Fossil Group, Inc. · NASDAQ:FOSL
Fossil — Investor Presentation (September 2019)
28 slides from Fossil's investor presentation, September 2019
Slide 1: Investor Presentation September 2019
Investor Presentation September 2019
Slide 2: Disclaimer
DISCLAIMER Certain statements contained herein that are not historical facts, including multi-year profit improvement estimates, the success and future features of our connected accessories and future financial guidance, constitute “forward-looking statements” within the meaning of the Private Secur
Slide 3: Business & Industry Overview
Business & Industry Overview 3
Slide 4: Fossil Group at a Glance
FOSSIL GROUP AT A GLANCE Portfolio Of Brands Multi-Category 50+ Countries Traditional Smartwatch Leathers Jewelry Watch Integrated Sourcing and Design Multi-Channel Distribution Digital Focus Technology Retail + Design E-Commerce = Fashion Tech Wholesale 4
Slide 5: Investment Highlights: Uniquely Positioned To 'Own The Wrist'
INVESTMENT HIGHLIGHTS Uniquely Positioned To ‘Own The Wrist’ Across Multiple Platforms • Leader in the growing “multi-segment” watch category - Traditional watches: $33 Billion market, with expansion in emerging markets - Connected Wearables: $14 Billion market, expected to reach $33 Billion by 2021
Slide 6: Global Watch Market Growth
GLOBAL WATCH MARKET GROWTH High growth and significant size - highly attractive 2021 Market Size And Projected Growth By Product Type And Country Some growth and/or size - somewhat attractive (Below $1,000) Declining market - less attractive USD, Billions USA Mexico Brazil UK Germany France China In
Slide 7: Significant Market Opportunity
SIGNIFICANT MARKET OPPORTUNITY Fossil Group’s Addressable Market Expected To Increase By Nearly 50% • Adding technology has enabled Fossil Group to expand the addressable market to include not only traditional fashion watches but also the connected wearables category • Fossil Group is even more comp
Slide 8: Competitive Advantages
COMPETITIVE ADVANTAGES Horizontal Advantage Vertical Advantage Technology Advantage Design Innovation Team Sourcing Display Platform Distribution Retail Partnerships Hybrid 8
Slide 9: Diversified Portfolio of Brands
DIVERSIFIED PORTFOLIO OF BRANDS Proprietary Brands Brand Categories Affiliation since Brand Categories Affiliation since Watch N/A Watch 1990 Leather Leather Jewelry Accessories Accessories Watch 2001 Watch 2012 Accessories Watch 2004 Watch 2015 Licensed Brands Br
Slide 10: Regional Growth Opportunities
REGIONAL GROWTH OPPORTUNITES • Connected growth in the U.S. • Direct to Consumer expansion across the region, Americas including owned and 3rd party e-commerce • Canada and Mexico growth across watch categories • Further connected expansion in major markets • E-commerce growth across Eurozone market
Slide 11: Diverse Sources of Profitability
Illustrative DIVERSE SOURCES OF PROFITABILITY Profitability by Product Profitability by Geography Contribution Margin1 (%) Contribution Margin1 (%) APAC Americas Jewelry2 Traditional EMEA Watches Americas Other Leathers Connected Watches Revenue Contribution Revenue Contribution Profitability by Cha
Slide 12: Our Core Strategies
Our Core Strategies 12
Slide 13: 2019 Strategic Initiatives
2019 STRATEGIC INITIATIVES We remain focused on stabilizing and returning our core watch business to growth through enhanced product innovation and investments in our e-commerce and digital opportunities, supported by transforming our business model and driving efficiencies throughout the Company Ov
Slide 14: Innovate Product Offering
1 INNOVATE PRODUCT OFFERING Our objective is to continuously innovate our product offering through the infusion of both design and technology 14
Slide 15: The Watch Category Is Evolving Quickly
1 INNOVATE PRODUCT OFFERING The Watch Category Is Evolving Quickly Product From clear cut …to a scaled offering based on feature category product groups… set Basic timepiece Minimalist, simple, stylish A basic timepiece for Traditional Multifunction, automatic function and a stylish complex case / d
Slide 16: Connected Product Evolution
1 CONNECTED PRODUCT EVOLUTION Fossil Group continues to deliver significant innovations in the Connected Wearables space Key Feature Trends Overall Assortment Strategy Health & Wellness LTE Focus distribution with Direct, CE, and Carriers $345+ Full featured smartwatches Gen 5 Leverage enhance
Slide 17: Connected Gen 5 Product Features
1 CONNECTED GEN 5 PRODUCT FEATURES Enhanced product features and software experiences put Fossil Group devices on parity with key competitors Product Features Software Enhancements HEART RATE + FITNESS TRACKING NOTIFICATIONS Receive call, text, email, SMART BATTERY MODES Track heart rate during app
Slide 18: Expand Ecom & Digital Marketing: Personalized Customer Experience
2 EXPAND ECOM & DIGITAL MARKETING Transitioning to SalesForce Marketing Cloud will allow the Company to scale and simplify E-Comm and CRM Integrated E-Commerce, Marketing, and CRM System Customer Database Growth Personalized Customer Experience Customer Engagement Purchase Frequency Drive E- Increas
Slide 19: Expand Ecom & Digital Marketing
2 EXPAND ECOM & DIGITAL MARKETING • Media spend mix continues to shift digital, with more than 90% of working marketing spend invested in digital channels, including social media, digital media, and paid search • Continuing to expand celebrity influencer activity along side hundreds of additional br
Slide 20: Transform Business Model: The Industry is Evolving
3 TRANSFORM BUSINESS MODEL The Industry is Evolving… Product category Geographic market Purchase channel More than 2 of every 5 wrists Developing countries Over 50% of watch sales will be wearing will make up almost 2/3 will take place online some form of connected watch of the traditional watch mar
Slide 21: Raising the Game on New World Fossil with NWF 2.0
3 TRANSFORM BUSINESS MODEL Raising the game on New World Fossil (“NWF”) with NWF 2.0 What we’ve accomplished… Sustaining and expanding impact… NWF 1.0: Right-Sizing NWF 2.0: Transform To Grow • Right-size organization given recent market • Refocus organization on prioritized shifts and financial rea
Slide 22: New World Fossil
3 NEW WORLD FOSSIL New World Fossil 1.0 Primary Drivers of New World Cumulative Run-Rate Financial Impact Fossil (USD in millions) $200M • Improved design for value $140M • Product sourcing • Category and pricing management $80M • Indirect spending management • Organizational efficiencies 2017 2018
Slide 23: Improve Profitability
4 IMPROVE PROFITABILITY • Core sales trends improving - Innovative technology and designs driving connected offset by reduced liquidation sales - Store closures, business exits, and currency negatively impacting 2019 sales performance approximately 500 basis points • EBIT margins expanding before ne
Slide 24: Improving Balance Sheet
4 IMPROVING BALANCE SHEET (1) (1) Year Ending Net Debt Quarter Ending Net Debt $ millions $ millions 519 339 215 (7) (44) 2 EOY 2015 EOY 2016 EOY 2017 EOY 2018 Q1 2019 Q2 2019 • Net debt has been reduced by over $500 million since the end of 2015 as a result of: • New World Fossil driving improved g
Slide 25: Capital Structure
4 CAPITAL STRUCTURE Capital Structure Capital Structure Philosophy • Current Credit Facility – Q2 2019 • Significant business volatility - Term loan with amortization - Fashion risk • March 2020: $64 million • December 2020: $165 million - Technology risk - ABL-like facility - Currency risk • Capaci
Slide 26: Financial Guidance Provided August 7, 2019
FINANCIAL GUIDANCE PROVIDED AUGUST 7, 2019 Q3 2019 Q4 2019 FY 2019 Net Sales (13%) to (6%) (5%) to 1% (12%) to (8%) Gross Margin 52.0% to 54.0% 50.0% to 53.0% 52.0% to 53.0% Operating Expenses(1) $275 million to $295 million $305 million to $335 million $1,110 million to $1,160 million Operating Mar
Slide 27: Quarterly Revenue Phasing
QUARTERLY REVENUE PHASING Q1 Q2 Q3 Q4 FY 2018 Year / Year Change (2%) (3%) (12%) (15%) (9%) in Sales Impact of Currency (5%) (3%) 1% 2% (1%) Constant Currency Change in Sales (7%) (6%) (11%) (13%) (10%) 2019 Year / Year Change (13%) to (6%) (5%) to 1% (12%) to (8%) (18%) (13%) in Sales(1) Impact of
Slide 28: Summary: Near-term focus is growth through transformation
SUMMARY Near-term focus is growth through transformation Reignite traditional watch through product innovation Reach We will consumers… Grow connected and jewelry continue to Pivot To whenever, evolve with the Accelerate China/India growth Growth wherever, industry to: however Expand online selling,
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