Fossil Group
Annual Report 2021

Plain-text annual report

Dear Stockholders, During 2019, our teams worked diligently to execute against our strategic and operational priorities, while facing considerable industry headwinds. Most notably, ongoing contraction in the wholesale channel is driving transformation across the industry and within our business model. We are addressing these challenges by seeking opportunities to maximize sales growth in other channels, while also pivoting our financial model to generate profitability over the long-term. Despite the challenges of 2019, Fossil Group had a number of important successes: • We completed our first New World Fossil program, NWF 1.0, which over the last three years, delivered $200 million of run-rate improvement across gross margin and operating expense. We also launched our New World Fossil 2.0 - Transform to Grow program, which is designed to drive operational efficiency and improve profitability, while also providing us with the ability to invest in new growth opportunities. In 2019, we captured total benefits of $50 million, primarily through operating expense reductions, which puts us on track to achieve gross margin benefits and operating expense reductions totaling $200 million by 2021. • From a product perspective, we delivered world-class technology upgrades in connected watches and exciting new innovations across our traditional watch categories. Positive response to our latest generation smartwatches tells us that high performance technology combined with the latest fashion designs will drive consumer interest and purchases. In addition, our accelerated product drop strategy, combined with a digital first marketing approach drove more consumer engagement than ever before. • We also made significant strides in the Asia Pacific region as we broadened our reach in key markets and delivered double digit growth. Importantly, we advanced our Direct to Consumer and online marketplace businesses by optimizing our segmented assortment strategy in key markets. • We ended the year in solid financial condition with $200 million of cash and virtually no net debt. In 2020, we are focusing on four key priorities that are expected to improve our operational efficiency and position us for improved financial performance over the long-term. Priority number one is delivering exceptional storytelling and innovation. We believe the path forward to changing our sales trajectory will come first and foremost from great product and unmatched creativity. Although we’ll have fewer product stories in the market in 2020, we’re going to tell them in bolder ways through focused digital marketing programs. We’ll be refining our assortment levels and distribution strategy in connected watches to more closely reflect consumer preferences across channel and assortment. Additionally, we plan to launch connected LTE product and aggressively expand in the consumer electronics and telecom channels, while reducing our connected presence in select wholesale accounts and brands. Our second priority is driving commercial transformation. The consumer is increasingly gravitating to all things digital, and we’re moving quickly to improve our digital capabilities across the company. The implementation of our new ecommerce platform is in process now and will bring us a robust set of tools to support a larger direct to consumer business in the coming years. Our third priority is to expand on our opportunities in China and India, where the emerging middle class has a strong affinity for our categories and brands. We’ve had great success with our localized marketing and segmented assortment approach, and we see even more runway to accelerate growth in these markets going forward. Our fourth priority is continuing to implement New World Fossil 2.0. This year, we are focusing on re- engineering our supply chain with the goal of reducing lead times, lowering costs, and enhancing our overall competitiveness. We appreciate the continued support of our stockholders and remain committed to restoring growth and improving profitability over the long-term. We thank our management team and Fossil Group employees around the world for their hard work and dedication as we strive to transform the business and create value for all of our stakeholders. Sincerely, K O S T A N . K A R T S O T I S Chairman and CEO Financial Highlights F I S C A L Y E A R (in thousands, except per share data) Net sales ($) Gross profit ($) 2019 2018 2017 2016 2015 2,217,712 2,541,488 2,788,163 3,042,371 3,228,836 1,099,438 1,340,137 1,358,839 1,578,186 1,753,467 Operating income (loss) ($) <28,383> 62,711 <424,276> 127,146 291,234 Net income (loss) attributable to Fossil Group, Inc. ($) <52,365> <3,478> <478,172> 78,868 220,637 Earnings per share: Basic ($) Diluted ($) Weighted average common shares and common equivalent shares outstanding: Basic (#) Diluted (#) Working capital ($) Total assets ($) <1.04> <1.04> <0.07> <0.07> <9.87> <9.87> 1.64 1.63 4.52 4.51 50,230 50,230 49,196 49,196 48,468 48,468 48,136 48,323 48,800 48,924 500,278 652,766 781,900 932,705 953,141 1,604,732 1,575,198 1,658,372 2,186,897 2,355,661 Total long-term liabilities ($) 541,711 380,764 568,337 756,874 933,589 Stockholders’ equity attributable to Fossil Group, Inc. ($) Return on average stockholders’ equity attributable to Fossil Group, Inc. [ 1 ] 503,054 585,543 576,133 1,006,236 921,388 <9.8%> <0.6%> <62.3%> 8.2% 24.7% Calculated by dividing net income (loss) attributable to Fossil Group, Inc. by five quarter average stockholders’ equity attributable to Fossil Group, Inc. Corporate Information E X E C U T I V E O F F I C E R S & D I R E C T O R S Kosta N. Kartsotis Chairman of the Board and Chief Executive Officer Randy C. Belcher Executive Vice President, Asia Pacific Jeffrey N. Boyer Executive Vice President, Chief Operating Officer and Chief Financial Officer Steven A. Evans Executive Vice President, Owned Brands Martin R. Frey Executive Vice President, EMEA Darren E. Hart Executive Vice President, Human Resources Greg A. McKelvey Executive Vice President, Chief Commercial Officer Beth A. Moeri Executive Vice President, Portfolio Brands Mark R. Belgya Director William B. Chiasson Director Kim Harris Jones Director Kevin Mansell Director Diane L. Neal Director Thomas M. Nealon Director James E. Skinner Director Gail B. Tifford Director James M. Zimmerman Director O U R W E B S I T E C O R P O R A T E I N F O R M A T I O N The company maintains a website at www.fossilgroup.com. Certain event and investor relations information concerning the company are available at the site. A N N U A L M E E T I N G The Annual Meeting of Stockholders will be held on Wednesday, May 20, 2020, at 9:00 a.m. local time at the company’s headquarters, 901 S. Central Expressway, Richardson, Texas 75080. C O M P A N Y I N F O R M A T I O N 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 FOSSIL MICHELE MISFIT SK AGEN BMW DIESEL DKNY ARMANI EXCHANGE EMPORIO ARMANI K ATE SPADE NEW YORK MICHAEL KORS PUMA RELIC TORY BURCH WATCH STATION ZODIAC 

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