LETTER TO STOCKHOLDERS
DEAR STOCKHOLDERS,
Looking back on 2014, Fossil Group delivered another year of solid sales and earnings per share growth
driven by the strength of our diversified business model, our team’s disciplined execution of our strategies
and our strong financial position.
We accomplished this while continuing
leathers business. We improved
an environment that reflects the
to invest in the business to fuel future
our performance in the category,
differentiated and unique aesthetic of
growth. We also drove efficiencies in
particularly women’s handbags, where
the brand. Additionally, we enhanced
our operations that we believe position
we concentrated efforts to add to our
our customers’ digital experience
us to generate solid returns for our
design team and bolstered our product
through the launch of a redesigned
shareholders well into the future.
offerings to gain broader consumer
SKAGEN website, which includes
During the year, we drove an 8% increase
in sales to $3.5 billion and we delivered
$7.10 in earnings per share, an 8%
increase over 2013.
We begin 2015 intensely focused
on taking advantage of the many
opportunities available to us to
accelerate our sales momentum. We
are investing in strategic initiatives
to further grow our owned brands
and developing new categories, while
appeal. Our elevated assortment is
improved functionality for the
resonating with customers, particularly
customer and incorporates rich brand
in our retail stores where we offer
content designed to bring greater
the entire brand experience, and in
awareness to the brand.
improved presentations through shop-
in-shops within U.S. department stores.
PORTFOLIO
In jewelry, we spent 2014 repositioning
our U.S. distribution and believe we
In our multi-brand portfolio,
we continued to leverage our
are well positioned to capitalize on the
competitive strengths in branding,
synergies that jewelry shares
with watches.
continuing to optimize our multi-brand
Unlocking the value of the FOSSIL
portfolio to take advantage of the
brand is a key priority for us as we
significant opportunities that exist to
believe considerable growth lies
expand these brands around the world.
ahead for this powerful brand. To
We believe our portfolio of highly
desirable brands, our continuous
innovation, disciplined execution and
considerable white space opportunity
by brand, category and geography, have
us well positioned to continue our
successful growth for many years in
the future.
achieve this objective, we turned our
attention towards brand awareness
and demand creation activities that
can yield dividends for the brand in the
future. We increased investments in
our customer relationship management
capabilities to allow us to deepen our
connection with our customers and add
more consumers to our fold.
In 2014, we made solid progress on many
key objectives that we will build upon
SKAGEN
in 2015.
FOSSIL
The FOSSIL brand experienced growth
across all of our regions. We leveraged
our position as a leader in lifestyle
brand watches and saw strong growth
in the watch category for the brand.
Geographically, the brand’s strongest
gains were in Asia.
We made solid progress advancing
SKAGEN during the year as evidenced
by a strong double digit top-line
increase, with all product categories
posting strong gains. In addition to
increases in watches, we saw solid
growth in jewelry, successfully
launched handbags and opened two
new high-profile store locations in
Frankfurt and New York. These stores,
along with our remodeled stores in
Outside of watches, the year included
London, allow us to showcase the
the successful repositioning of our
full array of SKAGEN products in
design, sourcing and distribution
to gain increased market share in
the growing watch industry. Our
multi-brand watch portfolio grew
9% for the year with the strongest
gains internationally. We advanced
our Swiss watch initiative with
introductions of Emporio Armani
Swiss Made and our Tory Burch watch
collection. The Swiss opportunity
represents one of the important
white space opportunities we see
available for fashion lifestyle brands.
Given our sourcing and production
capabilities, we are well positioned
to take advantage of this long-term
opportunity with our licensed brands,
as well as the continued execution of
FOSSIL Swiss Made.
The strength of our capabilities was
further demonstrated through our
renewal of two of our longstanding
licenses, Emporio Armani and Michael
Kors, each for ten years. These
renewals clearly solidify our position
as the natural partner for the best
global fashion brands. Following our
successful launch of the Tory Burch
collection in 2014, we look forward to
leveraging our competitive strengths
to assist Kate Spade & Company in
Outside North America, we saw balanced
2015, our priorities will be very focused
growing their watch business under the
growth in Europe and Asia. As the world
on the most important initiatives to drive
kate spade new york label and expanding
becomes increasingly globally branded,
growth. We will invest to ignite our owned
their brand around the globe in 2015.
our watch portfolio continues to be a
brands—FOSSIL and SKAGEN—to increase
CONNECTED ACCESSORIES
global watch market. As an innovative
accelerate their growth. We will invest in our
powerful tool to gain share in the growing
brand awareness, increase demand and
category leader with a world-class supply
digital capabilities to improve the customer
chain and a global distribution network of
experience online and increase our omni-
more than 30,000 doors, we are uniquely
channel capabilities, and we will leverage our
positioned to work with the best lifestyle
new partnerships to advance our position in
brands around the world.
the wearable technology space.
We advanced our position in wearable
technology as well, another white
space opportunity for fashion lifestyle
brands, announcing two very important
partnerships with Google and Intel.
We are partnering with the best in
technology, leveraging their knowledge
LOOKING FORWARD
and expertise to develop fashionable
Our goal as a company is to build a world-
connected accessories for our portfolio
class entity of excellence where creativity
of desirable lifestyle brands. We believe
and entrepreneurship are carefully
our expertise in design and creativity
balanced with operational discipline to
coupled with our partners’ expertise in
enable us to deliver solid returns for our
technology and innovation will enable
shareholders in the near and long term. As
us to introduce wearable technology in
a company, we are focused on using all of
a fashionable and scalable way. As we
our resources to drive shareholder value.
look forward to introducing our first
connected accessories in 2015, we are
working towards a larger objective of
leveraging our strengths and leadership
position in fashion lifestyle watches
to the point where fashion, design and
technology converge.
INTERNATIONAL MARKETS
We leveraged our diversified business
model, broad operational capabilities and
significant strategic advantages to deliver
growth in all three regions in 2014. In our
international markets, as lifestyle brands
take share from traditional watch brands,
our goal is to replicate the success that we
have experienced in the United States.
We are also committed to leveraging our
strong financial position. In 2014, we
invested $435 million to repurchase 4.1
million shares of common stock. This is an
important program for our shareholders,
and we’re fully committed to it, operating
with a share base that is more than 25%
lower than it was just three years ago.
We would like to thank all of our
associates for their inspired contributions
in 2014 as well as our partners and
investors for their continued support.
As we reflect on the past year, we are
pleased with our results, but excited about
our ability to improve on the company’s
performance. As we move ahead to
We are well positioned as a leader in a
growing industry with a strong global
footprint and significant competitive
advantages. Our diversification gives us
access to multiple sources of growth and
supports our goal of predictable earnings
and cash flows. The leverage we believe our
operating model can generate, along with our
strong financial position, give us access to the
fuel that we need to drive our business and to
deliver solid returns for shareholders.
We look forward to building on our success in
2015 and thank you for your support.
Sincerely,
KOSTA N. KARTSOTIS
Chairman and Chief Executive Officer
FINANCIAL HIGHLIGHTS
FI SCA L YEAR
(in thousands, except per share data)
Net sales ($)
Gross profit ($)
2014 2013 2012 2011 2010
3,509,691
3,259,971
2,857,508
2,567,302
2,030,690
2,001,172
1,861,686
1,606,543
1,439,186
1,155,164
Operating income ($)
566,536
561,596
488,840
471,991
376,414
Net income attributable to Fossil Group, Inc. ($)
376,707
378,152
343,401
294,702
255,205
Earnings per share:
Basic ($)
Diluted ($)
Weighted average common shares
and common equivalent shares outstanding:
7.12
7.10
6.59
6.56
5.63
5.59
4.66
4.61
3.83
3.77
Basic
Diluted
52,882
53,080
57,401
57,676
60,959
61,400
63,298
63,965
66,701
67,687
Working capital
1,043,025
987,556
737,334
844,124
801,329
Total assets ($)
2,207,552
2,230,414
1,841,989
1,642,922
1,467,573
Total long-term liabilities ($)
776,922
663,141
194,747
134,798
76,377
Stockholders’ equity attributable
to Fossil Group, Inc. ($)
Return on average stockholders’ equity
attributable to Fossil Group, Inc. 1
977,860
1,068,677
1,233,535
1,105,929
1,044,118
37.5%
33.1%
29.9%
28.0%
25.0%
1
Calculated by dividing net income attributable to Fossil Group, Inc. by five quarter average stockholders’ equity attributable to Fossil Group, Inc.
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NET SALES
(in thousands of dollars)
OPERATING INCOME
(in thousands of dollars)
NET INCOME
(in thousands of dollars)
10 11 12 13 14
STOCKHOLDERS’ EQUITY
(in thousands of dollars)
CORPORATE INFORMATION
EXECUTIVE OFFICERS
& DIRECTORS
Kosta N. Kartsotis
Chairman of the Board
and Chief Executive Officer
Darren E. Hart
Executive Vice President, HR
Jennifer Pritchard
President,
Skagen Brand
Dennis R. Secor
Executive Vice President,
Chief Financial Officer
and Treasurer
John A. White
Executive Vice President
and Chief Operating Officer
Elaine B. Agather
Director
Elysia Holt Ragusa
Director
Jeffrey N. Boyer
Director
Jal S. Shroff
Director
William B. Chiasson
Director
James E. Skinner
Director
Diane L. Neal
Director
James M. Zimmerman
Director
Thomas M. Nealon
Director
Mark D. Quick
Director
OUR WEBSITE
The company maintains a website at www.fossilgroup.com. Certain
event and investor relations information concerning the company are
available at the site.
ANNUAL MEETING
The Annual Meeting of Stockholders will be held on
Wednesday, May 20, 2015, at 9:00am CDT at the company’s
headquarters, 901 S. Central Expressway, Richardson, Texas 75080.
COMPANY INFORMATION
A copy of the company’s Annual Report on Form 10-K, as filed with
the Securities and Exchange Commission, and the Annual Report to
Stockholders, in addition to other company information,
is available to stockholders without charge upon written request
to Fossil Group, Investor Relations, 901 S. Central Expressway,
Richardson, Texas 75080-7302, or online at www.fossilgroup.com.
CORPORATE INFORMATION
Transfer Agent & Registrar
Computershare
P. O. Box 30170
College Station, Texas 77842-3170
Principal Independent
Auditors
Deloitte & Touche LLP
2200 Ross Avenue
Dallas, Texas 75201
Corporate Counsel
Akin Gump Strauss
Hauer & Feld LLP
1700 Pacific Avenue | Suite 4100
Dallas, Texas 75201