FOSL - Fossil Group Inc

[Jurgis]

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.

[MrB]

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...

[fisch777]

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?

[Dalal.Holdings]

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.

[DooDiligence]

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."

[DooDiligence]

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?)

[Spekulatius]

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.

[Green King]

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 dosen’t feel like Fossil is as strong as it once was.

 

Mr.B do you have a view of future market share and size ? TIA

 

[MrB]

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.

 

 

[MrB]

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

 

 

[MrB]

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"?

[MrB]

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.

 

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 dosen’t 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!

 

 

[Spekulatius]

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.

[MrB]

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. 

 

 

[MrB]

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

[eclecticvalue]

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.

[MrB]

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

 

 

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/

[DooDiligence]

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.

[Spekulatius]

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.

[DooDiligence]

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...)

[MrB]

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

[Ballinvarosig Investors]

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.

[DooDiligence]

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...)

[Dalal.Holdings]

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.

[Green King]

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.