Fossil digs the watch business while unearthing a place in the accessories and apparel niches. A leading mid-priced watchmaker in the US, it generates most of its sales from watches. Brands include its Fossil and Relic watches, as well as licensed names Armani, Michael Kors, adidas, Burberry, and Marc Jacobs, and private-label watches for Target and Wal-Mart. Fossil also distributes fashion accessories, such as leather goods, sunglasses, and apparel. The company peddles its products through department stores and specialty shops in more than 120 countries through some 400 mostly US and company-owned stores, as well as through its own catalog and website. Products are also sold on cruise ships and in airports.
With the economy improving and consumers once again opening their wallets, Fossil has benefitted. The company's total sales rose more than 17% in 2011 vs. 2010 following a noteworthy 31% sales increase vs. 2009. Both wholesale and direct-to-consumer sales have grown by double digits for two straight years and net income has jumped 15% in 2011 on the heels of an 83% rise in 2010 vs. 2009. These results are a strong rebound from past annual comparisons, when sales dipped about 2% in 2009 vs. the previous year. Fossil attributes the gains to the stronger global economy, upward trend in fashion watches, and its keen focus on design. A handful of licensed brands (including Michael Kors), as well as Fossil and Michele, have been strong contributors to sales growth. Direct sales gains were driven by increasing same-store sales, new store openings, and online sales increases in the US and Germany. In 2011, the company added 51 stores and shuttered 17 for a net new store boost of 34.
Fossil has been expanding its store base in recent years. In 2012, Fossil is planning to add up to 75 new stores while closing another 20 worldwide. It's focusing its efforts outside the US to sell its full-price accessories. Building on the Fossil brand name, the company also markets wallets, handbags, and belts. The company's wholesale business represented about three-quarters of its 2011 revenue, while its direct-to-consumer segment generated the rest.
Fossil has inked several deals that have given the company traction for long-term growth. The accessories maker kicked off 2012 expanding its brands portfolio and strengthening its foothold abroad. Fossil purchased Skagen Designs, a Nevada-based manufacturer and distributor of sleek Danish-style watches, jewelry, sunglasses, and clocks. The nearly $232 million cash-and-stock deal brings with it Skagen's international and regional offices in Denmark, Hong Kong, Germany, the UK, and Canada. Fossil also has a licensing agreement with Diesel through 2015 and holds the exclusive rights to manufacture, market, and distribute a Diesel jewelry collection. A move that has placed Fossil at a noteworthy advantage is its deal with retailing behemoth Wal-Mart to design, make, and distribute watches for the retailer's private-label brand George. The company's mass market watch business increased about 40% soon thereafter, more or less attributable to this partnership.
Like rivals Swatch and Guess?, Fossil has typically targeted those in their teens, 20s, and 30s, i.e., those hip to the latest trends. But Fossil's target audience has broadened to include those who will drop some big green for some bling. While the majority of Fossil's products are priced from $50 to $600, the company entered the luxury products niche when it acquired Tempus International, which does business as Michele Watches, for about $50 million. (Some Michele watches sell for thousands of dollars.) The subsidiary launched Michele Jewelry, a collection of 18-karat gold pieces that are sold at Neiman Marcus stores nationwide. Fossil also sells a vintage-inspired summer clothing collection -- called Vintage Expedition -- in stores in Germany and the UK. The 2010 launch was the first time Fossil made a full collection of its apparel available outside the US.
Fossil distributes its products worldwide with help from more than 25 company-owned foreign subsidiaries and through 60-plus independent distributors. Its reach has grown to extend to Africa, Asia, Australia, Europe, Central and South America, Canada, the Caribbean, Mexico, and the Middle East.
Fossil's chairman and CEO Kosta Kartsotis, who hasn't given himself a paycheck since 2008, and his brother Tom together controlled about 15% of the company until 2011, when Tom sold off a portion of his stake and stepped down as company director. Kosta Kartsotis now owns a more than 10% stake alongside investment firm FMR LLC with 15% of Fossil's shares and T. Rowe Price Associates with another 10%. – less
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