Fossil Group
Annual Report 2011

Plain-text annual report

T R O P E R L A U N N A IL, I N S S O F T W O . C A NNUAL R E P O R T N E V D E LE T HOU S A N 2 0 1 1 L E T T E R T O S T O C K H O L D E R S Dear Stockholders, Our fiscal 2011 results represented another year of excellent growth for Fossil and considerable progress towards our long-term objectives. We generated double-digit sales gains across all of our major brands, product categories and geographies, which were driven by the continued success of our two global growth initiatives - our FOSSIL brand and our multi-brand watch business. Earnings rose 22% to $4.61 per diluted share from $3.77 per diluted share, even as we invested in talent and infrastructure to capitalize on the significant opportunities that we see ahead of us. We attribute our ongoing strength to the many advantages of our owned distribution model, the incredible talent we possess around the world and the compelling brands and offerings in our portfolio. OUR 2011 FISCAL YEAR INCLUDED SEVERAL SIGNIFICANT MILESTONES: Total sales surpassed $2.5 billion, increasing by over $500 million, or 26%; Sales of FOSSIL-branded products eclipsed $1 billion, coming in just under $1.2 billion; Sales from our multi-brand watch business grew to over $1.8 billion; We invested in our businesses in Asia to capitalize on this game-changing growth opportunity, attracting key talent and making significant inroads into establishing the infrastructure to accelerate our expansion in this region; We utilized the strength of our balance sheet to aquire 6.2 million shares of our common stock since announcing our buyback program in August 2010; and We were added to the Nasdaq 100. Our FOSSIL brand continued its positive momentum during fiscal 2011 with sales increasing by 20%, led by a 19% increase in watches and a 31% increase in leather sales. The brand continues to strengthen as we present the image of American vintage with more authenticity and clarity. Our FOSSIL brand presents a strong offering on both the men’s and women’s side of the business and has high appeal all over the world. We believe the strength of the brand is further evidenced by the nine consecutive quarters of double- digit comparable store sales increases across our global retail store base. In our multi-brand watch business, we experienced a sales increase of 30% for the 2011 fiscal year. This impressive growth follows a 39% increase in sales last fiscal year. Our portfolio of owned and licensed brands represent many of the best global lifestyle brands in the world and are leading us to increased market share globally. During fiscal 2011, some notable performances include MARC BY MARC JACOBS doubling over the prior fiscal year and MICHAEL KORS and ARMANI EXCHANGE increasing over 70%, while DIESEL and BURBERRY were both up 30% or more. In addition, we entered into an agreement in January 2012 to acquire Skagen Designs, Ltd., which we expect to close in April 2012, subject to the receipt of regulatory approvals. We are also preparing for the launch of our newest global watch license, Karl Lagerfeld, in early 2013. We are focused on building the FOSSIL brand around the world as an accessories-based lifestyle brand. With the addition of Karl Lagerfeld, we are also expanding our leadership position in the aspirational lifestyle watch business. We feel strongly that the advantages of our accessories-based businesses, including higher margins, shorter lead times and less obsolescence than other categories, have us well- positioned to drive increased sales and profitability. As we begin 2012, we will continue to execute the strategies that led to our success in fiscal 2011. We have a talented team that is passionate about achieving our mission. I would like to thank our more than 13,000 employees around the world as well as our customers, suppliers and stockholders for their continued support and dedication. Sincerely, KOSTA N. KARTSOTIS Chief Executive Officer w w w . f o s s i l . c o m 3 2 0 1 1 F I N A N C I A L H I G H L I G H T S FISCAL YEAR (in thousands, except per share data) Net sales Gross profit Operating income Income before taxes attributable to Fossil, Inc. Net income attributable to Fossil, Inc. Earning per share: Basic Diluted Weighted average common shares and common equivalent shares outstanding: Basic Diluted Working capital Total assets 2011 2010 2009 2008 2007 $2,567,302 $2,030,690 $1,548,093 $1,583,242 $1,432,984 1,439,186 1,155,164 844,850 471,991 438,860 294,702 4.66 4.61 63,298 63,965 376,414 372,448 255,205 3.83 3.77 66,701 67,687 211,627 213,776 139,188 2.09 2.07 66,684 67,153 851,151 205,770 189,429 138,0971 2.051 2.021 67,525 68,323 742,031 186,485 187,526 123,2612 1.812 1.752 68,213 70,333 $844,124 $801,329 $701,193 $556,497 $546,410 1,642,922 1,467,573 1,276,483 1,087,296 1,122,628 Total long-term liabilities 134,798 76,377 Stockholders’ equity attributable to Fossil, Inc. 1,105,929 1,044,118 62,791 962,781 74,964 802,144 66,432 771,662 Return on average stockholders’ equity attributable to Fossil, Inc. 28.0% 25.0% 16.2% 17.8% 18.3% 1 2 Includes a $20.8 million benefit in income tax expense related to the reduction of certain current and long-term tax liabilities in connection with completion of prior year income tax audits. Includes $8.6 million in expenses, net of tax, relating to our voluntary evaluation of our accounting for equity-based compensation, including the appropriateness of accounting measurement dates used to determine the amounts of compensation charges and related tax effects which have been previously disclosed in filings with the Securities and Exchange Commission. w w w . f o s s i l . c o m 4 2600 2450 2300 2150 2000 1850 1700 1550 1400 1250 0 475 445 415 385 355 325 295 265 235 205 175 0 300 275 250 225 200 175 150 125 100 75 0 1150 1100 1050 1000 950 900 850 800 750 700 0 07 08 09 10 11 07 08 09 10 11 07 08 09 10 11 07 08 09 10 11 NET SALES (in thousands of dollars) OPERATING INCOME (in thousands of dollars) NET INCOME (in thousands of dollars) STOCKHOLDERS’ EQUITY (in thousands of dollars) w w w . f o s s i l . c o m 5 CORPORATE INFORMATION Transfer Agent and Registrar Computershare Shareowner Services LLC P. O. Box 358015 Pittsburgh, PA 15252-8015 Principal Independent Auditors Deloitte & Touche LLP 2200 Ross Avenue Dallas, TX 75201 Corporate Counsel Haynes and Boone, LLP 

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