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General Category => Investment Ideas => Topic started by: orthopa on April 09, 2015, 11:27:06 AM

Title: FOSL - Fossil Group Inc
Post by: orthopa on April 09, 2015, 11:27:06 AM
Did a search and didn't find any on this company yet.

This popped on a screen I was doing yesterday. Stock price seems to be beaten down due to greater likely
hood that the smart watch become the time piece of choice over traditional watches, specifically the i-watch. Just started to look into this over the past two days. Everyone is probably familiar with the Fossil watch brand. They do have some handbag merchandise an extensive licence brand portfolio of popular fashion watches.

PROs

1. Hated right now, looks like market thinks regular wrist watches will be extinct going forward

2. Cheap compared to historical multiples, 14.89 PE times this years projected earnings, 13 times next. Not super cheap but market is near all time highs.

3. 30%+ ROE, ROIC

4. 18% of shares held by insiders

5. Historically stingy management, CEO takes no cash compensation.

6. Agreement with Google for Android based smart watch technology.

7. Wholesale business expanding internationally.

8. ~15% of shares bought back last 3 years.

CONs

1. No real moat or competitive advantage but does have longish term agreements with Michael Kors, Kate Spade, Armani, Marc Jacobs, DKNY, Burberry.

2. Large portion of  business is fashion watches and fashion can be very fickle.

3. Very at risk if smart watch technology becomes norm going forward.

As I mentioned need to do more work on this and think about this more. At its simplest level looks like a reasonable play if you think the smart watch fear is overblown. This would be my thinking. Although traditional watch usage is less apparent with millennials I have a hard time believing that a large enough percentage of the population would want to carry both a phone/and or a watch at all times, or be inconvenienced with having to charge a smart phone constantly.  Not to mention from a fashion standpoint the i watch to many is undesirable. With FOSL expanding business overseas I think the penetration of a sub $200 fashion watch would be much higher then a $350-$11k smart watch.

I have started a small tracking position and will do more work on this one. Please feel free to add/correct anything.
Title: Re: FOSL - Fossil Group Inc
Post by: KCLarkin on April 09, 2015, 11:51:28 AM
Based on their historical performance, it is hard to believe they have no moat. There must be a hidden moat somewhere.

I tend to avoid retailers so I haven't looked at this in detail. It looks like analysts are expecting a 17% drop in earnings?
Title: Re: FOSL - Fossil Group Inc
Post by: berkshire101 on April 09, 2015, 12:47:18 PM
Isn't FOSL like the Luxottica but for watches?  They make watches for several well known brands out there.  I would imagine their expertise, design and vertical integration in watches would lead to some competitive advantage.
Title: Re: FOSL - Fossil Group Inc
Post by: constructive on April 09, 2015, 01:11:28 PM
Isn't FOSL like the Luxottica but for watches?  They make watches for several well known brands out there.  I would imagine their expertise, design and vertical integration in watches would lead to some competitive advantage.

The eyeglass market is very concentrated and Luxottica has a dominant market share. Watches are much more fragmented and Fossil is the #4 player, after Swatch, Rolex and Richemont. Probably soon to be #5 with Apple entering the market.

http://www.statisticbrain.com/wrist-watch-industry-statistics/
Title: Re: FOSL - Fossil Group Inc
Post by: fisch777 on April 09, 2015, 01:26:08 PM
They are good operators, but I think the sub-premium watch space is pretty fashion-sensitive.  For a few years earlier this decade, FOSL was killing it with these white acrylic Michael Kors models for women, which they also "copied" into other brands they have licensed.  No idea if these are still selling.  I would argue there is little moat here - FOSL is really a fashion retailer more than a watch manufacturer. 

They do have a (limited) Swiss-made line since 2013. It looks like they get movements from STP, one of 3 mfgs of Swiss movements.  While the Swiss watch business has real barriers to entry, I question how much more consumers would be willing to pay for a Fossil brand watch with a Swiss movement.  It looks like they originally released some models priced $1000-1500, but now most models in the Swiss line are $500-700.  I probably just answered my own question.

Title: Re: FOSL - Fossil Group Inc
Post by: KCLarkin on April 09, 2015, 01:43:02 PM
I would argue there is little moat here - FOSL is really a fashion retailer more than a watch manufacturer.

Possibly but they have grown EPS at 20% CAGR over 20 years and they have 34% ROE. It's hard to believe they have just been riding a fashion wave for 20 years.
Title: Re: FOSL - Fossil Group Inc
Post by: ItsAValueTrap on April 09, 2015, 02:07:19 PM
I don't think luxury retailers have moats.  Look at how badly COH is doing under the new CEO.

I really, really like Fossil's CEO.  Very good at his job (high returns on equity, lots of growth) and he's honest- doesn't take any salary.

(*I am long.)
Title: Re: FOSL - Fossil Group Inc
Post by: constructive on April 09, 2015, 02:11:49 PM
I would argue there is little moat here - FOSL is really a fashion retailer more than a watch manufacturer. 

You say that like fashion / retailing is bad and manufacturing is good in terms of moat. I think it is the opposite. Commodity manufacturers earn a return on their capital assets, which deteriorate over time. Branded manufacturers also earn a return on their intangible brand which grows stronger over time if they are executing effectively.
Title: Re: FOSL - Fossil Group Inc
Post by: constructive on April 09, 2015, 02:14:56 PM
I don't think luxury retailers have moats.  Look at how badly COH is doing under the new CEO.

Look at dozens of other luxury retailers. In general the luxury retail sector earns above average ROEs. Coach over its lifetime has been an awesome business. Now they have reached the part of their lifecycle where they are huge and maybe going into decline.
Title: Re: FOSL - Fossil Group Inc
Post by: coc on April 09, 2015, 02:28:35 PM
One note of context for some of you commenting on insider ownership. The company is run by Kotsa Karstosis, and used to be run by he and his brother Tom. Not long ago they together owned ~40% of the stock. Tom left and now runs (privately) Shinola watches. (Yes, that Shinola.) Tom no longer owns much stock and I believe Kotsa has sold some too, which brings it down under 20% now. So there is indeed a lot of management ownership, but it has also lessened over time and the story has changed a bit.
Title: Re: FOSL - Fossil Group Inc
Post by: KCLarkin on April 10, 2015, 09:22:15 AM
I don't think luxury retailers have moats.

Coach clearly has a moat. It is still making 73% gross margins. Their current problems seem to be self-inflicted. They sacrificed their brand in pursuit of growth.
Title: Re: FOSL - Fossil Group Inc
Post by: bizaro86 on April 10, 2015, 02:50:01 PM
I don't think luxury retailers have moats.

Coach clearly has a moat. It is still making 73% gross margins. Their current problems seem to be self-inflicted. They sacrificed their brand in pursuit of growth.

Luxury brands can trade brand equity for sales any time they want by selling more goods at lower prices. (Discount lines, outlets, sale pricing, etc) This is what coach has done, imo.
Title: Re: FOSL - Fossil Group Inc
Post by: kab60 on May 24, 2015, 12:38:41 PM
Vulcan has a big position and wrote about Fossil in their latest investor letter. I like what I see (actually I hate their design). Diversified brands makes them less vulnerable to changing fasion fads. Big insider ownership, low exec comp and very big share purchases. Plus, their jewelry sales sales are growing nicely. The joker is iWatch but my gut feeling is that it is owerblown and they have the Google/Intel partnership if it takes off.
Title: Re: FOSL - Fossil Group Inc
Post by: orthopa on May 25, 2015, 03:34:53 PM
Vulcan has a big position and wrote about Fossil in their latest investor letter. I like what I see (actually I hate their design). Diversified brands makes them less vulnerable to changing fasion fads. Big insider ownership, low exec comp and very big share purchases. Plus, their jewelry sales sales are growing nicely. The joker is iWatch but my gut feeling is that it is owerblown and they have the Google/Intel partnership if it takes off.

Im going to read their letter tonight, thanks.
Title: Re: FOSL - Fossil Group Inc
Post by: kab60 on May 27, 2015, 07:19:38 AM
Michael Kors announced FY2015 earnings and are down 20 percent on worse-than-expected outlook. Fossil Group was down 3-4 percent yesterday and is down another 6,5 atm on stronger USD and Kors' outlook.
Title: Re: FOSL - Fossil Group Inc
Post by: orthopa on May 27, 2015, 05:01:37 PM
Michael Kors announced FY2015 earnings and are down 20 percent on worse-than-expected outlook. Fossil Group was down 3-4 percent yesterday and is down another 6,5 atm on stronger USD and Kors' outlook.

FOSL looks to only be getting cheaper. Need to look more at Kors but both trading at 11-12 forward multiples now. Both have good balance sheets.
Title: Re: FOSL - Fossil Group Inc
Post by: notorious546 on May 28, 2015, 12:37:40 PM
quote from vulvan value partners letter.

"Fossil Group has a unique business franchise in that it produces timepieces, has a global distribution network, and owns and licenses watch brands. As a result, they are an attractive partner for watch brand owners. The strong dollar has obscured their underlying growth. In addition, concerns about the impact that the Apple Watch may have on their business has weighed on the stock price. Fossil has partnered with Google to produce several versions of Android smart watches. We think a market will exist for both traditional and smart watches. We think Fossil is uniquely positioned to prosper with both traditional watches and smart watches, regardless how the market evolves."
Title: Re: FOSL - Fossil Group Inc
Post by: mateo999 on May 29, 2015, 06:45:56 PM
Think about the economics to fosl from the kors relationship.  Kors clearly had the negotiating leverage going into last year's contract renewal. It was the only thing analysts kept asking about on the conference call at that time. And the CEO was evasive as could be. On top of that, ppl think that the apple watch is a different product than what fosl sells, and thus the two won't compete. i think that argument is wishful thinking.  I have a number of nicer automatic watches. If and when I get an apple watch, I'll have to think long and hard about how frequently the AW would be in rotation on my wrist. Once I'm used to checking emails on my wrist, there's no going back. It's going to be a real pain to want to check an email, but then realize.. Whoops..  I'm wearing my Tag today!  For me, if I ever started wearing an AW and found it useful, I'd probably look to sell my collection.

There's most certainly going to be an impact whether or not people are in denial about it.

Title: Re: FOSL - Fossil Group Inc
Post by: orthopa on May 30, 2015, 12:31:36 PM
Think about the economics to fosl from the kors relationship.  Kors clearly had the negotiating leverage going into last year's contract renewal. It was the only thing analysts kept asking about on the conference call at that time. And the CEO was evasive as could be. On top of that, ppl think that the apple watch is a different product than what fosl sells, and thus the two won't compete. i think that argument is wishful thinking.  I have a number of nicer automatic watches. If and when I get an apple watch, I'll have to think long and hard about how frequently the AW would be in rotation on my wrist. Once I'm used to checking emails on my wrist, there's no going back. It's going to be a real pain to want to check an email, but then realize.. Whoops..  I'm wearing my Tag today!  For me, if I ever started wearing an AW and found it useful, I'd probably look to sell my collection.

There's most certainly going to be an impact whether or not people are in denial about it.

Is pulling your phone out of your pocket that much more difficult then reading off of your watch?  Also how do you reply  to an email on  your phone with a lengthy reply? Siri? If that works as well and as often as it does on the phone you will end up typing it out.
Title: Re: FOSL - Fossil Group Inc
Post by: InsecurityAnalysis on May 31, 2015, 08:50:17 AM
From a purely aesthetic view traditional watches and the apple watch are very different, with each has their space. If a person is going to buy a traditional watch, I don't see them changing their mind to purchase an apple watch. Personally, traditional watches are the more versatile fashion piece across different social settings compared to the apple watch. I wouldn't wear an apple watch to an interview for example.
Just my two cents though.
Title: Re: FOSL - Fossil Group Inc
Post by: kab60 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.
Title: Re: FOSL - Fossil Group Inc
Post by: mateo999 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.
Title: Re: FOSL - Fossil Group Inc
Post by: RichardGibbons on June 01, 2015, 08:56:50 PM
I think this is a great point, Mateo, the crux of the issue.
Title: Re: FOSL - Fossil Group Inc
Post by: innerscorecard 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.
Title: Re: FOSL - Fossil Group Inc
Post by: notorious546 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 Ė 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.
Title: Re: FOSL - Fossil Group Inc
Post by: intensityjp on July 08, 2015, 08:25:37 PM
http://www.breathecast.com/articles/apple-watch-decline-news-tech-titan-selling-less-than-20-000-iwatch-units-daily-sales-down-90-29465/

and

http://www.nytimes.com/2015/06/11/fashion/why-im-breaking-up-with-the-apple-watch.html?_r=1

There is still hope for FOSL afterall.



Title: Re: FOSL - Fossil Group Inc
Post by: kab60 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.
Title: Re: FOSL - Fossil Group Inc
Post by: innerscorecard 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.
Title: Re: FOSL - Fossil Group Inc
Post by: Jurgis 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:

(http://www.paintinghere.com/UploadPic/Salvador%20Dali/big/clock%20melting%20clocks.jpg)
Title: Re: FOSL - Fossil Group Inc
Post by: kab60 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. :)
Title: Re: FOSL - Fossil Group Inc
Post by: intensityjp on July 09, 2015, 05:20:29 PM
I think no one denies that smart watches have the potential to "disrupt" the wearable timepiece market, but its another thing to say that apple will necessarily get it right and take the whole market.

http://mashable.com/2015/01/09/fossil-smartwatch-designers-2015/

"There is a lot of brand equity at risk when you are launching a tech product," said Greg McKelvey, chief strategy and marketing officer at Fossil. "It has to look right, feel right and have the right approach when it comes to hardware and software. We're getting there and that's why 2015 is the year it will happen. We're not in a race to get something out quickly.Ē

Title: Re: FOSL - Fossil Group Inc
Post by: tooskinneejs on November 18, 2015, 06:25:03 PM
Fossil Group's equity is priced at about $1.7 billion right now.  The company has about $500 million in net debt.  Net income over the last five years has averaged $329 million per year.  Return on equity has averaged 30 percent per year over the last five years.

The company's sales have fallen this year due to a decrease in volume of sales and due to foreign currency exchange rates.  As a result, Fossil Group expects to earn $200 to $230 million this year, down significantly compared to recent years.  Much of the volume declines appear due to licensed brand watch sales (particularly, Michael Kors).

Is this a temporary blip?  Does this create a buying opportunity?

I think so. 

Title: Re: FOSL - Fossil Group Inc
Post by: qanary on November 18, 2015, 07:07:50 PM
On what basis do you feel this is temporary?

Fossil Group's equity is priced at about $1.7 billion right now.  The company has about $500 million in net debt.  Net income over the last five years has averaged $329 million per year.  Return on equity has averaged 30 percent per year over the last five years.

The company's sales have fallen this year due to a decrease in volume of sales and due to foreign currency exchange rates.  As a result, Fossil Group expects to earn $200 to $230 million this year, down significantly compared to recent years.  Much of the volume declines appear due to licensed brand watch sales (particularly, Michael Kors).

Is this a temporary blip?  Does this create a buying opportunity?

I think so.
Title: Re: FOSL - Fossil Group Inc
Post by: kab60 on November 19, 2015, 05:11:02 AM
I'm very much under water but my thesis is that watches will continue to exist. I like(d) Fossil because they have a wide selection of brands and aren't dependant on only one brand (though Kors is obviously a big driver). I took a pretty big position (as I always do) because I also like the fact that it was owner-operated and there was a big buyback in place that can/could take advantage of a low stock price. Which is why I was negatively surprised by Q3 results and the announcement that they'll buy Misfit and then pay down debt instead of buying back shares. So I'm a bit undecided. I think it was too cheap post earnings but it sucks they can't/wont take advantage of that.
Title: Re: FOSL - Fossil Group Inc
Post by: misterkrusty on October 26, 2016, 01:19:08 PM
any thoughts on FOSL here?  price has come down enormously, yet short interest is >30% !!!!   what's the bear case at $29?

I thought this was an interesting long pitch: http://latticework.com/my-investment-thesis-on-fossil-group/
Title: Re: FOSL - Fossil Group Inc
Post by: kab60 on October 26, 2016, 01:57:16 PM
Large debtload, low profitability. I dumped it after Misfit acquisition. I hoped an owner operator would be more wise in his capital allocation. But there might be value. What do you think?
Title: Re: FOSL - Fossil Group Inc
Post by: ritrading on October 26, 2016, 02:26:45 PM
any thoughts on FOSL here?  price has come down enormously, yet short interest is >30% !!!!   what's the bear case at $29?

I thought this was an interesting long pitch: http://latticework.com/my-investment-thesis-on-fossil-group/

It doesn't appear to be just FOSL. Almost every apparel /accessories companies that I'm look at are seeing declines in year over year revenues. I don't believe the issue is that people decided to stop wearing clothes. I think it's due to the USD strengthening against other currencies. Companies like HBI, which have lower exposure to other countries in terms of both revenues and manufacturing, have been less affected.

I've been watching this sector closely the past year. Once there's an uptick for the sector, I plan on going long on many of the companies, FOSL included.
Title: Re: FOSL - Fossil Group Inc
Post by: MrB on November 01, 2016, 10:53:30 AM
Why I like Fossil
Elevator pitch
Fossil is the number 1 US watch company and number 3 global watch company. It also sells jewelry, leather goods and accessories. 55% of sales come from brands it pays royalties to license and we think this business has a compelling moat, with the rest of sales mainly coming from own brands, such as Fossil, Skagen, Relic, etc.

Its competitive edge consists of its design, manufacturing and distribution in the fashion watch category, where it can bring a new product to market in 70-80 days, where its closest competitor, Movado takes at least double that time. It is also 5x the size than its closest US competitor in the licensing business.

Management is well tenured, well incentivized and Kosta the CEO, holds 13% of the shares, takes zero salary, so with no dividend, the way he gets paid is the so they we get paid. We think management has solved some very difficult problems historically, which the market don't give them credit for.   

The company earned around $280m in free cash flow last year, averaged around $270m per annum over the last 5 and we think at $1.3Bn market cap (add another 500m for enterprise value) the risk of free cash flow decreasing substantially over the next 5 to 10 years is well priced in.

In conclusion; Firstly, we recognized the risks of which most have been touched on in this thread already, but secondly, we think we are well compensated to take on those risks at current prices, with thirdly, a management that is wildly underestimated by the market.

I will add to the above over coming weeks to flesh out more of our thinking.

P.S. I trust Sanjeev will forgive the free plug I'm giving the guys at Singular Diligence, but they've put out some good reports on Fossil, Swatch and Movado which are well worth the money. Great starting point.
http://singulardiligence.com/all-issues/
Title: Re: FOSL - Fossil Group Inc
Post by: MrB on November 01, 2016, 11:48:53 AM
Anybody that thinks the mechanical watch is dead, need to watch this.

https://www.youtube.com/watch?v=KcwHHRJvNi8

Do you really feel like rushing out and buying an Apple Watch after you've watched it? Maybe you do, but the point is not everybody does.
Title: Re: FOSL - Fossil Group Inc
Post by: Jurgis on November 01, 2016, 12:05:55 PM
Anybody that thinks the mechanical watch is dead, need to watch this.

https://www.youtube.com/watch?v=KcwHHRJvNi8

Do you really feel like rushing out and buying an Apple Watch after you've watched it? Maybe you do, but the point is not everybody does.

Haven't worn a watch for 20 years. No plans to start. Mechanical or not.  8)
Title: Re: FOSL - Fossil Group Inc
Post by: DooDiligence on November 01, 2016, 08:33:44 PM
Anybody that thinks the mechanical watch is dead, need to watch this.

https://www.youtube.com/watch?v=KcwHHRJvNi8

Do you really feel like rushing out and buying an Apple Watch after you've watched it? Maybe you do, but the point is not everybody does.

I'd love to have a Lange 31 and a Breguet Classique Power Reserve (if someone gave them to me) but would only wind up wearing them about as often as I do any of the Hamilton automatics I bought years ago.

The engineering is fascinating but what really appeals to me (especially as a professional mariner) is the impact timepieces have had on navigation & commerce (lattitude can be obtained without any timekeeping but longitude can't.)

Breguet developed the 1st tourbillion & he made timepieces for Napolean (ignore the fact that he was a douche for a minute) & general Ney (among others) which enabled more precise coordination of troop movements.

All that aside; I passed on Swatch after doing what passes for a deep dive with me.

Recent problems with inventory builds because Swatch has been required to manufacture regardless whether demand is there plus the overhang of pissing off a lot of businesses by wanting to cut them off from movements & more importantly escarpments plus, plus, plus the Chinese crackdown on graft (luxury watches make nice bribes...)

They did however; purchase Harry Winston & still maintain a clean balance sheet.

Too many things I can't make out & Ms. Hayek makes statements that lead me to believe she may not be as good a steward/business person as her father...
Title: Re: FOSL - Fossil Group Inc
Post by: MrB on November 02, 2016, 04:25:40 AM
Anybody that thinks the mechanical watch is dead, need to watch this.

https://www.youtube.com/watch?v=KcwHHRJvNi8

Do you really feel like rushing out and buying an Apple Watch after you've watched it? Maybe you do, but the point is not everybody does.

I'd love to have a Lange 31 and a Breguet Classique Power Reserve (if someone gave them to me) but would only wind up wearing them about as often as I do any of the Hamilton automatics I bought years ago.

The engineering is fascinating but what really appeals to me (especially as a professional mariner) is the impact timepieces have had on navigation & commerce (lattitude can be obtained without any timekeeping but longitude can't.)

Breguet developed the 1st tourbillion & he made timepieces for Napolean (ignore the fact that he was a douche for a minute) & general Ney (among others) which enabled more precise coordination of troop movements.

All that aside; I passed on Swatch after doing what passes for a deep dive with me.

Recent problems with inventory builds because Swatch has been required to manufacture regardless whether demand is there plus the overhang of pissing off a lot of businesses by wanting to cut them off from movements & more importantly escarpments plus, plus, plus the Chinese crackdown on graft (luxury watches make nice bribes...)

They did however; purchase Harry Winston & still maintain a clean balance sheet.

Too many things I can't make out & Ms. Hayek makes statements that lead me to believe she may not be as good a steward/business person as her father...

I generally agree with what you said, but wish to emphasize a few points and add my own.
Swatch has a compelling market position and the fact that they can cut off people from movements simply proves their market power via ETA and Nivarox in particular http://www.ablogtowatch.com/inside-nivarox-the-heart-of-the-swiss-watch-industry/
When it comes to management I agree that I'm not convinced, but considering Swatch's high quality franchise it can probably withstand quite inept management (I'm not saying management is inept).
My biggest concern with Swatch is their significant China exposure (something Fossil does not have in a meaningful way) and the only way I can address that risk is to be adequately compensated for it, which I don't believe I am at current prices.

So at the right price I'm definitely a buyer of Swatch, but we are currently way off. 
Title: Re: FOSL - Fossil Group Inc
Post by: DooDiligence on November 02, 2016, 04:49:52 AM
Regarding Swatch; Timken made carriage parts & they survived (who knows...)

Regarding Fossil; I'll look harder at consumer cyclical in the next recession...
Title: Re: FOSL - Fossil Group Inc
Post by: MrB on November 02, 2016, 09:16:24 AM
Regarding Swatch; Timken made carriage parts & they survived (who knows...)

Regarding Fossil; I'll look harder at consumer cyclical in the next recession...
Fossil's top line (and bottom line) increased over the 08-11 period. The lowest Price/Sales it got to was in 2010 at 0.49x and today it's selling at 0.42x 2016 sales or say around 0.47x forward sales. Therefore one way of looking at Fossil is to say that a recession is priced in.
Title: Re: FOSL - Fossil Group Inc
Post by: DonFanucci on November 02, 2016, 10:08:24 AM
In 2010 FOSL had $400m of net cash, now they have $500m of net debt.
Title: Re: FOSL - Fossil Group Inc
Post by: MrB on November 02, 2016, 11:22:23 AM
In 2010 FOSL had $400m of net cash, now they have $500m of net debt.

Fair point, but debt naturally has to be considered in context, such as the free cash flow mentioned above.  They could very well half that debt in one year.
Title: Re: FOSL - Fossil Group Inc
Post by: mateo999 on November 02, 2016, 12:09:03 PM
In 2010 FOSL had $400m of net cash, now they have $500m of net debt.

Fair point, but debt naturally has to be considered in context, such as the free cash flow mentioned above.  They could very well half that debt in one year.

Would anyone miss fossil if it didn't exist?
Title: Re: FOSL - Fossil Group Inc
Post by: Green King on November 02, 2016, 07:10:57 PM
In 2010 FOSL had $400m of net cash, now they have $500m of net debt.

Fair point, but debt naturally has to be considered in context, such as the free cash flow mentioned above.  They could very well half that debt in one year.

Would anyone miss fossil if it didn't exist?

Quote
Luxury goods something you don't need but can't live without.

Don't know if it has that. As far as i know its existence shows its value. Since i don't own a watch it don't know if it will be popular in the future. But I think it will be more of a long term problem than anything else.
Title: Re: FOSL - Fossil Group Inc
Post by: abyli on November 02, 2016, 07:31:09 PM
Keyword here: Apple Watch!
Title: Re: FOSL - Fossil Group Inc
Post by: DooDiligence on November 02, 2016, 08:59:47 PM
Would anyone miss fossil if it didn't exist?

I've got an old Fossil wallet in my top drawer...
Title: Re: FOSL - Fossil Group Inc
Post by: Jurgis on November 03, 2016, 11:24:47 AM
Would anyone miss fossil if it didn't exist?

I've got an old Fossil wallet in my top drawer...

I found a wallet fossil while digging my backyard.
Title: Re: FOSL - Fossil Group Inc
Post by: MrB on November 03, 2016, 01:03:21 PM
Why I like Fossil
Elevator pitch
Fossil is the number 1 US watch company and number 3 global watch company. It also sells jewelry, leather goods and accessories. 55% of sales come from brands it pays royalties to license and we think this business has a compelling moat, with the rest of sales mainly coming from own brands, such as Fossil, Skagen, Relic, etc.

Its competitive edge consists of its design, manufacturing and distribution in the fashion watch category, where it can bring a new product to market in 70-80 days, where its closest competitor, Movado takes at least double that time. It is also 5x the size than its closest US competitor in the licensing business.

Management is well tenured, well incentivized and Kosta the CEO, holds 13% of the shares, takes zero salary, so with no dividend, the way he gets paid is the so they we get paid. We think management has solved some very difficult problems historically, which the market don't give them credit for.   

The company earned around $280m in free cash flow last year, averaged around $270m per annum over the last 5 and we think at $1.3Bn market cap (add another 500m for enterprise value) the risk of free cash flow decreasing substantially over the next 5 to 10 years is well priced in.

In conclusion; Firstly, we recognized the risks of which most have been touched on in this thread already, but secondly, we think we are well compensated to take on those risks at current prices, with thirdly, a management that is wildly underestimated by the market.

I will add to the above over coming weeks to flesh out more of our thinking.

P.S. I trust Sanjeev will forgive the free plug I'm giving the guys at Singular Diligence, but they've put out some good reports on Fossil, Swatch and Movado which are well worth the money. Great starting point.
http://singulardiligence.com/all-issues/

When we talk about watch companies' market position there are different ways to measure it, unit volume, value of sales etc. However, generally speaking the three major listed companies in this space are Swatch, Richemont, Fossil at roughly 26%, 17% and 9% respectively and then Rolex at 15% of the market, which is a private company. In this case the market is measured in value. However it is a overly simplistic way of looking at these companies. Richemont and Rolex average revenue per unit is well over $4,000 and although for Swatch it is $410 ($91 for Fossil) it jumps to $877 if you strip out the basic Swatch brand. Many perceive Swatch to be a fashion watch brand, but it is really a higher end luxury brand e.g. its largest brand is Omega, with revenue of $2,845 per unit. The fashion watch side watch of the business sells about 10m pieces a year, which firstly is roughly 1/3 of what Fossil sells, but secondly it sells most of those outside the US, where Fossil is most dominant.
When you look at the higher end of the market and especially the top end of the market then these names have sold off over the last few years, because of sales being under pressure, which again is in large part due to China. So although all watch companies have sold off they have done so for very different reasons.

The average/uninformed investor will tell you the traditional watch companies are selling off, because nobody wears mechanical watches anymore, smart watch threat, etc. Now I'm not suggesting these are not issues, but it is a gross over simplification.

The informed investor will also raise the above, but do better than essentially putting "Apple" and "watch" together in a sentence. The informed investor will also talk about Michael Kors, Swatch, Richemont and Rolex being competitors, they are concerned about leverage and the general weak consumer outlook. All of these are issues one needs to look at those carefully (I'll get to that later).

However, I think the odds are high that the market is underestimating the strength of the franchise, mainly on the licensing side of the business, and when you balance the good and the bad you end up with a pretty compelling case to take on the various risks at the current prices. Especially with this management, which I think has solved some pretty challenging business problems in the past. 

So when we focus on the franchise, then the notable difference between Fossil and the rest is that it is a fashion watch company, which is loosely defined as watches under $1,000. In that market Fossil is the clear leader with 48% market share in the US, 29% in the Americas, 15% EMEA and 6% APAC. Now if we look at the market share from a moat perspective, let's start with the most important market, the US.
Here you really have only two significant competitors in the fashion watch category, Fossil and Movado. Movado is a great company, but Fossil is 5x the size of Movado. So not only does it dominate the market it really does not have a close competitor. As it pertains to the US where it generates more than half of sales it is in a very, very strong position.....to be continued...
Title: Re: FOSL - Fossil Group Inc
Post by: fisch777 on November 03, 2016, 02:01:52 PM
Comparing Fossil to Rolex/Swatch/Richemont is a stretch.  I realize that Swatch brand itself overlaps.  The core luxury Swissmade watch segment is an entirely different beast, that is, yes, suffering from some of the same issues as FOSL. 

My question is: is contract manufacturing/retailing inexpensive watches a good business, despite past successes?
Title: Re: FOSL - Fossil Group Inc
Post by: Dalal.Holdings on November 03, 2016, 04:20:28 PM
Looking at this as interesting on a valuation basis. Seems cheap for sure, and the question is whether there is a secular shift in the industry. I do think that the Apple Watch/fit bit are not runaway successes (when compared to iPod/iPhone) and unlikely by themselves to dethrone the place of the watch.

Watches are jewelry/fashion items and those tech products (so called "wearables") have not yet managed to supplant them.

I don't find much of Fossil's tech segment appealing (the Misfit products are poorly rated on amazon) and have never been much of a fan of exercise tech/etc. I think it's a limited niche and most people only use such devices for a limited time then get bored of them.

The most attractive portion of this business is the licensing biz: where they make watches for Burberry and the like--powerful brands, limited risk for Fossil. Continued free cash generation and repurchasing of shares would make this a winner.
Title: Re: FOSL - Fossil Group Inc
Post by: DooDiligence on November 03, 2016, 10:09:30 PM
Would anyone miss fossil if it didn't exist?

I've got an old Fossil wallet in my top drawer...

I found a wallet fossil while digging my backyard.

A testament to either Apple Pay or Google's dealio!

I wonder if the law allows for a scanned copy of a drivers license on your phone?

Officer: license & registration.
Driver: what's your email address?
Officer: "blahblah@blackandwhite.com" or "step out of the car sir."
Title: Re: FOSL - Fossil Group Inc
Post by: DooDiligence on November 03, 2016, 10:49:31 PM
Quartz watches were perceived as a threat to the Swiss watch industry back in the 70's & 80's & although they did largely supplant mechanical movements, they did not destroy the Swiss industry & I think the SmartWatch will eventually do to quartz what quartz failed to do to the Swiss mechanicals.

Swatch produces the majority of the worlds movements (calibres) & escarpments & also owns Breguet, Blancpain, Glashutte, Jaque Droz, Leon Hatot (prestigeous though not the big revenue drivers) & Omega, Longines, Rado, Tissot, Ballmain, Certina, Mido, Hamilton (I have 4 really nice & affordable Hamiltons), Calvin Klein (by license) & Swatch & Flik Flak (the sweet spot on profitability is in the $4000 to $5000 range.)

Rolex & Omega are viewed as pedestrian by the well heeled (rightfully so considering the massive engineering & care that goes into producing say a Lange 31 where every piece is done in house) not to mention the difference between quiet & loud money (Hamilton would be considered quiet money in my circle...)

My comments are related to the industry as a whole & are probably way wrong (does everybody REALLY like waffles?)

I'd have to read the K's & Q's of Fossil & reread this thread to decide for myself if I believe Fossil will survive in the watch space (are they producing a SmartWatch? Swatch has had one abortive attempt at this & isn't giving up on it.)

I'd rather spend my time reading up on med tech & how to do what Buffet did in the partnership days & his subsequent shift to qualitative (I'm trying to figure out if Apple can/will/should form partnerships with Medtronic, Cerner, anyone else as growth/quality of life enhancers?)
Title: Re: FOSL - Fossil Group Inc
Post by: Spekulatius on November 05, 2016, 08:23:21 AM
I think the smart watch will eventually destroy the midprice conventional watch market, but it will do nothing to the high end mechanical watch market, because the latter are basically artisan/jewellery pices where functionality is secondary.
I think some midprice segments like Tissot (Swatch) could feel the pressure. Fossil is strong in the midprice segment and should see a lot of pressure in their business. Maybe there is a certain "fast fashion" segment that they are going to be able to hold onto but besides that, I think Fossil has a huge structural problem and will become a cigar but.
Title: Re: FOSL - Fossil Group Inc
Post by: Green King on November 05, 2016, 10:05:11 AM
Fossil is in the fashion business or a am I looking at this wrong ? Correct me please i need the help.  :D I don't know much about the business please take all with a grain of salt.

I always viewed fashion as a different beast, since the source of the eventual cash flow require buy-in from meeting the desires of others by consistent good marketing and positioning. Therefore what I viewed as important here is high intensity of desire like Ultra luxury and market share doesn't matter as much as compared to other businesses. Unlike food that directly targets the human body and a basic need (giving it high staying power), the waves of fashion are constantly changing (like tech) if you miss a wave you might miss boat and be left in the dust and what Apple and Fitbit has done seems to be part of the new wave as these new tech brings more utility as compared to tradition offerings.

In business terms it seems they have a weaker business since half of the revenue are from brands they do not own. This later down the road will cause a revaluation of the business like American Expresss/Costco or sports in TV network. Most of the value will go to the brand owners and not Fossil which has a added risk as it looks like Fossil Is providing the technology and distribution in the current  partnership.
In valuation terms although the market likes to give them high multiples they should be view as weaker cash flow due to the reasons mentioned above which gives high convexity when they start to decline instead of being consistent and controllable like tobacco or food. It feels like more players are fighting over the same market so there will be a smaller pie left for Fossil. It dosenít feel like Fossil is as strong as it once was.

Mr.B do you have a view of future market share and size ? TIA
Title: Re: FOSL - Fossil Group Inc
Post by: MrB on November 17, 2016, 06:40:51 AM
Comparing Fossil to Rolex/Swatch/Richemont is a stretch.  I realize that Swatch brand itself overlaps.  The core luxury Swissmade watch segment is an entirely different beast, that is, yes, suffering from some of the same issues as FOSL. 

My question is: is contract manufacturing/retailing inexpensive watches a good business, despite past successes?
Not sure if it is a rhetorical question, but my observation is that they don't "contract manufacture" just as Luxottica does not contract manufacture. Fossil designs (with a resident brand presence in the design process), manufactures/assembles, co-market and distributes/retail. What they do is much more complex and the do control certain distribution channels. Therefore if a fashion brand wishes to extend into the watch space they deal with Fossil. The best illustration of this is the most recent licence Fossil picked up, called Chaps. The Chaps brand is owned by Ralph Lauren and the interesting thing is that RL manufactures it watches in JV with Richemont. The question to ask is why would RL sign a licensing agreement with Fossil if they are experts in all steps of the value chain? I would argue it is reflecting Fossil's moat in the sub $1,000/fashion watch space. Note: It is better to focus on price points, because "inexpensive watches" really does not say anything.

So on the one hand it is a good business if some of your competitors/operators in the space pass on their business to you and on the other hand the industry itself has been growing for at least the last 15 years. Although growth is very slow (1.7% per annum) it has seen only one year of negative growth (2009) and the industry is certainly sizable with 420m watches sold globally per annum. So yes, I do think it will be as good a business going forward.

Title: Re: FOSL - Fossil Group Inc
Post by: MrB on November 17, 2016, 07:21:25 AM
Looking at this as interesting on a valuation basis. Seems cheap for sure, and the question is whether there is a secular shift in the industry. I do think that the Apple Watch/fit bit are not runaway successes (when compared to iPod/iPhone) and unlikely by themselves to dethrone the place of the watch.

Watches are jewelry/fashion items and those tech products (so called "wearables") have not yet managed to supplant them.

I don't find much of Fossil's tech segment appealing (the Misfit products are poorly rated on amazon) and have never been much of a fan of exercise tech/etc. I think it's a limited niche and most people only use such devices for a limited time then get bored of them.

The most attractive portion of this business is the licensing biz: where they make watches for Burberry and the like--powerful brands, limited risk for Fossil. Continued free cash generation and repurchasing of shares would make this a winner.
I generally agree with what you're saying and the following is just adding some data points and observations.

I think it is a bit of a male way of thinking, but underlying to a lot of the conversation around Fossil/watches is the assumption that it is a question of functionality. Its not. We're talking about jewellery, fashion, design, craft, etc. Even thinking about it as a gadget is helpful. Kosta likes to say that you ask any man with a chronograph in his watch, whether the chronograph is the reason he bought the watch and almost without fail he will say yes. Then ask him, when is the last time he used it.

So another way of thinking of wearables is that it adds another gadget/function to the watch if you can incorporate it. So on the one hand it competes, but on the other it can also help to broaden the category. Recently, I was having a chat with a girl in Kate Spade (Regent Street, London) asking about their hybrid watches. It happened to land in the store room the previous evening and was not on display yet. Interestingly one of the staff members observed that when people look at the Kate Spade trackers http://www.katespade.co.uk/uk/view-all/black-cat-scallop-activity-tracker/invt/ksa31210 the ask, why does it not tell the time. However, now Kate Spade can answer with this http://www.katespade.co.uk/uk/view-all/black-and-rose-smart-watch/invt/kst23100, which has all the functionality of the tracker, looks great and can tell the time. So the above sequence does seem to suggest wearables could widen the watch category. 

Smartwatches: 21m shipped last year (13m Apple) against global watch volume of 420m. I've not been able to find data to suggest that smartwatch volumes come at the expense  of traditional watches. That is what a lot of people are assuming, but I have not seen any data to back that up. Please share if anyone has such data. However, on the negative side two things. a) smartwatch sales declined by 51% in Q3 2016 (Apple by 71%) http://www.idc.com/getdoc.jsp?containerId=prUS41875116 and b) abandonment rates are high (35% to 46% after one year according to this article http://endeavourpartners.net/wearables-abandonment-rates-are-not-improving-materially/ and for Fitbit some estimate it as high as 50% after 6 months http://www.imore.com/state-fitbit-rapid-growth-and-oncoming-challenges

Title: Re: FOSL - Fossil Group Inc
Post by: MrB on November 17, 2016, 07:40:34 AM
I think the smart watch will eventually destroy the midprice conventional watch market, but it will do nothing to the high end mechanical watch market, because the latter are basically artisan/jewellery pices where functionality is secondary.
I think some midprice segments like Tissot (Swatch) could feel the pressure. Fossil is strong in the midprice segment and should see a lot of pressure in their business. Maybe there is a certain "fast fashion" segment that they are going to be able to hold onto but besides that, I think Fossil has a huge structural problem and will become a cigar but.
What price points are you using when you talk about midprice, high end, etc?
What do you mean by "structural problem"?
Title: Re: FOSL - Fossil Group Inc
Post by: MrB on November 18, 2016, 09:43:29 AM
Fossil is in the fashion business or a am I looking at this wrong ? Correct me please i need the help.  :D I don't know much about the business please take all with a grain of salt.
Yes and no. Fossil's own brands (Fossil, Skagen, Relic, etc) are what I call fashion neutral. These brands take very little fashion risk, they are pretty much middle of the road if generally compared with the brands that sits in Fossil's portfolio, such as Michael Kors, Kate Spade, Tory Burch, etc.   
I always viewed fashion as a different beast, since the source of the eventual cash flow require buy-in from meeting the desires of others by consistent good marketing and positioning. Therefore what I viewed as important here is high intensity of desire like Ultra luxury and market share doesn't matter as much as compared to other businesses. Unlike food that directly targets the human body and a basic need (giving it high staying power), the waves of fashion are constantly changing (like tech) if you miss a wave you might miss boat and be left in the dust and what Apple and Fitbit has done seems to be part of the new wave as these new tech brings more utility as compared to tradition offerings.
I generally agree and Fossil management likely will also agree with you, which explains why they started licensing in the early 1990's; to hedge their fashion risk by not owning certain brands, but just selling for them. In the meantime they've built it out to the largest fashion watch licensing business in the world.


In business terms it seems they have a weaker business since half of the revenue are from brands they do not own. This later down the road will cause a revaluation of the business like American Expresss/Costco or sports in TV network. Most of the value will go to the brand owners and not Fossil which has a added risk as it looks like Fossil Is providing the technology and distribution in the current  partnership.
In light of what I said previously the brands they do not own allow them to limit fashion risk, which makes for a stronger business, because it is less risky. One way of making the point is to consider the risk in Fossil as it is today v a hypothetical business that consisted entirely and solely  of selling Michael Kors watches. I would argue the latter has significantly more risk.

As for the benefits accruing to the owners, it is helpful to consider the licensing revenue of watches/jewellery etc from the position of the licencor. Firstly it is unlikely to make up anything more than single digits for the licencor (MK is the exception, which might hit 10%) and secondly it is an extension of the brand; it is not a core focus. From speaking to brand managers the licencor really wants to see two things from the relationship, 1. revenues without any fuss and 2. no damage to the brand. I therefore consider the risk of the economics migrating significantly to the licencor over the long term to be low.
[/quote]

In valuation terms although the market likes to give them high multiples they should be view as weaker cash flow due to the reasons mentioned above which gives high convexity when they start to decline instead of being consistent and controllable like tobacco or food. It feels like more players are fighting over the same market so there will be a smaller pie left for Fossil. It dosenít feel like Fossil is as strong as it once was.
That is the general perception, but our research shows the data does not back that up.
Watch sales have consistently increased for 15 years.
There are essentially 6 or 7 main players globally and the top 5 pretty much control the market. That is watches in general. Then when you come to fashion watches you really only have Fossil and Movado is a distant second (FOSL is 7x the size). The fashion watch category is still expanding in Asia and you have to consider that one of Fossil's portfolio brands, Armani, is the second most recognized brand in China.
I've also argued previously that the facts do not seem to support the notion that smartwatches/wearables come at a 1 to 1 cost to the watch industry. There is enough to suggest it might actually be broadening the category. Not convinced either way at this point.
 
Therefor, I think it is a stretch to conclude that you have more players fighting over a shrinking market from the data I've seen. Happy to look at any data that suggests otherwise.


Mr.B do you have a view of future market share and size ? TIA
Fashion watch data for the US is pretty accurate, but not for the rest of the world from what I've seen. So I don't know what Fossil's global market share is or even the size of the market. However, it seems clear to me that fashion brands, especially western ones are still growing globally. It is also worth bearing in mind that Fossil does not only sells watches.
Having said that the estimates or all types of watches are that 420m watches are sold globally worth $64Bn, branded makes up $51Bn (126m watches) at retail and market share for Swatch, Richemont, Rolex, Fossil and LVHM are 26%, 17%, 15%, 9% and 4%, respectively measured on value.

By the way the Fossil watch brand is the 6th most largest watch brand globally after Rolex, Omega, Cartier, Citizen and Longlines. Not too shabby!

Title: Re: FOSL - Fossil Group Inc
Post by: Spekulatius on November 18, 2016, 09:26:04 PM
I think the smart watch will eventually destroy the midprice conventional watch market, but it will do nothing to the high end mechanical watch market, because the latter are basically artisan/jewellery pices where functionality is secondary.
I think some midprice segments like Tissot (Swatch) could feel the pressure. Fossil is strong in the midprice segment and should see a lot of pressure in their business. Maybe there is a certain "fast fashion" segment that they are going to be able to hold onto but besides that, I think Fossil has a huge structural problem and will become a cigar but.
What price points are you using when you talk about midprice, high end, etc?
What do you mean by "structural problem"?

Midprice would be $100 to $500 for me. Below that, it's cheap chic, above that, it's more a luxury item. I think the $500 could be expanded to $1000 perhaps.
Title: Re: FOSL - Fossil Group Inc
Post by: MrB on November 21, 2016, 06:56:44 AM
I think the smart watch will eventually destroy the midprice conventional watch market, but it will do nothing to the high end mechanical watch market, because the latter are basically artisan/jewellery pices where functionality is secondary.
I think some midprice segments like Tissot (Swatch) could feel the pressure. Fossil is strong in the midprice segment and should see a lot of pressure in their business. Maybe there is a certain "fast fashion" segment that they are going to be able to hold onto but besides that, I think Fossil has a huge structural problem and will become a cigar but.
What price points are you using when you talk about midprice, high end, etc?
What do you mean by "structural problem"?

Midprice would be $100 to $500 for me. Below that, it's cheap chic, above that, it's more a luxury item. I think the $500 could be expanded to $1000 perhaps.

The following is for clarification: the Swiss Watch industry would generally refer to "mid" as $200-$3,000 with "lower mid" being 200-500 and 500-3,000 being "upper mid". Fossil will call $500-$4,000 "fine premium" and "fashion" $60-$1,000.

If I understand you correctly then you're suggesting the "fashion" segment will be impacted heavily or even destroyed by smart watches, but above $1k will feel nothing for the most part. I'm struggling to follow the logic between the price points/functionality/jewellery and the smart watch threat. Also, what do you mean by "conventional watches" (v mechanical), please?

Kindly clarify. 

Title: Re: FOSL - Fossil Group Inc
Post by: MrB on November 22, 2016, 02:52:03 AM
Swiss Watch Exports Have Biggest Monthly Drop in Seven Years

https://www.bloomberg.com/news/articles/2016-11-22/swiss-watch-exports-suffer-biggest-monthly-drop-in-seven-years

All price points hit hard


http://www.fhs.swiss/scripts/getstat.php?file=comm_161010_a.pdf
Title: Re: FOSL - Fossil Group Inc
Post by: eclecticvalue on November 22, 2016, 05:43:35 AM
One way to think about this is. There has been no hype around fossil watches. People haven't bragged about a watch. There is the apple watch but I think it only has been a hit with middle-aged men. I don't see the younger ones hyped about the apple watch.
Title: Re: FOSL - Fossil Group Inc
Post by: MrB on November 22, 2016, 07:34:48 AM
One way to think about this is. There has been no hype around fossil watches. People haven't bragged about a watch. There is the apple watch but I think it only has been a hit with middle-aged men. I don't see the younger ones hyped about the apple watch.

Those are roughly my sentiments, but I'm not sure it is accurate, because it probably reflects my personal biases more than the facts.
I spent a bit of time last night trying to get a feeling for what is happening around the hybrid watch space and the brands are clearly cranking up the hype. Michael Kors has been doing so for months, Kate Spade just started, Emporio Armani. Gwyneth Paltrow for Frederick Frederique Constant, etc

http://www.michaelkors.co.uk/access

http://www.prnewswire.com/news-releases/emporio-armani-enters-the-world-of-the-connected-and-launches-a-hybrid-smartwatch-300350015.html

https://www.youtube.com/watch?v=ncwQQVmFuRY

http://www.latimes.com/fashion/la-ig-fashion-style-gwyneth-paltrow-frederique-constant-smartwatches-20161103-story.html

As for Apple watches. If you sell more than 1m every 3 months then who needs hype ;-)
http://money.cnn.com/2016/10/26/technology/smartwatch-sales-apple/
Title: Re: FOSL - Fossil Group Inc
Post by: DooDiligence on November 22, 2016, 05:39:20 PM
I saw a FitBit commercial tonight & the offerings were very fashion forward (at least they looked that way to a 54 year old guy who occasionally wears socks with flip flops...)

I think this kind of validates the fashion argument as related to watches.
Title: Re: FOSL - Fossil Group Inc
Post by: Spekulatius on November 22, 2016, 07:47:12 PM
I think the smart watch will eventually destroy the midprice conventional watch market, but it will do nothing to the high end mechanical watch market, because the latter are basically artisan/jewellery pices where functionality is secondary.
I think some midprice segments like Tissot (Swatch) could feel the pressure. Fossil is strong in the midprice segment and should see a lot of pressure in their business. Maybe there is a certain "fast fashion" segment that they are going to be able to hold onto but besides that, I think Fossil has a huge structural problem and will become a cigar but.
What price points are you using when you talk about midprice, high end, etc?
What do you mean by "structural problem"?

Midprice would be $100 to $500 for me. Below that, it's cheap chic, above that, it's more a luxury item. I think the $500 could be expanded to $1000 perhaps.

The following is for clarification: the Swiss Watch industry would generally refer to "mid" as $200-$3,000 with "lower mid" being 200-500 and 500-3,000 being "upper mid". Fossil will call $500-$4,000 "fine premium" and "fashion" $60-$1,000.

If I understand you correctly then you're suggesting the "fashion" segment will be impacted heavily or even destroyed by smart watches, but above $1k will feel nothing for the most part. I'm struggling to follow the logic between the price points/functionality/jewellery and the smart watch threat. Also, what do you mean by "conventional watches" (v mechanical), please?

Kindly clarify.

Conventional watches would be quartz watches. I think of mechanical watches as "timepieces" versus a Koors or Fossil watch as a fashion piece. Those that buy mechanical watches regard them as soft of a timeless piece of jewellery and that is not something that directly competes with a smartwatch.

However, I think a smartwatch that is designed well and looks good can very well regarded as a fashion piece, with the added benefit of more functionality.

At least that is my view - I like watches and have a few mechanical ones, but I would not call me an enthusiast either. Enthusiasts  mostly buy mechanical watches anyways, as do those that want to show off.
Title: Re: FOSL - Fossil Group Inc
Post by: DooDiligence on November 23, 2016, 04:54:59 AM
I think the smart watch will eventually destroy the midprice conventional watch market, but it will do nothing to the high end mechanical watch market, because the latter are basically artisan/jewellery pices where functionality is secondary.
I think some midprice segments like Tissot (Swatch) could feel the pressure. Fossil is strong in the midprice segment and should see a lot of pressure in their business. Maybe there is a certain "fast fashion" segment that they are going to be able to hold onto but besides that, I think Fossil has a huge structural problem and will become a cigar but.
What price points are you using when you talk about midprice, high end, etc?
What do you mean by "structural problem"?

Midprice would be $100 to $500 for me. Below that, it's cheap chic, above that, it's more a luxury item. I think the $500 could be expanded to $1000 perhaps.

The following is for clarification: the Swiss Watch industry would generally refer to "mid" as $200-$3,000 with "lower mid" being 200-500 and 500-3,000 being "upper mid". Fossil will call $500-$4,000 "fine premium" and "fashion" $60-$1,000.

If I understand you correctly then you're suggesting the "fashion" segment will be impacted heavily or even destroyed by smart watches, but above $1k will feel nothing for the most part. I'm struggling to follow the logic between the price points/functionality/jewellery and the smart watch threat. Also, what do you mean by "conventional watches" (v mechanical), please?

Kindly clarify.

Conventional watches would be quartz watches. I think of mechanical watches as "timepieces" versus a Koors or Fossil watch as a fashion piece. Those that buy mechanical watches regard them as soft of a timeless piece of jewellery and that is not something that directly competes with a smartwatch.

However, I think a smartwatch that is designed well and looks good can very well regarded as a fashion piece, with the added benefit of more functionality.

At least that is my view - I like watches and have a few mechanical ones, but I would not call me an enthusiast either. Enthusiasts  mostly buy mechanical watches anyways, as do those that want to show off.

Agreed & I'm a high end enthusiast with a low priced collection.

I made a foray into the jewelry biz back in 2000 (a miserable fail) & one of my jewelers was a Hamilton dealer (I traded merchandise for a handful of really nice automatics.)

I was wearing one of them on a sales call in Adlers (NOLA) & the person I was meeting with commented on what a nice piece it was (they carry A. Lange & Sohne, Breguet & Patek) & when I told them it was a Hamilton they were surprised.

Hamilton uses some nice calibres (very accurate but only low end and faux complications...)
Title: Re: FOSL - Fossil Group Inc
Post by: MrB on November 23, 2016, 06:51:44 AM
Interesting management observation from Movado's conference call.

"We are pleased by the very early sellthrough results of our new smartwatches as we introduce these new collections across our licensed brand portfolio. Our approach is to offer beautiful, traditional-looking watches that provide consumers with new and preferred smart functionalities such as notifications, step counts, and world timer -- all on a hidden screen. Early results indicate these collections have been very well received by consumers. Although we are excited and confident with our approach to this emerging smartwatch category, today we do not see this segment becoming a significant portion of our business, given the limitations in the functionalities and physical dimension of current technology. We will continue to engage in this category as the technology evolves and the opportunities arise."


http://www.nasdaq.com/aspx/call-transcript.aspx?StoryId=4025550&Title=movado-group-s-mov-ceo-efraim-grinberg-on-q3-2017-results-earnings-call-transcript
Title: Re: FOSL - Fossil Group Inc
Post by: Ballinvarosig Investors on February 15, 2017, 07:52:37 AM
I see Fossil came out with their outlook for 2017, and it's awful.

https://www.sec.gov/Archives/edgar/data/883569/000088356917000003/q42016ex991.htm

It's kind of crazy to see this and other iconic brands (Abercrombie, Guess, etc.) of just ten years ago getting smashed up. I feel like there is opportunity for maybe one or two to survive and become multi-baggers, but I have no clue how to evaluate which ones could do this.
Title: Re: FOSL - Fossil Group Inc
Post by: DooDiligence on February 15, 2017, 08:04:49 AM
I see Fossil came out with their outlook for 2017, and it's awful.

https://www.sec.gov/Archives/edgar/data/883569/000088356917000003/q42016ex991.htm

It's kind of crazy to see this and other iconic brands (Abercrombie, Guess, etc.) of just ten years ago getting smashed up. I feel like there is opportunity for maybe one or two to survive and become multi-baggers, but I have no clue how to evaluate which ones could do this.

I stopped in a Fossil outlet store a week or so ago while looking at retailers & 3 different salespeople jumped on me within a very short period of time (the most aggressive of all the retailers.)

Prices on wallets were high & I didn't see any big promos (good / bad, dunno...)
Title: Re: FOSL - Fossil Group Inc
Post by: Dalal.Holdings on February 15, 2017, 08:28:33 AM
There seems to be a giant sucking sound out in the business world. And it seems to be coming from anything associated with Retail.

Changing trends (Not just Amazon, but Apple, fast fashion, etc and the like) seem to have fundamentally changed the game, and it's hard to know where this ends for old players. There are a lot of plays like FOSL and GPS that seem cheap/value bargains on the surface, but it's hard to map going forward in a changed world.

We are generally avoiding retail except in a certain few areas (i.e. grocers like WFM), but even approaching those cautiously.
Title: Re: FOSL - Fossil Group Inc
Post by: Green King on April 06, 2017, 06:21:34 AM
Looked at FOSl again awhile back. I get what you are seeing here the cheap sales per share. But the fixed nature of their operating leverage scares me if they can not do anything they will get squeezed very quickly. Anyone know why they haven't been able to lower their cost base as their revenue decline? I am surprised being owner operators they haven't been able to respond quickly and control cost.
Title: Re: FOSL - Fossil Group Inc
Post by: MrB on May 25, 2017, 11:34:26 PM
THE FOSSIL - IT IS DEAD MAHN!

FOSSIL SHARES TOUCH 8-YR LOW OF $11.71 IN VOLUME SPIKE, LAST DOWN 3.1 PCT AT $11.72 - RTRS
Title: Re: FOSL - Fossil Group Inc
Post by: Scuttlebutt Plunger on May 26, 2017, 10:38:42 AM
The FCF profile is very attractive, but I have gotten this wrong before and cut losses.  Doubtful that women stop wearing fashion watches altogether...  I checked out their fitness tracker device (misfit products) - very inferior to similarly priced products.  And that's a fact, not an opinion
Title: Re: FOSL - Fossil Group Inc
Post by: MrB on May 26, 2017, 12:40:23 PM
The FCF profile is very attractive, but I have gotten this wrong before and cut losses.  Doubtful that women stop wearing fashion watches altogether...  I checked out their fitness tracker device (misfit products) - very inferior to similarly priced products.  And that's a fact, not an opinion

I don't disagree, but that does not mean there is not a market for it.
Title: Re: FOSL - Fossil Group Inc
Post by: Dalal.Holdings on May 26, 2017, 02:16:02 PM
Misfit was a garbage acquisition.

The Q line of watches are mediocre at best, don't have full functionality with iOS.

How can a company that only offers second rate (at best) smart watches compete with tech titans?

If this is a play on jewelry, why engage in this competition with Apple and the like? They won't win with their poor products and end up damaging their own brand. FOSL could just focus on the jewelry/accessory market and downsize. At these prices, if they do have free cash, buying back chunks of stock or taking the whole thing private might be the way forward.

Their licensing biz (where they make watches for other brands with more cachet like Burberry--who is not renewing and Michael Kors) was the most attractive/resistant to competition with high ROI and low capex. That business could cater to whichever fashion brand is the "brand of the moment" with licensing deals (ie. what used to be Coach and became Michael Kors, etc etc). Instead they seem to have gone on this "wearables"/"tech" escapade with half assed products (how would they ever get the tech talent to build products to compete w the likes of Apple?). Should have just kept focus on the licensing/jewelry biz and not gone the tech route.
Title: Re: FOSL - Fossil Group Inc
Post by: Scuttlebutt Plunger on May 30, 2017, 04:52:57 AM
Decisions that management teams make are not linear - even the best make mistakes, some times.  I can't get over how cheap this thing is.  Cash per share of $6.61 and TTM P/S ratio of 0.18x (significantly lower than 08/09).  Significant debt hurdle in 2019 (likely could be refinanced), but people/analysts are likely too negative.

Going to take a closer look (again) and if management buys back shares at these levels I could become a little more confident.

Title: Re: FOSL - Fossil Group Inc
Post by: MrB on May 30, 2017, 05:14:01 AM
Misfit was a garbage acquisition.
Why?

Quote
The Q line of watches are mediocre at best, don't have full functionality with iOS.

How can a company that only offers second rate (at best) smart watches compete with tech titans?
Mediocre compared to what?
Also could you not make that same argument about their traditional watch business?

Quote
If this is a play on jewelry, why engage in this competition with Apple and the like?
Why do you consider Fossil a play on jewelry?

Quote
They won't win with their poor products and end up damaging their own brand. FOSL could just focus on the jewelry/accessory market and downsize. At these prices, if they do have free cash, buying back chunks of stock or taking the whole thing private might be the way forward.
If it is a bad investment, which I think is what you're saying, then why would it be a good idea for management to repurchase stock and/or take it private?

Quote
Their licensing biz (where they make watches for other brands with more cachet like Burberry--who is not renewing and Michael Kors) was the most attractive/resistant to competition with high ROI and low capex. That business could cater to whichever fashion brand is the "brand of the moment" with licensing deals (ie. what used to be Coach and became Michael Kors, etc etc). Instead they seem to have gone on this "wearables"/"tech" escapade with half assed products (how would they ever get the tech talent to build products to compete w the likes of Apple?). Should have just kept focus on the licensing/jewelry biz and not gone the tech route.
I think the flip side would be that Fossil caters to fashion brands and fashion brands want the new thing, which is wearable tech. I think Basil 2017, recent industry research and industry sales confirms it as the new trend and Fossil is expected to cover that base for these brands. 
Title: Re: FOSL - Fossil Group Inc
Post by: Green King on May 30, 2017, 06:14:35 AM
Misfit was a garbage acquisition.
Why?

Quote
The Q line of watches are mediocre at best, don't have full functionality with iOS.

How can a company that only offers second rate (at best) smart watches compete with tech titans?
Mediocre compared to what?
Also could you not make that same argument about their traditional watch business?

Quote
If this is a play on jewelry, why engage in this competition with Apple and the like?
Why do you consider Fossil a play on jewelry?

Quote
They won't win with their poor products and end up damaging their own brand. FOSL could just focus on the jewelry/accessory market and downsize. At these prices, if they do have free cash, buying back chunks of stock or taking the whole thing private might be the way forward.
If it is a bad investment, which I think is what you're saying, then why would it be a good idea for management to repurchase stock and/or take it private?

Quote
Their licensing biz (where they make watches for other brands with more cachet like Burberry--who is not renewing and Michael Kors) was the most attractive/resistant to competition with high ROI and low capex. That business could cater to whichever fashion brand is the "brand of the moment" with licensing deals (ie. what used to be Coach and became Michael Kors, etc etc). Instead they seem to have gone on this "wearables"/"tech" escapade with half assed products (how would they ever get the tech talent to build products to compete w the likes of Apple?). Should have just kept focus on the licensing/jewelry biz and not gone the tech route.
I think the flip side would be that Fossil caters to fashion brands and fashion brands want the new thing, which is wearable tech. I think Basil 2017, recent industry research and industry sales confirms it as the new trend and Fossil is expected to cover that base for these brands.

What is the reason that FitBit is also suffering?
Got a view on the Asian Players that are also entering Fitbit's market (wearables)?
Title: Re: FOSL - Fossil Group Inc
Post by: MrB on May 30, 2017, 11:03:23 AM
What is the reason that FitBit is also suffering?
Got a view on the Asian Players that are also entering Fitbit's market (wearables)?
Most industry commentators seem to think it is because Fitbit don't have a smartwatch offering. Most smartwatches now come with Fitbit functionality. Makes sense to me.

No view on Asian players.
Title: Re: FOSL - Fossil Group Inc
Post by: Green King on May 30, 2017, 11:47:27 AM
What is the reason that FitBit is also suffering?
Got a view on the Asian Players that are also entering Fitbit's market (wearables)?
Most industry commentators seem to think it is because Fitbit don't have a smartwatch offering. Most smartwatches now come with Fitbit functionality. Makes sense to me.

No view on Asian players.

Care to comment on the high operating leverage? failure to cut cost? Is this like the cosmetic businesses where the brand will melt away if they stop spending? Since this is like the car businesses if they miss this product line how many more times can they bet? (ie. Nintendo)

The price has significantly changed the risk profile of this investment.
Title: Re: FOSL - Fossil Group Inc
Post by: MrB on May 30, 2017, 12:19:00 PM
What is the reason that FitBit is also suffering?
Got a view on the Asian Players that are also entering Fitbit's market (wearables)?
Most industry commentators seem to think it is because Fitbit don't have a smartwatch offering. Most smartwatches now come with Fitbit functionality. Makes sense to me.

No view on Asian players.

Care to comment on the high operating leverage? failure to cut cost? Is this like the cosmetic businesses where the brand will melt away if they stop spending? Since this is like the car businesses if they miss this product line how many more times can they bet? (ie. Nintendo)

The price has significantly changed the risk profile of this investment.

Fitbit or FOSL?
Title: Re: FOSL - Fossil Group Inc
Post by: Dalal.Holdings on May 30, 2017, 02:57:09 PM
Tech segments are usually winner-take-all. There is a loaded graveyard with companies like Nokia, Blackberry, etc which developed tech products that were not quite as good as Apple/etc. If you think that a struggling watchmaker with a fraction of the capital resources of Apple and operating in Software/Hardware (outside of its circle of competence but within Apple's circle) is somehow going to win, thrive, or even have moderate success, good luck with that. I'm sure the software talent picked up by misfit is going to compete with Apple. I'm sure top programmers want to go work for Fossil and not Apple.

Luxury products are not winner-take-all. Brands like Michael Kors, Gucci, Burberry, Rolex, Omega, etc can all thrive as each one is picked not on the basis of product superiority, but rather how a customer relates to them/wears them in terms of expression. That's why Fossil will have somewhat of a moat in jewelry, licensing business verses wearables where it has no moat and virtually no chance of success.

Go ahead and go read reviews of misfit and the Q line of products. Then ask yourself why someone would buy those, when at an extra $50-100, they could get something superior from Apple/Samsung.
Title: Re: FOSL - Fossil Group Inc
Post by: MrB on May 30, 2017, 05:09:30 PM
Tech segments are usually winner-take-all. There is a loaded graveyard with companies like Nokia, Blackberry, etc which developed tech products that were not quite as good as Apple/etc. If you think that a struggling watchmaker with a fraction of the capital resources of Apple and operating in Software/Hardware (outside of its circle of competence but within Apple's circle) is somehow going to win, thrive, or even have moderate success, good luck with that. I'm sure the software talent picked up by misfit is going to compete with Apple. I'm sure top programmers want to go work for Fossil and not Apple.
Ah of course. We're all going to wear Apple watches, just as we're all using iPhones today. I missed the fact that Fossil is a tech company; I was under the impression it was the largest vertically integrated watch company in the US.

Quote
Luxury products are not winner-take-all. Brands like Michael Kors, Gucci, Burberry, Rolex, Omega, etc can all thrive as each one is picked not on the basis of product superiority, but rather how a customer relates to them/wears them in terms of expression. That's why Fossil will have somewhat of a moat in jewelry, licensing business verses wearables where it has no moat and virtually no chance of success.
So if a consumer is willing to buy a Michael Kors, Gucci, etc product "not on the basis of product superiority, but rather how a customer relates to them", why does it stop being true when that product is a watch? I doubt anyone with a Michael Kors or Kate Spade hybrid or smart watch would argue their product is superior to the Apple watch.

Quote
Go ahead and go read reviews of misfit and the Q line of products. Then ask yourself why someone would buy those, when at an extra $50-100, they could get something superior from Apple/Samsung.

Simply because the $50-$100 is a bridge too far for Fossil segment (generally speaking). They cannot afford it. That is why Kosta is so set on driving volume, so he can drive the prices below $200, whilst getting margins up thereby making the value proposition clear to the typical Fossil customer. 

Put another way. Go to a Wal-Mart watch section and "Then ask yourself why someone would buy those". Don't you think that customer buying that watch in Wal-Mart (supplied by Fossil) also wants a hybrid/smart watch and don't you think Kosta wants to be the guy supplying it.


All being said, the concern around tech is valid, but I think it is simplistic to reduce the argument to Fossil v Apple.
Title: Re: FOSL - Fossil Group Inc
Post by: Dalal.Holdings on May 30, 2017, 05:52:18 PM
Please explain how vertical integration makes Fossil competitive in wearables/tech watches. My original argument that Fossil is not competitive in this space (but does have a chance to survive in the traditional watch space) still stands.

Yeah, it's going to be the big guys with the software/hardware talent that will dominate in tech/smart watches. I'm sure many analysts thought Nokia phones would keep selling because they're "more affordable" to "certain segments". Then the iPhone 2 came out and the iPhone 1 was sold at the same prices as those Nokia phones and those cheaper folk bought the old gen iPhone because it was still superior to the new product Nokia put out. You know, all that seamless software integration with their Apple devices and products they already had. Plus there was something called the App Store. Oh yeah and Nokia had nothing in terms of software talent compared to Apple. And it won't be just Apple, but Samsung's watches that will crush Fossil's Q line particularly as they will directly target that price point.

You seem to misinterpret what I mean by "jewelry". Jewelry brands will have a moat. Fossil's old non-smart watches and licensed (ie Kors) watches were "jewelry" in the same sense that Rolex is. They are worn as accessories, not for their superiority in telling time. The hybrid watches are interesting and may be an area where Fossil can keep this moat while offering some limited tech capabilities (ie, no screen, touchscreen, or apps). This is because these are still more fashion accessories/jewelry than tech products (at least outwardly).

However, the Q series/full touch screen watches and the misfit series will not be able to compete against the likes of Apple/Samsung/etc. Fitbit will also likely fall to the better resourced tech firms that can create watches with screens. With these products, it's less about wearing them as accessories (ie, not "jewelry") and more about the tech capabilities. In that realm, companies like Apple will always beat Fossil. This is likely a wasted area of effort for FOSL.

EDIT:
Just to add, a quick Amazon search of "smartwatch" yields a huge number of products from Asus, Pebble, Garmin, Sony, Fitbit, Samsung, Apple, Huawei, a plethora of random asian brands, etc ranging in price from $25 to $350. Fossil's products don't even make the front page. And most of these have a higher number of ratings and higher star ratings than Fossil's 2nd gen Q or misfit lines. So, again, what is the point of engaging in this market?
Title: Re: FOSL - Fossil Group Inc
Post by: Green King on May 31, 2017, 01:05:32 AM
What is the reason that FitBit is also suffering?
Got a view on the Asian Players that are also entering Fitbit's market (wearables)?
Most industry commentators seem to think it is because Fitbit don't have a smartwatch offering. Most smartwatches now come with Fitbit functionality. Makes sense to me.

No view on Asian players.

Care to comment on the high operating leverage? failure to cut cost? Is this like the cosmetic businesses where the brand will melt away if they stop spending? Since this is like the car businesses if they miss this product line how many more times can they bet? (ie. Nintendo)

The price has significantly changed the risk profile of this investment.

Fitbit or FOSL?

Fosl
Title: Re: FOSL - Fossil Group Inc
Post by: bonkers on May 31, 2017, 06:59:05 AM
Does anyone know how to best estimate retailer's risk of going bankrupt? And what is the typical pattern / timeline?

However, in my mind FOSL is not "just a retailer" trying to select 3rd party stuff that customers lover and to sell it efficiently, but more of a branded apparel company with subcontracting business as well, that designs and produces its own merchandise, and then tries to sell it. So it's not Sears or Target, but more like Ralph Lauren and Benetton (albeit with weaker main brand).
Title: Re: FOSL - Fossil Group Inc
Post by: MrB on June 01, 2017, 04:12:08 AM
Please explain how vertical integration makes Fossil competitive in wearables/tech watches. My original argument that Fossil is not competitive in this space (but does have a chance to survive in the traditional watch space) still stands.
That was not the point; Fossil is vertically integrated (design, manufacture/source, distribute & design) of watches and related products across a range of brands (own and licensed). Smartwatches are only one part of the business (5% of revenue the last time I checked). My point is to look at it as a tech company is simplistic.

Quote
Yeah, it's going to be the big guys with the software/hardware talent that will dominate in tech/smart watches. I'm sure many analysts thought Nokia phones would keep selling because they're "more affordable" to "certain segments". Then the iPhone 2 came out and the iPhone 1 was sold at the same prices as those Nokia phones and those cheaper folk bought the old gen iPhone because it was still superior to the new product Nokia put out. You know, all that seamless software integration with their Apple devices and products they already had. Plus there was something called the App Store. Oh yeah and Nokia had nothing in terms of software talent compared to Apple. And it won't be just Apple, but Samsung's watches that will crush Fossil's Q line particularly as they will directly target that price point.

As I said and to echo what I said above in this post, "All being said, the concern around tech is valid, but I think it is simplistic to reduce the argument to Fossil v Apple."
Quote
You seem to misinterpret what I mean by "jewelry". Jewelry brands will have a moat. Fossil's old non-smart watches and licensed (ie Kors) watches were "jewelry" in the same sense that Rolex is. They are worn as accessories, not for their superiority in telling time. The hybrid watches are interesting and may be an area where Fossil can keep this moat while offering some limited tech capabilities (ie, no screen, touchscreen, or apps). This is because these are still more fashion accessories/jewelry than tech products (at least outwardly).
No, that is a poor attempt to misdirect. It was a simple question. "So if a consumer is willing to buy a Michael Kors, Gucci, etc product "not on the basis of product superiority, but rather how a customer relates to them", why does it stop being true when that product is a watch? I doubt anyone with a Michael Kors or Kate Spade hybrid or smart watch would argue their product is superior to the Apple watch."

Quote
However, the Q series/full touch screen watches and the misfit series will not be able to compete against the likes of Apple/Samsung/etc. Fitbit will also likely fall to the better resourced tech firms that can create watches with screens. With these products, it's less about wearing them as accessories (ie, not "jewelry") and more about the tech capabilities. In that realm, companies like Apple will always beat Fossil. This is likely a wasted area of effort for FOSL.
I view at as a range of options Kosta faced, so I don't agree it is a wasted effort at all.
The basic options being,

1. Does he refuse to engage with tech?
2. Does he engage along the lines they did with China manufacturing in the 80's or Swiss manufacturing in the 90's?
3. Does he engage along the lines Movado does (partner on the tech side)?

2 or 3 makes the most sense to me and my preference would be for 3, but can I fault Kosta for choosing 2 considering past success? No, I don't believe I can, especially considering the demand drivers for his licensing customers.

Quote
EDIT:
Just to add, a quick Amazon search of "smartwatch" yields a huge number of products from Asus, Pebble, Garmin, Sony, Fitbit, Samsung, Apple, Huawei, a plethora of random asian brands, etc ranging in price from $25 to $350. Fossil's products don't even make the front page. And most of these have a higher number of ratings and higher star ratings than Fossil's 2nd gen Q or misfit lines. So, again, what is the point of engaging in this market?
Because you're shopping like a geek man! Do you think the average gal that bought a Michael Kors Bradshaw in rose gold searched for "smartwatch" on Amazon?


Again, I don't fault the gist of your argument re tech, but it is too simplistic as it relates to Fossil Inc.
Title: Re: FOSL - Fossil Group Inc
Post by: Green King on June 01, 2017, 04:39:44 AM
This is something I've been thinking about for the past few weeks while looking at retail. Since the advertising age, a big part of demand and desire is created in a retail display setting as more of the flow move online and mall traffic decrease, will this have an effect on overall consumptions since online display is not as developed as offline at this moment in time. In effect put some of the weaker players in receivership. Due to operating leverage & debt.
Title: Re: FOSL - Fossil Group Inc
Post by: DooDiligence on June 01, 2017, 05:54:57 AM
This is something I've been thinking about for the past few weeks while looking at retail. Since the advertising age, a big part of demand and desire is created in a retail display setting as more of the flow move online and mall traffic decrease, will this have an effect on overall consumptions since online display is not as developed as offline at this moment in time. In effect put some of the weaker players in receivership. Due to operating leverage & debt.

Smaller store footprints & more store within a store formats (geared towards product demos & capturing old fashioned bag shoppers as an afterthought?)
Title: Re: FOSL - Fossil Group Inc
Post by: MrB on June 01, 2017, 06:18:17 AM
This is something I've been thinking about for the past few weeks while looking at retail. Since the advertising age, a big part of demand and desire is created in a retail display setting as more of the flow move online and mall traffic decrease, will this have an effect on overall consumptions since online display is not as developed as offline at this moment in time. In effect put some of the weaker players in receivership. Due to operating leverage & debt.

Smaller store footprints & more store within a store formats (geared towards product demos & capturing old fashioned bag shoppers as an afterthought?)

and/or  larger flagship/product entertainment stores.
Title: Re: FOSL - Fossil Group Inc
Post by: DooDiligence on June 01, 2017, 06:30:05 AM
This is something I've been thinking about for the past few weeks while looking at retail. Since the advertising age, a big part of demand and desire is created in a retail display setting as more of the flow move online and mall traffic decrease, will this have an effect on overall consumptions since online display is not as developed as offline at this moment in time. In effect put some of the weaker players in receivership. Due to operating leverage & debt.

Smaller store footprints & more store within a store formats (geared towards product demos & capturing old fashioned bag shoppers as an afterthought?)

and/or  larger flagship/product entertainment stores.

I think AND in major metros with minis everywhere else

Is the Sham Wow guy still alive?
Title: Re: FOSL - Fossil Group Inc
Post by: Green King on June 01, 2017, 06:36:21 AM
That takes time. I think what we are seen with retail is the beginning of that change and decline in SSS are just the beginning since the physical world is changing much slower than the digital. I think the retail number partly reflect that. And this is a moment of uncertainty I think those ideas might work. But like mining, you don't know how much gold is down there until all the ores are mine out and milled.
Title: Re: FOSL - Fossil Group Inc
Post by: DooDiligence on June 01, 2017, 06:40:44 AM
That takes time. I think what we are seen with retail is the beginning of that change and decline in SSS are just the beginning since the physical world is changing much slower than the digital. I think the retail number partly reflect that. And this is a moment of uncertainty I think those ideas might work. But like mining, you don't know how much gold is down there until all the ores are mine out and milled.

They're mining desire & need to create attachments to be successful
Title: Re: FOSL - Fossil Group Inc
Post by: Dalal.Holdings on June 01, 2017, 09:29:32 AM
I view at as a range of options Kosta faced, so I don't agree it is a wasted effort at all.
The basic options being,

1. Does he refuse to engage with tech?
2. Does he engage along the lines they did with China manufacturing in the 80's or Swiss manufacturing in the 90's?
3. Does he engage along the lines Movado does (partner on the tech side)?

2 or 3 makes the most sense to me and my preference would be for 3, but can I fault Kosta for choosing 2 considering past success? No, I don't believe I can, especially considering the demand drivers for his licensing customers.

2 or 3 are classic "do something syndrome". Just a reminder that Fossil bought Misfit for $260M one and a half years ago -- more than half of Fossil's market cap today....and to add insult to injury, the transaction was done with cash (not stock).

We seem to agree about the tech limitation and yes, it is a small % of revenues for Fossil. My opinion is that the company can continue to survive in fashion watches and limited tech (hybrid) watches. The Q and misfit lines likely do not have a viable future however. The fashion watch segment seems to be in decline and it is a question of if this is short term turbulence or long term secular decline. I do not feel that Apple's watch or the full screen watch category is a "game changer" like smart phones were, but merely that Q/misfit would never compete in this area. It is quite likely in my opinion that the market will settle on hybrid as the best of both worlds: offering fashion/jewelry like accessory outwardly with some underlying tech functionality that is less apparent on the surface.
Title: Re: FOSL - Fossil Group Inc
Post by: Mungerish on June 01, 2017, 10:16:08 AM
Kartsotis sold 20% of his holdings on 5/25 for prices ranging from $11.21- 11.82. Geez I hope he is building a yacht or a house that he cant get out of paying for.......Otherwise, that is a pretty bad sign to be selling at these levels.
Title: Re: FOSL - Fossil Group Inc
Post by: Dalal.Holdings on June 13, 2017, 09:24:33 AM
Looks like CEO dumping even more shares at record low prices:

Over half a million shares at 10.71
https://www.gurufocus.com/news/531498/fossil-group-inc-fosl-chairman-of-the-board--ceo-kosta-n-kartsotis-sold-56-million-of-shares

That represents a significant part of his stake...has dumped about 30% of his overall position recently.
Title: Re: FOSL - Fossil Group Inc
Post by: BeerBBQ on June 13, 2017, 11:47:39 AM
From https://www.thestreet.com/story/14176443/1/fossil-is-in-a-black-hole-and-will-probably-stay-there-for-eternity-says-analyst.html?puc=twitter&cm_ven=TWITTER&utm_source=dlvr.it&utm_medium=twitter


"On Monday, the company released a Form 4, which is a Securities and Exchange Commission filing required when there's a material change in the company insiders' holders. What prompted the filing was that Fossil CEO Kosta Kartsotis sold 520,000 shares of the company's stock on Thursday and Friday, which follows the divestiture of 1.074 million shares on May 30. Those sales leave the CEO with 4.426 million shares, wrote the analysts.


"In Time's Up: 10K Concerns, we outlined our initial concern following the 10K release that the CEO pledged 3.8MM shares in February at roughly $19/share equating to $73MM," wrote Macquarie analysts Laurent Vasilescu and Dan Isaacson in the note. "With the shares now at about $11, we estimate the pledge is in the red by $30MM. (3.8M shares at $19/share minus 3.8M shares at 11). It is our understanding that the pledged shares are with a bank and the bank can choose to sell these shares."


Macquarie analysts added with the stock trading at about $11 since the end of May, they had outlined in a previous note that Kartsotis would be forced to sell his shares to make up for the lower value of the collateral. The proceeds from the May 30 sale of $12.1 million likely would need to be used for an estimated $30 million shortfall, wrote the analysts."
Title: Re: FOSL - Fossil Group Inc
Post by: Green King on August 21, 2017, 07:23:43 AM
Here is some insight from @victoriouscake

(https://pbs.twimg.com/media/DHwjh4rU0AQ7TG8.jpg)
Title: Re: FOSL - Fossil Group Inc
Post by: Green King on November 09, 2017, 04:38:55 AM
Here is some insight from @victoriouscake

(https://pbs.twimg.com/media/DHwjh4rU0AQ7TG8.jpg)

I might have had a short-sighted bias. $Fosl had a good quarter it looks like a good bet based on the price here. Will dig further.
Title: Re: FOSL - Fossil Group Inc
Post by: BeerBBQ on November 09, 2017, 05:24:33 AM
Anyone know what the major differences are between the Apple Watch and ios compatible watches?
Title: Re: FOSL - Fossil Group Inc
Post by: MrB on November 09, 2017, 04:15:25 PM
Anyone know what the major differences are between the Apple Watch and ios compatible watches?
If I can sync my watch with an iphone then it is ios compatible. So most watches will be android and ios  compatible
Title: Re: FOSL - Fossil Group Inc
Post by: BeerBBQ on November 10, 2017, 07:37:03 AM
Mr B,

What I meant was If I have an iPhone, why do I choose an Apple Watch over any other smartwatch that is compatible with my iPhone?  Are there functions/capability that the Apple watch has that others do not?

Title: Re: FOSL - Fossil Group Inc
Post by: Yours Truly on November 10, 2017, 08:18:03 AM
Mr B,

What I meant was If I have an iPhone, why do I choose an Apple Watch over any other smartwatch that is compatible with my iPhone?  Are there functions/capability that the Apple watch has that others do not?

Yes for the fitness fanatics, Garmin's line of smartwatches are still the dominant brand.
Title: Re: FOSL - Fossil Group Inc
Post by: KCLarkin on November 10, 2017, 09:44:54 AM
What I meant was If I have an iPhone, why do I choose an Apple Watch over any other smartwatch that is compatible with my iPhone?  Are there functions/capability that the Apple watch has that others do not?

You need to evaluate them holistically not based on functions/capability because fitting a smartphone into a watch entails endless tradeoffs. For example, as far as I know, Apple is the only one who has an attractive, small watch (e.g. women-friendly). Other watches can offer similar functionality but not in a small device. The System-on-a-Chip is the key differentiator.
Title: Re: FOSL - Fossil Group Inc
Post by: DooDiligence on November 10, 2017, 01:00:29 PM
Mr B,

What I meant was If I have an iPhone, why do I choose an Apple Watch over any other smartwatch that is compatible with my iPhone?  Are there functions/capability that the Apple watch has that others do not?

The addition of LTE is the one unique feature worth having (if it'd work.)

Anyone know if Apple fixed the LTE on the watch?
Title: Re: FOSL - Fossil Group Inc
Post by: MrB on November 12, 2017, 01:48:17 PM
Mr B,

What I meant was If I have an iPhone, why do I choose an Apple Watch over any other smartwatch that is compatible with my iPhone?  Are there functions/capability that the Apple watch has that others do not?

You will choose it for the difference in functionality and brand name, which sells at a higher price point and there are trade offs e.g. Fossil hybrids have more limited functionality, donít need a daily charge like Apple (battery replaced every six months), do not look like an Apple and sells at a lower price point. In some ways you are heading for the same scenario as tradional watches where the movements equate to smartwatch/hybrid tecnology with companies more or less the same, but mainly leading on design/brand name. Not everyone will agree with that view, but its mine and generally Fossilís view too.   
Title: Re: FOSL - Fossil Group Inc
Post by: pau_ on November 12, 2017, 03:43:01 PM
Anyone know if Apple fixed the LTE on the watch?

Apple released a software update that fixed the issue everyone was reporting on, namely that the watch would connect to "captive portal" wifi networks (e.g. starbucks where you have to click through) and have a wifi connection but no real connection to the internet. Now it only relies on wifi if it can get to the internet. So, if you have your phone on you, it uses that. If you are in range of wifi you've connected to before and that has internet access, it uses that. As a last resort, it connects to LTE.

I have one and the LTE mostly works. I routinely wear it to the gym and on outdoor runs without my phone. It sometimes takes a minute or two to acquire a signal if you go somewhere without coverage. I'm guessing this is a tradeoff for battery life (check network less often = more battery), and probably depends on network/signal strength to begin with. The only place this is really an issue for me is the first floor of my old, concrete-and-stone gym, where I sometimes don't have a signal (I could fix this by connecting to wifi but haven't gotten around to it).

For a tiny little internet-connected computer+health monitor/coach on my wrist, I'm very happy.
Title: Re: FOSL - Fossil Group Inc
Post by: MrB on November 23, 2017, 06:24:36 AM
Insider purchases.

Greg McKelvey +110k shares @ $6.22/share on 10 Nov
Martin Frey 7.5k shares @7.40 on 23 Nov

Approaching $2m of insider purchases over last month or so.
Title: Re: FOSL - Fossil Group Inc
Post by: MrB on January 19, 2018, 01:48:43 PM
Hybrid watch strategy looks like it's coming together
https://www.wareable.com/fossil/fossil-group-designer-hybrid-collections-spring-2018
Title: Re: FOSL - Fossil Group Inc
Post by: DooDiligence on January 20, 2018, 07:53:39 AM
Hybrid watch strategy looks like it's coming together
https://www.wareable.com/fossil/fossil-group-designer-hybrid-collections-spring-2018

I'll probably regret not seeing the forest here.
Title: Re: FOSL - Fossil Group Inc
Post by: MrB on January 22, 2018, 07:24:08 AM
Fossil Group jumps on speculation of private buyout

https://seekingalpha.com/news/3324000-fossil-group-jumps-speculation-private-buyout
Title: Re: FOSL - Fossil Group Inc
Post by: MrB on February 13, 2018, 04:13:59 PM
Extended Hours | 7:12:18 PM EST
   
16.50  + 7.46 (+82.52%)   
Volume 4,265,341

https://www.cnbc.com/quotes/?symbol=FOSL
Title: Re: FOSL - Fossil Group Inc
Post by: DooDiligence on February 13, 2018, 05:27:09 PM
Extended Hours | 7:12:18 PM EST
   
16.50  + 7.46 (+82.52%)   
Volume 4,265,341

https://www.cnbc.com/quotes/?symbol=FOSL

Congrats (you were long here?)
Title: Re: FOSL - Fossil Group Inc
Post by: Green King on February 14, 2018, 08:19:03 AM
Extended Hours | 7:12:18 PM EST
   
16.50  + 7.46 (+82.52%)   
Volume 4,265,341

https://www.cnbc.com/quotes/?symbol=FOSL

High five. 🖐
Looks like the thesis is coming along its natural course.
Title: Re: FOSL - Fossil Group Inc
Post by: Phoenix01 on March 03, 2018, 01:49:51 PM
FOSL seems to be executing extremely well against their strategy.  They are first to market with fashion first connected watches.  Apple and other manufactures are tech companies essentially trying to strap phones onto wrists, and their approach to women's watches is to Shrink it & Pink it.  Only a subset of the functionality is actually useful for the mass market.  FOSL is focusing their offerings around fashion with only the essential functionality.

FOSL is also defining the hybrid watch market.  They are basically the only player in this space.  It is growing slowly but there is a long runway for this offering.
Title: Re: FOSL - Fossil Group Inc
Post by: Phoenix01 on October 04, 2018, 05:08:02 PM
The new Fossil watches Gen4 are excellent.  These watches are targeted for women and address their needs. The market for smartwatches has moved into Fossil's sweet spot.  The next 2 quarters should confirm Fossil's leadership position in this market.
Title: Re: FOSL - Fossil Group Inc
Post by: MrB on October 05, 2018, 02:27:38 AM
The new Fossil watches Gen4 are excellent.  These watches are targeted for women and address their needs. The market for smartwatches has moved into Fossil's sweet spot.  The next 2 quarters should confirm Fossil's leadership position in this market.
Actually just ordered one a few days ago to test. Think NFC a great addition.

Decent presentation that went up on their website recently.
https://www.fossilgroup.com/wp-content/uploads/2018/10/FOSL-Sept-27-2018-Investor-Pres-Final1.pdf