Fossil Group, Inc. · NASDAQ:FOSL
Fossil — Investor Presentation (September 2018)
25 slides from Fossil's investor presentation, Sep 27, 2018
Slide 1: Disclaimer
DISCLAIMER Certain statements contained herein that are not historical facts, including multi-year profit improvement estimates, the success of our connected accessories and future financial guidance, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Ref
Slide 2: Fossil Group Situation Summary
FOSSIL GROUP SITUATION SUMMARY Product and channel shifts continue Company transformation underway “Smaller & More Profitable” philosophy initiated FY 2017 & FY 2018 Mid-Term FY 2019 & FY 2020 Longer Term FY 2021+ Moderation in category and channel shifts Company transformation continues “Smaller &
Slide 3: Who We Are
WHO WE ARE Portfolio of Brands Multi-category Digital First Focus Differentiated software 20+ languages 50+ countries Smartwatch Traditional Leathers Branded apps Smartwatch dials Branded custom watch apps Jewelry 4
Slide 4: Investment Highlights
INVESTMENT HIGHLIGHTS 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 Leading the convergence of style and technology to become the fashion
Slide 5: Significant Market Opportunity
SIGNIFICANT MARKET OPPORTUNITY 10.0% 17% ($7) 2017 25% ($12) 2021E $47 5% ($2) 2% ($1) 2015 $40 $69 70% ($33) 53% ($36) 11% ($8) 81% ($32) 36% ($25) 9.2% CAGR (’15-17) CAGR (’17-21) Percent of total watch market ($ billions) Traditional Smartwatch Hybrid Source: Market model – IDC, Euromonitor Inter
Slide 6: Global Watch Market Growth
High growth and significant size - highly attractive Some growth and/or size - somewhat attractive Declining market – less attractive 2021 Market Size And Projected Growth By Product Type And Country (Below $1000) USD, Billions Hybrid Traditional Display Mexico Brazil France India S Korea Overall Ma
Slide 7: Regional Growth Opportunities
REGIONAL GROWTH OPPORTUNITES Connected growth in the U.S. Direct to Consumer expansion across the region, including owned and 3rd party e-commerce Canada and Mexico growth across watch categories Americas Europe Asia Further connected expansion in major markets E-commerce growth across Eurozone mark
Slide 8: Competitive Advantages
Vertical Advantage Horizontal Advantage RETAIL DISTRIBUTION SOURCING DESIGN Technology Advantage Platform Team HYBRID DISPLAY COMPETITIVE ADVANTAGES 9
Slide 9: 2018 Strategic Initiatives
2018 STRATEGIC INITIATIVES Four Overarching Objectives 1) Improve profitability 2) Innovate product offering 3) Expand e-commerce and digital marketing 4) Transform business model We remain focused on stabilizing and returning our core watch business to growth, bringing more innovation to connected
Slide 10: Improve Profitability
IMPROVE PROFITABILITY Disruption in traditional watches and traditional retail driven by expanding influence of e-commerce and technology Issue Response Fossil Group adapted to a rapidly evolving consumer landscape Acquired Misfit to enable the capability necessary to meaningfully grow connected whi
Slide 11: Improve Profitability: 2018 and 2019 Outlook
IMPROVE PROFITABILITY 2019 Connected expansion offset by traditional declines Innovative technology and designs driving connected Store closures, business exits, and license terminations negatively impacting sales performance approximately 500 basis points EBIT margins expand $140 million in run-rat
Slide 12: Innovate Product Offering
INNOVATE PRODUCT OFFERING Comprehensive display offering Minimal feature mass market display Hybrid+ Minimum hybrid offering Minimalist, stylish Basic timepiece A classic watch equipped with tech for the modern world A display watch with comprehensive tech offering to stay connected, track fitness a
Slide 13: Innovate Product Offering
Our objective is to infuse technology into traditional watches and to infuse fashion and our global resources into connected INNOVATE PRODUCT OFFERING 2 14
Slide 14: Connected Market Segmentation
CONNECTED MARKET SEGMENTATION 2 15 Source: Euromonitor International
Slide 15: Gen vs. Gen Comparison
GEN 3 VS. GEN 4 COMPARISON 2 16 Gen 3 Fossil Q Venture, Q Explorist Michael Kors Access Sofie, Grayson Emporio Armani Connected Diesel Full Guard Misfit Vapor Skagen Falster Kate Spade New York Scallop Marc Jacobs Riley Gen 4 Fossil Q Venture HR, Q Explorist HR Michael Kors Access Runway Emporio Arm
Slide 16: Gen Product Features
GEN 4 PRODUCT FEATURES 2 17 Regular Reminders: Don’t forget to take your vitamins! Set reminders & alarms so you don’t miss a beat. Ready To Go: Download Uber from Google Play to order a car right from the wrist & head out for the day. Tap & Go Payments: Use Google Pay to grab a smoothie with your c
Slide 17: Connected Offering Comparison
CONNECTED OFFERING COMPARISON 2 18 Gen 4 (Falcon/ Raven) Apple Series 3 Apple Series 3 LTE Samsung Gear s3 Fitbit Ionic Fitbit Versa Garmin fenix 5 Pricing $255+ $329 $399 $349 $299.95 $199.95 $549.99 OS Wear OS by Google watchOS watchOS Tizen OS Fitbit OS Fitbit OS Garmin OS Case Size 41mm - 48mm,
Slide 18: Expand Ecom & Digital Marketing
EXPAND ECOM & DIGITAL MARKETING Media spend mix continues to shift digital; now have more than 90% of marketing invested in digital channels, including social media, digital media, and paid search Continuing to expand celebrity influencer activity along side hundreds of additional brand ambassadors
Slide 19: Transform Business Model: New World Fossil 2.0
TRANSFORM BUSINESS MODEL What we’ve accomplished Maintaining sustainable impact NWF 2.0: Refocusing Refocus organization on prioritized consumer and market opportunities for growth Create long-term process and system enhancements to maintain momentum Key opportunities in Speed to Market Strategic So
Slide 20: New World Fossil 1.0
NEW WORLD FOSSIL 1.0 4 New World Fossil Run-Rate Financial Impact (USD in millions) Primary Drivers of New World Fossil Improved Design for Value Product Sourcing Category & Pricing Management Indirect Spending Management Organizational Efficiencies 22 2017 2018 $140M $80M
Slide 21: Transform Business Model
TRANSFORM BUSINESS MODEL We will continue to evolve with the industry to: Pivot To Growth Sustain Operational Efficiencies Reignite traditional watch through innovation Grow connected Optimize store network and cost for omnichannel Apply analytics and science to everything we do Accelerate and susta
Slide 22: Improving Balance Sheet
Q1 2016 Q2 2017 Q2 2016 Q3 2016 Q4 2016 Q3 2017 Q1 2017 Q4 2017 Q1 2018 Q2 2018 $ millions IMPROVING BALANCE SHEET End of Quarter Net Debt $362 million reduction in net debt since 2016 as a result of: New World Fossil driving improved gross margins and operational efficiencies Improved working capit
Slide 23: Capital Structure
Significant business volatility Fashion risk Technology risk Currency risk Capital structure implications Conservative debt posture Maintain ABL for flexibility Capital Structure Philosophy CAPITAL STRUCTURE 4 Current Credit Facility Term loan with amortization March 2019: $125 million March 2020: $
Slide 24: Financial Guidance Provided August 7, 2018
FINANCIAL GUIDANCE PROVIDED AUGUST 7, 2018 (16)% to (10)% Net Sales Q3 2018 Gross Margin Operating Expenses(1) Operating Margin Other Income (Expense) Interest Expense Income (Loss) Before Taxes 50% to 52% $300 million to $320 million (1)% to 1% Approximately $(2) million Approximately $12 million $
Slide 25: Financial Guidance Provided August 7, 2018
FINANCIAL GUIDANCE PROVIDED AUGUST 7, 2018 Q3 2018 Q4 2018 (16)% to (10)% (14)% to (8)% 50% to 52% 50% to 52% Operating Expenses" BRET ME g $330 million to $350 million Operating Margin (1)% to 19% 8% to 10% Other Income (Expense) Approximately $(2) million Approximately $1 million Interest Expense
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