Texas-based company, Fossil, Watches its Way to the Top

April 25, 2011 by · Comments Off 

By Maggie Ashworth
mashworth@smu.edu

Fossil Inc., a company that specializes in the manufacturing, distribution and sale of watches, accessories and apparel, has had a successful year during 2010. From 2009 to 2010, during the fourth quarter, Fossil has seen its net sales increase 32.8 percent, from $527.8 million to $701.1 million.

Fossil originated as a watch company in 1984, and while it sells and distributes additional merchandise, its watches continue to be the main source of sales. During the fourth quarter of 2010 all watch brands under the Fossil name have led to a 41.7 percent increase in global watch sales. These sales were primarily led by the brands of Michael Kors Inc., Fossil Inc., and Michele Watch. However, watches haven’t been the only source of booming business for Fossil. The company’s line of accessories saw a 10.4 percent increase in net sales, which was mostly due to the growth of sales amongst leather products for men and women.

The Asia Pacific region of Fossil’s sales was a primary area of growth last year. The wholesale shipments of merchandise to the Asia Pacific areas increased by $22.9 during the fourth quarter. According to the press release announcing its fourth quarter earnings for the fiscal year of 2010, this increase is due in part to the company’s decision to remove Fossil’s third-party distributor in Korea, and use a “company-owned subsidiary” instead, thus making the business more profitable.

Fossil ‘s headquarters are located in Richardson, TX, but the company operates stores across the world. According to Fossil’s reports record fourth quarter and fiscal year net sales and earnings, the most recent business summary, there are Fossil stores in over 120 countries, with over 360 company-owned and operated retail stores worldwide.

In a May 11, 2010 conference call, Kosta Kartsotis, chief executive officer of Fossil described the company’s recent progress, as well as plans for the future. “The Fossil brand also continues to reap rewards with strong sales growth and increased margins across our total stores platform. Combined with our e-commerce and catalog initiatives, our retail store growth is continuing to boost awareness of the Fossil brand… resulting in increased sales through both our retail and wholesale channel,” Kartsotis said.

Fossil’s recent success can be attributed to the company’s continued effort to bring something new to its stores and merchandise, as well as the distribution of products through other licensed brands. However, Fossil’s recent earnings release shows that most of the company’s sales, 76.2 percent, are wholesale. This figure means that Fossil’s largest source of income stems from manufacturing watches that are sold to other retail companies and only 23.8 percent of the company’s sales are made directly to the consumer, or through its own retail stores and website.

By distributing products under the name of several brands, Fossil appeals to the masses, regardless of their style and budget. Bryce May, a sales associate at a Dallas Fossil store says that “some people don’t really know that we manufacture that many [watches]” but then the customers will come into the store and say “I saw this at Michael Kors, and then I saw it at Fossil and it looks the same. But some people just have to have the name.” Fossil distributes watches to brands such as Michele, known as a luxury timepiece retailer, and Michael Kors, a brand that is known for having fashionable statement pieces.

Aside from distributing products to other retail companies, Fossil has also been revamping its own company image. Fossil has recently launched a new type of Fossil store, a pop-up store. “First one of its kind for us, it’s in SoHo. It’s cool, it’s completely different from anything we do. We sell things we find at garage sales, we sell everything in there,” said Kevin Stephens, manager of a Fossil store in Dallas, TX. Fossil is exploring a whole new aspect of retail by not only selling its own brand, but also exploring the sales of vintage items and random finds, mixed in with the company’s own merchandise.

Overall, the company’s addition of retail stores, continued sales of proprietary brands, and launch of a pop-up store is bringing significant increases of sales and income.