productive areas, such as fixtures and and traditional watch styles, while improving performance in the
displays, and redeploying marketing dollars toward higher-return handbag and jewelry categories and driving increases in digital
digital activities. sales. We continue to expect that North America will be a particular
challenge given the dynamics of the regional retail and consumer
Maximizing the potential of our digital channels environment. But, with our commitment to drive out cost through
our New World Fossil initiative and with our efforts to improve
In 2017, we worked hard to expand our digital sales channels, sourcing costs, we expect to deliver more profit to the bottom line
driving a 31 percent increase in e-commerce sales in the fourth to further fuel our progress in fiscal 2018.
quarter alone. We also significantly expanded our growth with pure-
play online retailers by 77 percent. As a result, 17 percent of our These are challenging times for Fossil Group but also very exciting
total fourth-quarter sales were from online channels, up from nine times as we transform the company and position it for future
percent over the comparable quarter. growth. Our heartfelt thanks go out to all of our Fossil Group team
members all over the world for their relentless focus, energy and
We focused heavily on developing and growing our brands across creativity, day-in and day-out, all year long.
e-commerce platforms, as well as mobile and social media. We
optimized our sales funnel by precisely targeting customers, and, as
a result, more than a third of Fossil brand business started with a
Sincerely,
digital interaction—via social, search, digital media, email or other
digital marketing efforts.

This continuing expansion is critical to our future growth and value

creation. As the major disruption in retail continues, more sales and
customer engagement will take place online where Fossil Group is
strongly positioned for success.
Kosta N. Kartsotis
Chairman and Chief Executive Officer
Designing a sustainable future

We care about the things that matter: our people, our customers,
our shareholders, our communities and our planet. Our newly-
launched sustainability platform, Make Time for Good, is setting
FI NAN CIAL H I G H LI G HT S

FISCAL YEAR 2017 2016 2015 2014 2013

(in thousands, except per share data)

Net sales ($) 2,788,163 3,042,371 3,228,836 3,509,691 3,259,971

Gross profit ($) 1,358,839 1,578,186 1,753,467 2,001,172 1,861,686

Operating income ($) <$424,276> 127,146 291,234 566,536 561,596

Net income attributable to Fossil Group, Inc. ($) <$478,172> 78,868 220,637 376,707 378,152

Earnings per share:

Basic ($) <$9.87> 1.64 4.52 7.12 6.59

Diluted ($) <$9.87> 1.63 4.51 7.10 6.56

Weighted average common shares and common

equivalent shares outstanding:

Basic 48,468 48,136 48,800 52,882 57,401

Diluted 48,468 48,323 48,924 53,080 57,676

Working capital — 932,705 953,141 1,008,264 939,573

Total assets ($) 1,658,372 2,186,897 2,355,661 2,177,460 2,186,251

Total long-term liabilities ($) 568,337 756,874 933,589 747,351 618,978

Stockholders’ equity attributable

576,133 1,006,236 921,388 977,860 1,068,677
to Fossil Group, Inc. ($)

Return on average stockholders’ equity

-62.3% 8.2% 24.7% 37.5% 33.1%
attributable to Fossil Group, Inc. 1

Calculated by dividing net income attributable to Fossil Group, Inc. by five quarter average stockholders’ equity attributable to Fossil Group, Inc.
CO R P O R ATE I N FO R MATIO N

EX ECUTIVE OFFI C ER S & D I R EC T OR S

Kosta N. Kartsotis
Greg A. McKelvey Mark D. Quick
Chairman of the Board
Executive Vice President, Director
and Chief Executive Officer
Chief Strategy and Digital Officer
James E. Skinner
Randy C. Belcher
John A. White Director
Executive Vice President, Asia Pacific
Executive Vice President
and Chief Operating Officer
Gail B. Tifford
Jeffrey N. Boyer
Director
Executive Vice President,
William B. Chiasson
Chief Financial Officer
Director
and Treasurer James M. Zimmerman
Director
Mauria A. Finley
Steve Evans
Director
Executive Vice President, Owned Brands

Diane L. Neal
Martin Frey
Director
Executive Vice President, EMEA

Thomas M. Nealon
Darren E. Hart
Director
Executive Vice President, HR

O U R WEBSITE C O R P O R A TE I N F O R M A TIO N

The company maintains a website at www.fossilgroup.com. Certain

Transfer Agent & Registrar
event and investor relations information concerning the company are
available at the site. Computershare
P. O. Box 505000
Louisville, KY 40233-5000
ANNUA L MEETING

The Annual Meeting of Stockholders will be held on

Principal Independent Auditors
Wednesday, May 23, 2018, at 9:00a.m. CDT at the company’s
headquarters, 901 S. Central Expressway, Richardson, Texas 75080. Deloitte & Touche LLP
2200 Ross Avenue
Dallas, Texas 75201
C OMP A N Y IN FOR M A T I ON

A copy of the company’s Annual Report on Form 10-K, as filed with Corporate Counsel
the Securities and Exchange Commission, and the Annual Report to
Akin Gump Strauss
Stockholders, in addition to other company information, is available
Hauer & Feld LLP
to stockholders without charge upon written request to Fossil Group,
1700 Pacific Avenue | Suite 4100
Investor Relations, 901 S. Central Expressway, Richardson, Texas
Dallas, Texas 75201
75080-7302, or online at www.fossilgroup.com.