Good afternoon, ladies and gentlemen, and welcome to the Fossil Group Second Quarter 2025 Earnings Call. [Operator Instructions] This conference call is being recorded and may not be reproduced in whole or in part without written permission from the company. Now I'll turn the call over to Christine Greany of the Blueshirt Group to begin.

Hello, everyone, and thank you for joining us. With me on the call today is Franco Fogliato, Chief Executive Officer; and Randy Greben, Chief Financial Officer. Before we begin, I would like to remind you that information made available during this conference call contains forward-looking information and actual results could differ materially from those that will be discussed during this call. Fossil Group's policy on forward-looking statements and additional information concerning a number of factors that could cause actual results to differ materially from such statements is readily available in the company's Form 8-K, 10-Q and 10-K reports filed with the SEC. In addition, Fossil assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. During today's call, we will refer to constant currency results as well as certain non-GAAP financial measures. Please note that you can find a reconciliation of actual results to constant currency results and other information regarding non-GAAP financial measures discussed on this call in Fossil's earnings release, which was filed today on Form 8-K and is available in the Investors section on fossilgroup.com. With that, I'll now turn the call over to Franco.

Thank you, Christine. Good afternoon, everyone, and thank you for joining us today. As noted in today's press release, we delivered second quarter financial performance above expectation, raised our full year guidance and announced a comprehensive debt refinancing. These developments reflect ongoing operational and financial momentum resulting from our turnaround plan. In Q2, our talented global teams drove a third consecutive quarter of both gross margin expansion and positive adjusted operating income against in a complex macro backdrop. A few highlights from the quarter. Net sales trends reflect continuing improvement in the wholesale channel as well as better-than-expected comparable sales strength in our Fossil retail stores. This is particularly meaningful given that we substantially lowered our promotional activity and took some strategic pricing action during the quarter. Importantly, we also fueled a strong bottom line performance with gross margin of more than 57% and significant cost reduction, delivering positive adjusted operating income of $4 million. The results demonstrate the power of our rich brand heritage and ability to connect with consumers around the world as we continue to execute under the 3 key pillars of our turnaround, refocusing on our core, rightsizing our cost structure and strengthening our balance sheet. Next month will mark the completion of my first year at Fossil Group. Since joining the company last September, the pace of change has been fast and furious, and our progress has been notable. During this time, we have built a world-class leadership team, bringing fresh perspective to key function across the organization. Most recently, Lakshmanan was appointed Chief Supply Chain Officer, bringing more than 20 years of expertise to the role. I'm thrilled about the team we have assembled and the way everyone has united around our game plan and strong desire to succeed. We have much more work…

Thank you, Franco, and good afternoon, everyone. We're pleased to have delivered another quarter of outperformance across the P&L as we continue to advance our turnaround strategies. As a result of our strong year-to-date performance, we're raising full year guidance on the top and bottom line with adjusted operating margin now expected to be breakeven to slightly positive. Second quarter net sales totaled $219 (sic) [ 220 ] million, down 16% in constant currency and in line with our expectations. Second quarter gross margin expanded 480 (sic) [ 490 ] basis points compared to last year, coming in at 57.4% (sic) [ 57.5% ]. You'll note that this is now the third consecutive quarter of meaningful gross margin expansion. The year-over-year increase primarily reflects higher product margins in our core categories, driven by improved product costing, our exit from connected watches, lower freight costs and importantly, a completely refreshed philosophy with significantly lower reliance on discounts and promotions. We are proactively addressing the tariff landscape and remain confident that we can mitigate the full impact to our cost of goods sold in 2025. As a global organization with a flexible supply chain and significant scale, we are well positioned. We have several tactics in our arsenal, ranging from cost sharing with vendors to optimizing our sourcing allocations and distribution to strategic pricing actions. Specific initiatives include partnering with our long-standing suppliers to drive cost reduction on our key platforms, utilizing our strong supply base to optimize costs across multiple sourcing regions and supply chain tiers, leveraging our free trade zone status at our Dallas distribution center and implementing surgical price increases. With respect to pricing, thus far, we have not seen any pushback from the consumer, which we view as a testament to our democratic pricing architecture. Continuing down the…

[Operator Instructions] Your first question comes from the line of Francesco Marmo from Maxim Group.

Congratulations on the quarter. I would like to start from the ongoing impressive gross margins improvement. I understand that there's a lot of moving parts, but I was hoping you guys could focus a bit more on the impact of the changes in your promotional activity in your price increases. And then also I was hoping you guys could give us some color if there was any impact from tariffs?

Francesco, thanks for the question. Look, we're extremely pleased. As I mentioned, since I joined the company, for us, it was very important to really move into a full price model. And the full price model, combined with the very strong work done by the supply chain teams has led this improvement into gross margin, which we think we guided in the mid- to high 50s in a long-term perspective. We're very pleased. I would say what is very pleased in what we have seen over the last month since we changed our strategy is that our brands are so strong that despite being less promotional, we haven't seen really any decrease. Consumers have been paying the value for the brand. They understand that the product has more value than what we were asking for, and they've been very resilient. So we've seen a strong increase in AUR. We're very pleased, and we believe that this is a new model that we can continue over the long run. Same on our supply chain, but I will ask Randy to jump in. He's going to give you an idea on all of the work that's been happening.

Yes. Thank you, Franco. And thank you, Francesco, very much for the question. To address specifically your question, we have not seen any negative impact in our gross margins year-to-date from tariffs. As I shared in my prepared remarks, we have a litany of strategies that we are employing to address tariffs. Obviously, that situation remains quite fluid with nearly daily or weekly changes. But as we've said in the past, and we continue to believe into the future, our diverse, sophisticated supply chain affords us with a number of levers that we can pull to effectively mitigate any sort of incremental tariff pressure. One thing that I do want to mention, though, because while tariffs right now are not currently a tailwind or a headwind that we're unable to manage through, we did want to make sure that folks understood the way in which minimum royalty guarantees do impact our business. We shared externally prior to this call that we'd achieved modest royalty reductions in '25 and meaningful royalty reductions in '26. That's why in Q3 in years past and certainly in 2025, we would expect a debit in our gross margin percentage from the recognition of those minimum royalty rate shortfalls. Our underlying margin rate remains quite strong, very much in line with the actions that Franco just articulated.

Okay. Great. That was extremely helpful. And then shifting gear one second. Talking about wholesale, it looks like a pretty resilient part of your business, and it sounds like you guys are working closely with your partners. I was wondering whether you guys could give us some color on the initiatives you are taking and in general, the trends that you're seeing in that channel.

Yes, great question. So Francesco, look, let me take the lead and maybe Randy can give some color. We're excited. I've been in a roadshow since I joined the company talking to our -- really our largest partners globally. The love that our partners have for our brands is extremely high. But they've also been very critical to all of us about our promotional activity, which led us to really start to lead by example. We're building great relationship. I think -- when I was talking to them early days, they loved my story. They said we want to see action. We proved that in quarter 4. They said, great. Let's see the future. We proved in Q1, and we doubled down in Q2. And even last week, our teams were in New York meeting with the largest accounts, they all have been very complementary. You guys are now leading the industry by example. You're driving stronger relationship. This is step #1. Step #2 is about what we are doing to invest with them. And we've been very clear over the last -- over the plan that wholesale channel was really a priority for the company. We are doubled down on investing in-store presentation for this year. The project is really taking live now with a lot of new fixture delivered to our accounts globally as well as we are doubled down on activities from a marketing perspective. And I will mention the pretty soon launch of the Nick Jonas collaboration, which we are excited about hitting our wholesale partners globally. So we're building a relationship. We know it takes time. We want to be credible. We want to be their best partner, and we will focus on continuing to do that, and we're seeing this paying off dividends.

Okay. Great. And then if I have time, if I can sneak in one more. So we're seeing anecdotal evidence of a renewed interest in traditional fashion watches among younger consumers. And then we've been following clearly the Fossil brand really closely. And we noticed that several of the limited edition collaboration are actually sold out on your website. I'm talking about the -- Fantastic Four, Superman S-Shield and Minecraft. So I was wondering whether you guys saw any strength in that younger consumer category? What kind of products are those customers more interested in? And then when it comes to the collaboration side of things, I was hoping you guys could give us an idea of the kind of initiatives you guys are undertaking to manage and promote those launches and how you see that brand momentum kind of reverberate across the broader offering of the Fossil brand?

Great question. Thanks for asking. Look, we're definitely seeing a comeback of the traditional watch. I would say it's really different by region, definitely very strong in India, in the Americas. We don't see that really happening in China. China has been still -- even has been a little better, but we still don't see those consumers there. From what we see is exciting because you see this new generation coming and the relevance of the smart watch for them is not quite there. The traditional watch becomes an accessory, a way to express themselves. They don't need to -- they really don't need to take the smart watch approach in general as I've done over the years or many other consumers have done over the years. So we're excited about the traditional watch coming back. I think a collaboration are helping us to connect with some very key communities that drive brand awareness and brand momentum. I think we have an amazing team that has been able to refocus the business into what we are good on, which is really building great product and telling stories. And those communities and those collaborations are just helping us to tell a better story. You're right, I recall Minecraft, honestly, we didn't expect that. It was impressive. We were sold out within hours. Shelby, Superman has been -- I'm really, really proud of the work the teams have done because it really has led Fossil to a different level, to a new level. And -- but I'm also very excited about what's coming next. I'm going to be in New York next week, and I can't wait to see the new collaboration with Nick Jonas. This is going to be by far the biggest activation we've done for the Fossil brand since years. So I look forward to tell more in the next call about the success of this collaboration.

There are no further questions for Q&A. I'll turn the call back to management for closing comments.

Thank you, everyone, for joining today. We're excited about the future. We're looking forward to see you and talk to you for Q3 earnings. Thank you.

This concludes the meeting. You may now disconnect.