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Suravi Thacker
Suravi Thacker
Articles (157) 

Why Fossil’s Good Days Will Continue

June 16, 2014 | About:

Watch and accessory designers are having a tough time after the debut of Michael Kors (NYSE:KORS) since the retailer is taking away all customer attention. However, there are companies who are still being able to shine on by providing great products to its customers, Fossil (NASDAQ:FOSL) being one of them.

Fossil’s recently reported quarter was a blockbuster one with a 14% rise in the top line. One of the primary drivers of higher sales was the watch segment which grew a whopping 17% over last year. Fossil witnessed growth in all the segments, including the retail and the wholesale segment which grew by 18% and 12.8%, respectively. However, same store sales declined 2.4% during the quarter as store traffic took a hit because of severe weather. Nonetheless, the company managed to register an increase in the bottom line to $1.22 per share as against $1.10 per share in the prior year’s quarter.

The competitive side

On the other hand, peer Coach’s (COH) quarter was not up to the mark. Its top line stood at $1.1 billion, a decline of 7% over the previous year’s quarter. Analysts were expecting it to be at $1.13 billion. Also, the bottom line dropped 19% to $0.68 per share. Even Coach faced similar problems, of lower mall traffic in the U.S., which led to a decline of 18% in revenue from the region. Nonetheless, the company has undertaken a brand transformation initiative in order to position itself as a global lifestyle brand. Also, it plans to expand its footprint in the international markets such as China and Japan.

Although Fossil has been a better performer as compared to Coach, Michael Kors is definitely the leader. With a total stock price appreciation of 286%, since its inception in December 2011, Kors has become very popular among customers. Also, its quarterly revenue has jumped by almost 58% in the last one year as its fancy designer products continue to lure customers.

The retailer now plans to strengthen its business through various expansionary measures. It has recently announced its partnership with Luxottica, one of the leading providers of sports eyewear. The 10 year agreement will help Kors add luxury eyewear designed by Luxottica. The first collection of the combined entity will be introduced in spring 2015. This new range of eyewear should bring additional revenue to Michael Kors’ coffer.

Although Fossil faces stiff competition from some players such as Kors, it has been able to do better than companies such as Coach. In order to strengthen its business it plans to increase its promotional efforts and expand its footprint globally. Also, it plans to launch a new Android wear, in collaboration with Google. These efforts make Fossil even more interesting.

Final verdict

Fossil is doing well as it provides a wide range of accessories and apparels for customers’ needs. In fact, it has variations in that too. The prices of its products start from $7 and goes up to $2,000 per product. This is probably the reason why the retailer has managed to register growth. Further, its growing numbers, good performance and initiatives for the future make it look attractive. Therefore, Fossil makes a good buy.

Rating: 4.0/5 (1 vote)



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