ABSTRACT
This paper covers general analysis of Fossil Group – an American company that was founded in 1984 (main product – accessories, recreational products, watches, etc.). This analysis includes the background of the company, its position on a market, and performance analysis: market shares dynamic, sales growth and profitability (Net Profit Margin). In order to do this paper the annual reports were overviewed as well as Bloomberg market analysis report. As a result, Fossil Group could be considered as a stable company, with a great background, strong position on the market, and good financial results.
INTRODUCTION AND BRIEF ON A COMPANY
Company’s Background
The Fossil Group was founded in 1984 (as Overseas Products International) in Dallas as a retail company that was like a transition point between East producers and US market. The US economic was increasing as well as market demand, so it was a very good idea to find producers abroad and sell their goods inside the country. The main categories that were retailed were apparels, watches and leather goods. And as company’s performance was so good, founders (Tom Kartsotis and his brother – Kosta) decided to take their company on IPO. It was in 1993 and the success was incredible. After that, Fossil Group streamed on a rapid development process and still on it. It has about 400 locations all over the world with around 13,000 employees. The main brands that the company works with are Adidas original, Emporio Armani, DKNY, Burberry, Diesel, etc. These brands go with original Fossil brand goods – watches, apparel, and other accessories. The headquarter of the company is in Richardson, Texas, USA. In addition, the company’s shares are included in S&P 500 set as recognition of its stability and strong development. The major market for Fossil Group is USA, and Asia is a main suppliers region.
FOSSIL GROUP ANALYSIS
Vision and Mission
The mission of the Fossil Group is to bring a rich, technological experience to the world by stylish products that stand on the edge of fashion and technology. The vision of the company is to be the leader on the market that never stops in introducing new innovative and stylish products. The main idea of the company’s philosophy is that because of more and more dynamic changes in lifestyle and globalization process, each person needs unique proposition that fits his individuality and needs. According to this philosophy, Fossil Group always tries to develop “personalized” brands that could be considered as life-style brands. Fossil Group always tried not only to keep on touch with global trends, but to create them. It is focused on innovation as a combination of fashion and technology.
Position and Performance
Fossil Group is one of the leaders in the recreational products industry. This industry covers apparels, accessories and cloth – all the products that Fossil Group produce, and the company has extremely stable position on this market. For example, it had over 80% market share on US watches market in 2014 (with a price range $100 - $500). Watches is one of the main category in Fossil’s portfolio. Let’s look more closely to the financial results of the Fossil Group. There is no still report for 2015 performance year (only some figures), so we will use 2014 annual report in order to see not only the last year results, but the dynamic of main financial scores.
Figure 1. Main financial indicators of Fossil Group, 2010-2014
As we can see from the Figure 1 and Figure 2, main financial indicators are increasing from year to year. Net Sales in 2014 reached incredible US $3,5 billion (in comparison to US $2,85 billion in 2012, and US $2 billion in 2010). Gross profit in 2014 was nearly US $2 billion (US $1,6 billion in 2012, US $1,15 billion in 2010). Operating income that was reached by Fossil Group in 2014 was nearly US $0,57 billion (Us $0,48 billion in 2012, US $0,38 billion in 2010). But the most important indicator that shows profitability of the whole performance is Net income: for Fossil Group it was US $0,38 billion in 2014 (US $0,34 billion in 2012, US $0,25 billion in 2010). So, the average growth of the company’s financial result was nearly 10%-15% per year that is very impressive for the stable market. Let’s count a Net Profit margin (Net Income / Net Sales). In 2014 the Net Profit
Figure 2. Main financial indicators of Fossil Group, 2010-2014
margin for Fossil Group was 10,7% (in 2012 – 12% , in 2010 – 12,5%). So, as we can see from the figures, the dynamic of Net profit margin is negative, but still the result is very good.
As for 2015 financial year, the results are not so optimistic. Because of Asia currencies’ volatility (main region of Fossil’s suppliers), the operational income has decreased. According to latest quarterly report of Fossil Group, the currency issue hurt its net sales for over US $55 million. The revenue reached US $924 million (- 13% in contrast to the same period of the last year). In addition, operational performance failed due to sales decrease in USA. As a result, the share price has dropped off 65% in 2015. Let’s look more closely to shares price dynamic as it is external indicator of business performance.
As we can see from the figure 3, the 2015 decreasing was very huge. For the period of 2011-2015 the price was very stable and, in average, was nearly US $110 per share (the standard range was US$ 100-120). The lowest price in 2015 was nearly US $25 (in the las quarter), and it was like a turning point – in the first quarter of 2016 there was an increasing in more than twice.
Figure 3. Share price in dynamic, Fossil Group, 2011-2016
According to the market analysts, this increasing is based on the operational results of the company that are better than expectations. Moreover, the trend for Fossil Group in 2016 is positive, so there is a huge possibility that the company will recover its markets position. The company’s Executive Board expected to increase the sales for 1%-3% this year. The benchmark for the Earnings per share is targeted between US $2,80 and US $3,60. According to external analysts (Thomas Reuters), the company’s sales will drop for 4% and the Earning per share indicator will be nearly US $3,18.
CONCLUSION
Fossil Group is one of the world leaders in apparel, watches and cloth markets. It was founded in 1983 in Dallas and from early beginning it was the company that connected East and West. The mission of the company is to bring a high-quality, fashionable and technology innovative products to the world. Main brands in the Fossil’s portfolio are Adidas, Diesel, Burberry, DKNY and its’ own brands. It is growing company with great financial indicators and with a plenty opportunities to develop more and more stylish products. Fossil Group is a company with strong vision to change the peoples’ lives and it already does so for over 30 years.
REFERANCES
Fossil Group’s official web-site: https://www.fossilgroup.com/about-us/#portfolio
Fossil Group’s Annual Report 2014. Retrieved from: https://www.fossilgroup.com/documents/2015/04/annual-report-13.pdf
Fossil Group reports better-than-expected results. Web. Marketwatch.com. 16 Feb, 2016. Retrieved from: http://www.marketwatch.com/story/fossil-group-reports-better-than-expected-results-2016-02-16-17485747
Fossil Group Bloomberg Profile. Retrieved from: http://www.bloomberg.com/quote/FOSL:US
Fossil Group Profile. Retrieved from: http://csimarket.com/stocks/compet_glance.php?code=FOSL
