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Safe Harbor Statement
This presentation contains certain statements that are not historical facts, which are “forward-looking information” within the meaning of the Private Securities Litigation Reform Act of 1955 and involve a number of risks and uncertainties. The actual results of the future events described in such forward-looking statements could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are: continued acceptance of the Company’s products in the marketplace; intense competition, both domestically and internationally; changes in external competitive market factors, such as introduction of new products, development of new competitors, competitive brands or competitive promotional activity or spending; changes in consumer demands for the various types of products that Fossil offers; changes in consumer tastes and fashion trends; inventory risks due to shifts in market demands; changes in foreign currency rates in relation to the United States dollar; the Company’s ability to successfully implement manufacturing, distribution and other cost efficiencies; changes in accounting rules; accuracy of forecast data; general economic conditions; acts of terrorism or acts of war; government regulation; and possible future litigation, as well as the risks and uncertainties set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 and its Form 10-Q reports filed with the Securities and Exchange Commission. Accordingly, you should consider these facts in evaluating the information and are cautioned not to place undue reliance on the forward-looking statements contained herein. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
June 6, 2006
Investment Highlights
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• Global watch leader
• Leading supplier to department stores for accessories
• Competitive advantages – worldwide design and distribution
• High margin businesses
• Strong cash flow
Company Overview
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• Fiscal 2005 revenue exceeding $1 billion
• Global watch advantages
Infrastructure
• Design
• Sourcing
• Distribution (Market ownership)
Portfolio approach maximizes growth potential & leverage
• Complimentary jewelry lines
• Expanding accessories category
• Retail store expansion
Revenue Breakdown
2005 Total Revenue | 2005 Total Revenue by |
By Geography | Product Category |
| |
[CHART] | [CHART] |
Sales Channels
• | Geographic | | More than 90 countries worldwide |
| | | |
• | Wholesale | | Luxury to mass, specialty retail, jewelry and sporting goods |
| | | |
• | Retail | | 177 company-owned stores |
| | | |
• | Direct | | Web and catalog |
Watch Industry Overview
• Global watch industry estimated at $20 to $30 billion
• U.S. watch market estimated at one-third of the world
• International watch market estimated at two-thirds
• Major European markets include UK, Germany, France and Italy
• Major Asian markets include Japan, Hong Kong and Korea
• Compelling industry dynamics
• Portability
• Predictability
• Profitability
Watches
Leader in Fashion watch category – growing presence in luxury and mass
Advantages
• Recognized & sustainable global brands
• Global distribution network
• High margin, adaptable portfolio
Current initiatives
• Stabilize Fossil domestic watch sales
• Increased innovation
• Increase inventory turns
• Capitalize on strength for new brands and channels
• Adidas
• Expand luxury and mass business
• Cultivate new markets
Jewelry
New business initiative with significant growth potential
Advantages
• Scalability
• High margins
• Leverage distribution
Current initiatives
• Expand markets
• Increase penetration in existing markets
• Licensing opportunities
Accessories
Handbags, Small Leather Goods, Belts & Sunglasses
Advantages
• 2005 sales growth of 20%; Q1-06 up 25%
• Industry leader in department and mid-tier stores
• Design talent
• Brand building
Current initiatives
• Broaden product offerings and price points
• Leverage design capabilities
• Expand international presence
Retail
Expanding Retail Platform
• Domestic 140 and 37 international
• Opportunity to utilize cash flow generating strong ROI
Advantages
• Test and react
• Build and enforce brand image
• Direct interface with consumer
• Limits wholesale dependence
• Outlets – profitable way to close out styles
Key initiatives
• 30 to 35 new stores planned for 2006
• Grow presence internationally
• New accessories concept
• Update brand image, broaden demographic
• Expand accessories presentation
Retail Footprint
(total of 177 at the end Q1 2006)
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2005 Milestones/Accomplishments
• Exceeded $1 billion in net sales
• Domestic accessories business growth of 20%
• Adidas license, Diesel jewelry license, launch of Mark Jacobs
• Initiated Fossil catalog
• $75 million expended to repurchase 3.6 million shares of common stock
• Acquisition of Scandinavia/Taiwan distribution
First Quarter 2006
• Exceeded sales and earnings expectations
• Q1 net sales up 13.6% to $264 million
• Q1 diluted EPS of $0.14 vs $0.12 consensus
• Realized rebound in international watch sales
• Strong contributions from accessories, retail and jewelry
• Continued challenges in Fossil domestic watches
• Favorable sales to inventory ratios at retail
• Increased annual guidance for diluted EPS to $1.07
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Margin Expansion Initiatives
• Leverage investments
• Distribution
• SAP
• New product categories
• Increase operating leverage
• Increase international and retail store sales
• Grow revenue contributions from new product category
• Jewelry
• Swiss watches
• Mass market watches
• New licenses
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Strategic Initiatives
• Watches worldwide
• Stabilize Fossil domestically, expand internationally
• Increase portfolio through acquisitions/licensing
• Focus on developing markets
• Accessories
• Grow market share in US
• Expand internationally
• Expand jewelry offering
• Retail stores
• US & international expansion
• Brand building
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Investment Highlights
• Global watch leader
• Leading supplier to department stores for accessories
• Competitive advantages – worldwide design and distribution
• High margin businesses
• Strong cash flow
