Author Topic: FOSL - Fossil Group Inc  (Read 35158 times)

kab60

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Re: FOSL - Fossil Group Inc
« Reply #20 on: May 31, 2015, 09:06:39 AM »
No idea if AW will be a gamechanger but isn't Fossil already priced like that? I won't bet against Apple but I don't think you need to at these levels.


mateo999

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Re: FOSL - Fossil Group Inc
« Reply #21 on: June 01, 2015, 05:57:59 PM »
I understand there are differences in aesthetics, and a smartwatch isn't for everyone.  My point is there are TONS of watch wearers, that likely have MULTIPLE watches.  But all it takes is ONE Apple Watch to keep this collector from ever buying another regular/fashion watch again.  This is because once a person has committed to the step change that is a smartwatch, a regular watch becomes largely irrelevant to that person.  It's a many to one conversion that will absolutely affect FOSL.  It's not a 1:1 relationship.

This dynamic is actually what's keeping me from buying an Apple Watch now.  I like to wear one of my few watches on a daily basis.  But I'm reluctant to buy the AW because I know once I do, it's going to be super awkward to simply introduce the AW as just another one in my collection to be worn occasionally.  I have this same issue (admittedly on a super frivolous level), when I go to use my chronograph to time something, but then realize i'm just wearing a non-chrono model.

RichardGibbons

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Re: FOSL - Fossil Group Inc
« Reply #22 on: June 01, 2015, 08:56:50 PM »
I think this is a great point, Mateo, the crux of the issue.

innerscorecard

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Re: FOSL - Fossil Group Inc
« Reply #23 on: June 01, 2015, 11:17:10 PM »
I actually wonder if FOSL may still be a good short. After all, the VIC short thesis from a while ago has so far played out exactly as expected.
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notorious546

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Re: FOSL - Fossil Group Inc
« Reply #24 on: June 12, 2015, 08:13:12 PM »
I actually wonder if FOSL may still be a good short. After all, the VIC short thesis from a while ago has so far played out exactly as expected.

I've attached the short thesis for easy access. I think elements of it have definitely played out while concerns from other members on the forum are consistent to what has been laid out in the write up as well. The inability of management to clearly outline answers to the questions has stopped me from making an investment here. That said there's a purchase price for everything, but I'm afraid I don't see a compelling valuation at today's levels.


Quote
Question 1
Omar Saad - Evercore ISI Group - Analyst
Wanted to ask my one question on the 10-year license renewal with Michael Kors. Congratulations on that, as well.
It's obviously been a great relationship. Can you help us understand maybe some of the underlying dynamics,
especially since I think last quarter you had announced a renegotiation, a similar 10-year extension with Armani.
That one, I think, had lapsed and was running month to month for a while whereas this one I think was a little more
preemptive. Maybe help us understand the backdrop there. Are those situations really different or is it more of the
same?
 
Kosta Kartsotis - Fossil Group, Inc. - Chairman of the Board and CEO
Well, we were very pleased to sign the 10-year agreement. As you know, Michael Kors has been a fantastic
opportunity for us. Our two companies work very closely together. We've got very strong business in the US. It's
growing very rapidly in Europe. Asia's a huge potential. There's a follow-on jewelry opportunity that's very
significant. Men's is going to grow and will become very important, especially as we get larger in Asia. We're
building shop-in-shops all over the world; could be a significant number of them. There's a long-term opportunity in travel retail, and wearable technology will follow on in there also. We have very close relationship, it's very
significant business for us and them, and we felt it was prudent for us to go ahead and get a contract signed, put it
in there for 10 years. There's a significant amount of work and investment made by both parties for this. We felt it
was better to get a deal signed early and go unencumbered after opportunity and get back to business. That's why
we did it.
 
Question 2
Rick Patel - Stephens Inc. - Analyst
Good afternoon everyone. I will add my congratulations as well. Can you talk about the margin profile of your
license multi-brand portfolio? You renewed Armani earlier in the year, now you've locked in Kors. As we think about
the margins of this portfolio over the next three to five years, is it going to look similar as the last five years? Just
curious what's going to change if anything. Thank you.
 
Dennis Secor - Fossil Group, Inc. - CFO
If you look at the margin profile over the next several years, there's a lot of factors that you need to consider and
opportunities and some headwinds. You see that there's opportunities for us as we reduce cycle times,
international growth becomes a big opportunity for us, channel mix becomes a lot. So there's a lot of opportunities
in an overall portfolio of initiatives that we can use to drive margin, and the profile of the portfolio is one of those.
Each contract has different dynamics, and so you can see some mix changes among the brands. But overall we
think that there's opportunities longer term for us to drive margin expansion, and like I say, the components of the
individual contracts and brands are one element of that.
 
Question 3
John Kernan - Cowen and Company - Analyst
Just to circle back to Michael Kors, can you update us on, one, how the brand is performing in Europe, both from a
watch and jewelry perspective, how big you think that business can be relative to what it already is here in the US.
And then can you just confirm that the economics behind the Kors licensing agreement haven't materially
changed? Thank you.
 
Kosta Kartsotis - Fossil Group, Inc. - Chairman of the Board and CEO
In terms of Europe, the business is growing very quickly in Europe, both watches and jewelry, and it looks like it's
going to be a very significant business. And I would say the same thing about Asia, even though it's a relatively
small business now. And in terms of the economics of the deal, it fits very well into our business model and
where we focused on focusing on the business and growing it and putting major distribution around the world and
monetizing the opportunity, that's in front of us.
This is in stark contrast to previous statements they have made. In a conference call on June 11, 2014, they had no
problem saying that things are typically renewed at similar terms, in a direct response to a question about KORS.
Why not now?
 
Dennis Secor - Fossil, Inc. - CFO and Treasurer 06/11/14
There is -- the process generally is -- most of the agreements are five-year agreements and we try to structure them
at all times so that they are win-win relationships for both parties. We view these as important partnerships and
relationships and we want those to continue. I think historically, generally they have renewed at similar terms.
I believe the writing is now on the wall. I expect a material decline in the earnings trajectory beginning in 2016, if not
before due to the KORS royalty reset. The rise in the stock on extending the deal is an opportunity to add to the
short at better prices, in my opinion.


kab60

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Re: FOSL - Fossil Group Inc
« Reply #26 on: July 08, 2015, 11:26:32 PM »
While I welcome the news I can't say I trust it. The story seems very shady.

innerscorecard

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Re: FOSL - Fossil Group Inc
« Reply #27 on: July 09, 2015, 12:55:16 AM »
The report's methodology and conclusions are flawed. Additionally, product category disruption happens slowly at first - it would be wrong to conclude from slow Apple Watch sales that traditional watch sales are stable or even only a slowly melting ice cube.
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Jurgis

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Re: FOSL - Fossil Group Inc
« Reply #28 on: July 09, 2015, 04:20:50 AM »
traditional watch sales are stable or even only a slowly melting ice cube.

This has been predicted:

"Before you can be rich, you must be poor." - Nef Anyo

kab60

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Re: FOSL - Fossil Group Inc
« Reply #29 on: July 09, 2015, 04:33:03 AM »
Did Salvador Dali anticipate the coming of the Apple watch? I love his paintings and have visited his museum and house numerous times, but I hope he got this one wrong. Nice find by the way. :)