LE T TE R TO STOCK H O LD E R S
Dear Stockholders,
We entered 2018 with four major objectives. We’re proud to report that in spite of the many challenges we
faced, we accomplished these objectives and achieved significant success around the globe as follows:
• We improved profitability.
• We spearheaded innovation and design in the watch category.
• We invested in digital to expand our e-commerce efforts.
• We continued to transform our business model under our New World Fossil initiative.
Through these efforts and more, we delivered $2.5 billion in net sales, reduced net debt and generated strong cash flow.
In accordance with our goal to become a leaner, more profitable company, we aggressively responded to the ever-evolving retail
environment, exited unprofitable businesses to sharpen our focus and effectively managed expenses and inventory. While we saw
improvements in 2018, these efforts will continue to provide benefits in 2019 and beyond. We will continue to build on our success
from this past year, while working to further improve our financial performance and create value for you, our investors, in the
coming year.
Our Strategy
Armed with strategic insights from 2018, we plan to
FOSSIL Brand
pursue several priority areas to continue our progress
through 2019 and beyond:
Connected
As consumers continued to express their desire for
connected devices, we listened. Thanks to our dedication
to distinguished designs, improved technology and
We saw a modest increase in FOSSIL’s global core
watch sales in 2018, as we placed a heavy emphasis on
product innovation and expanding our direct-to-consumer
business. We worked hard to excite the consumer with
new ways to shop, such as Buy Online and Pick Up In
Store, and we experienced notable success for handbags
in the direct channel. Going forward, we’re enhancing
continuous innovation, we experienced 29 percent growth
FOSSIL’s consumer targeting and social content
in the wearables category in 2018. We launched the next
generation of smartwatches, with the overall smartwatch
category representing 21 percent of our total watch sales
initiatives to further improve engagement while driving
sales through search, affiliates and retargeting efforts.
in Q4. Additionally, we signed a strategic technology
Digital/E-Commerce
partnership with CITIZEN to help further our growth
in the connected space.
By creating products with all the features our customers
want and need, we’re strongly differentiating ourselves
from our competition and positioning Fossil Group for
sustained growth.
The way our customers shop continues to evolve rapidly
and so must our ability to serve them better and faster.
To achieve this, we must continue to understand our
customers’ behaviors and what drives their shopping
channel preference. In 2018, we increased our marketing
spend and invested more in our e-commerce platforms.
These efforts optimized our ability to reach consumers
Looking Ahead
online. This approach also helped us more effectively
use the power of social influencers to generate direct
sales from posts which include our products. As a result,
we achieved 21 percent sales growth in our digital and
e-commerce channels in 2018.
Portfolio Brands
Our licensed brands continue to support our company’s
initiatives, as our wide variety of watch styles — from
kate spade new york to Michael Kors to Emporio
Armani — offers options for every customer’s unique
taste and need. We enhanced the footprint of our
licensed brands in the wearables space through
continued innovation and teamwork with our partners,
including launching the first kate spade new york and
Tory Burch touchscreen smartwatches. Additionally,
In the past year, we have seen how disruption in the
marketplace creates opportunity. We’ve also seen the
critical importance of emphasizing product innovation
and placing the highest priority on strengthening our
connection with consumers. Winning in the marketplace
means engaging our customers where they are and having
the understanding and insight to anticipate where they’re
going next.
We made significant strides in 2018 to change
Fossil Group’s profit profile. And, looking ahead, we
see tremendous opportunity to accelerate our pace
of innovation and creativity. While our competitive
environment remains challenging, I have no doubt in
our ability to capitalize on these retail dynamics and
successfully turn those challenges into new opportunities.
new licenses with PUMA and BMW will fuel the
My thanks to our board of directors, our management
growth of our portfolio brands and extend our reach
team and our approximately 11,000 Fossil Group
into currently untapped customer segments.
employees around the world for all they have done to
position us so strongly for success. And, as always, my
thanks to you for your continued support and confidence
as we embark on this next step in our company’s story.
Sincerely,
Kosta N. Kartsotis
Chairman and Chief Executive Officer
Cash Flow / Capital Structure
As part of our New World Fossil transformation, we
improved our profitability and strengthened our capital
structure, reducing our net debt by more than $200
million in 2018. With our focus on profitability, we have
exited marginal businesses and closed underperforming
store locations, in addition to implementing significant
working capital improvements. We did an outstanding job
of doing more with less by reducing inventory levels by
$196 million and generating nearly $250 million in cash
from operations.
Sustainability
Over the past year, we strengthened our social and
environmental commitments to our people, planet
and communities through our Make Time for Good
sustainability platform. This year, we plan to announce
our sustainability targets, with a goal of reporting on
progress as early as 2020. While we know we are only
at the beginning of this journey, we look forward to
making the biggest impact that only we can make.
FI NAN CIAL H I G H LI G HTS
FISCAL YEAR
2018
2017
2016
2015
2014
(in thousands, except per share data)
Net sales ($)
Gross profit ($)
2,541,488
2,788,163
3,042,371
3,228,836
3,509,691
1,340,137
1,358,839
1,578,186
1,753,467
2,001,172
Operating income (loss) ($)
62,711
<424,276>
127,146
291,234
566,536
Net income (loss) attributable to Fossil Group, Inc. ($)
<3,478>
<478,172>
78,868
220,637
376,707
Earnings per share:
Basic ($)
Diluted ($)
Weighted average common shares and common
equivalent shares outstanding:
<0.07>
<0.07>
<9.87>
<9.87>
1.64
1.63
4.52
4.51
7.12
7.10
Basic (#)
Diluted (#)
49,196
49,196
48,468
48,468
48,136
48,323
48,800
48,924
52,882
53,080
Working capital ($)
652,766
781,900
932,705
953,141
1,008,264
Total assets ($)
1,575,198
1,658,372
2,186,897
2,355,661
2,177,460
Total long-term liabilities ($)
380,764
568,337
756,874
933,589
747,351
Stockholders’ equity attributable
to Fossil Group, Inc. ($)
Return on average stockholders’ equity
attributable to Fossil Group, Inc. 1
585,543
576,133
1,006,236
921,388
977,860
<0.6%>
<62.3%>
8.2%
24.7%
37.5%
Calculated by dividing net income attributable to Fossil Group, Inc. by five quarter average stockholders’ equity attributable to Fossil Group, Inc.
CO R P O R ATE I N FO R MATIO N
EX EC UTIV E OFFICERS & DIRECT ORS
Kosta N. Kartsotis
Chairman of the Board
and Chief Executive Officer
Greg A. McKelvey
Executive Vice President,
Chief Strategy and Digital Officer
Diane L. Neal
Director
Randy C. Belcher
Executive Vice President, Asia Pacific
Jeffrey N. Boyer
Executive Vice President,
Chief Financial Officer
and Treasurer
Steve A. Evans
Executive Vice President, Owned Brands
Martin R. Frey
Executive Vice President, EMEA
Darren E. Hart
Executive Vice President, HR
Beth A. Moeri
Executive Vice President,
Portfolio Brands
Mark R. Belgya
Director
William B. Chiasson
Director
Mauria A. Finley
Director
Thomas M. Nealon
Director
James E. Skinner
Director
Gail B. Tifford
Director
James M. Zimmerman
Director
OUR WEBSIT E
CORPORATE INFORMAT IO N
The company maintains a website at www.fossilgroup.com.
Certain event and investor relations information concerning the
company are available at the site.
ANN UAL MEE TING
The Annual Meeting of Stockholders will be held on
Wednesday, May 22, 2019, at 9:00a.m. CDT at the company’s
headquarters, 901 S. Central Expressway, Richardson, Texas 75080.
CO MP AN Y IN FORMATION
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.
Transfer Agent & Registrar
Computershare
P. O. Box 505000
Louisville, KY 40233-5000
Principal Independent Auditors
Deloitte & Touche, LLP
2200 Ross Avenue
Dallas, Texas 75201
Corporate Counsel
Akin Gump Strauss
Hauer & Feld, LLP
2300 N. Field Street, Suite 1800
Dallas, Texas 75201