Description of Fossil Group Inc's Business Segments
Watch products
We believe that the current market for watches generally can be divided into
four segments. One segment of the market consists of fine watches characterized
by internationally known brand names such as Audemars Piguet, Cartier, Omega,
Patek Philippe, Piaget and Rolex. Watches offered in this segment are usually
made of precious metals or stainless steel and may be set with precious gems.
These watches are almost exclusively manufactured in Switzerland and are sold
by trade jewelers and in the fine jewelry departments of better department stores
and other purveyors of luxury goods at retail prices ranging from $4,000 to
in excess of $20,000. Selected limited editions of our BURBERRY and MICHELE
lines compete in this market. A second segment of the market consists of fine
premium branded and designer watches produced in Switzerland and the Far East
such as Gucci, Movado, Raymond Weil, Seiko, TAG Heuer and Tissot. These watches
are sold at retail prices generally ranging from $495 to $4,000. Our BURBERRY,
EMPORIO ARMANI, MICHELE, SKAGEN and ZODIAC lines generally compete in this market
segment. A third segment of the market consists of watches sold by mass marketers,
which typically consist of digital and analog watches manufactured in the Far
East. Well-known brands in this segment include Armitron, Casio and Timex. Retail
prices in this segment range from $7 to $60. We compete in this segment through
the design and production of private label watch products for Wal-Mart and Target.
The fourth segment of the market consists of moderately priced watches characterized
by contemporary fashion and well known fashion brand names. Moderately priced
watches are typically produced in Japan, China or Hong Kong and are sold by
department stores and specialty stores at retail prices ranging from $60 to
$795. This market segment is targeted by us with our FOSSIL, SKAGEN and RELIC
lines and by our principal competitors, including the companies that market
watches under the Anne Klein II, Guess', Kenneth Cole and Swatch brand names,
whose products attempt to reflect emerging fashion trends in accessories and
clothing. Our ARMANI EXCHANGE, DKNY, DIESEL, MARC BY MARC JACOBS and MICHAEL
KORS lines generally compete in this segment as well. We compete in the sports
specialty area of this segment with our ADIDAS line of womens and mens sport
timepieces. We believe that a number of consumers regard branded fashion watches
not only as time pieces, but also as fashion accessories, and that has historically
resulted in consumers owning multiple watches that may differ significantly
in terms of style, features and cost.
Watches typically utilize either a mechanical or quartz-analog movement to
maintain their time keeping function. Mechanical watches utilize intricate arrangements
of wheels, jewels and winding and regulating mechanisms to keep time, while
quartz-analog watches are precisely calibrated to the regular frequency of the
vibration of a quartz crystal powered by a battery. Although quartz-analog movements
typically maintain their time keeping functions more precisely than mechanical
movements, mechanical movements are prized for their craftsmanship and are generally
associated with high-end luxury timepieces.
Fashion accessories
In addition to watches, the fashion accessories market also includes an array
of products such as small leather goods, handbags, belts, sunglasses, neckwear,
underwear, lounge wear, jewelry, gloves, hats, hosiery and socks. We believe
that a number of consumers view accessories as fashion statements, and as a
result, purchase brand name, quality items that complement other fashion items.
These fashion accessory products are generally marketed through department stores,
specialty retailers and mass merchandisers, depending upon price and quality.
Higher price point items include products offered by fashion names such as Louis
Vuitton and Prada.
Moderately priced fashion accessories are typically marketed in department
stores and are characterized by contemporary fashion and well-known brand names
at reasonable price points, such as our FOSSIL and RELIC brands. We currently
offer small leather goods, handbags, belts, sunglasses and soft accessories
for both men and women through department stores and specialty retailers in
the moderate to upper-moderate price ranges. Our competitors in this market
include companies such as Coach, Guess', Nine West, Kenneth Cole and Liz Claiborne.
In addition, we currently offer fashion jewelry sold under the DIESEL, DKNY,
EMPORIO ARMANI, FOSSIL, SKAGEN and MICHAEL KORS brands.
Clothing
FOSSIL clothing is distributed exclusively through Company-owned retail stores,
www.fossil.com and through our FOSSIL catalogs. Selling through Company-owned
distribution channels allows us to more effectively manage visual presentation,
information feedback, inventory levels and operating returns. The clothing line
is focused on the casual lifestyle of the savvy consumer who is youthful in
their approach to life and is not tied to any one demographic or age. The clothing
line consists primarily of jeans, tee shirts and vintage-inspired fashion clothing.
The suggested retail selling price of the clothing line is comparable to that
of major competitors like American Eagle Outfitters and J. Crew. We have leveraged
our existing graphic and store design infrastructure to create a unique, inviting
and welcoming environment rich in details of design, product and merchandising
to appeal to the consumers sense of discovery. We discontinued our shoe product
line in the latter half of fiscal year 2012.
Fashion accessories
In order to leverage our design and marketing expertise and our close relationships
with our principal retail customers, primarily in the U.S. and Europe, we have
developed a line of fashion accessories for both men and women, including handbags,
belts, small leather goods, jewelry and sunglasses. We also offer a line of
soft accessories including hats, gloves and scarves under the FOSSIL brand.
Our handbags are made of a variety of fine leathers and other materials that
emphasize classic styles and incorporate a variety of creative designs. Our
small leather goods are typically made of fine leathers or other man-made materials
and include items such as mini-bags, coin purses, cosmetic bags and wallets.
Our jewelry lines include earrings, cufflinks, necklaces, rings and bracelets
marketed under the EMPORIO ARMANI, DIESEL, DKNY, FOSSIL, SKAGEN and MICHAEL
KORS brands and typically include materials such as base metals, stainless steel,
semi-precious stones or silver jewelry with 18K gold plating on top. We offer
100% UV protected fashion sunglasses in both the FOSSIL and RELIC brands. Our
soft accessories are made of a variety of blends consisting of natural yarns
such as cotton, wool, cashmere, angora and alpaca, as well as man-made blends
including acrylic, viscose and nylon. We currently sell our fashion accessories
through a number of our existing major department store and specialty retail
store customers, as well as our Company-owned retail stores, www.fossil.com,
other internationally-owned e-commerce sites and through our catalog operations.
In the U.S. and certain international markets, we generally market our fashion
accessory lines through the same distribution channels as our watches using
similar in-store presentations, graphics and packaging.
We have licensed our FOSSIL and RELIC brands to the Safilo Group, who manufactures,
markets, and sells optical frames under the FOSSIL and RELIC brands in the U.S.
and Canada. The license agreement provides for royalties to be paid to us based
on a percentage of net sales and includes certain guaranteed minimum royalties.
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