Fossil Group, Inc. · NASDAQ:FOSL
Fossil — Investor Day (September 2007)
150 slides from Fossil's investor day presentation, Sep 11, 2007
Slide 1: Welcome
Welcome
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains certain statements that are not historical facts, which are “forward-looking information” within the meaning of the Private Securities Litigation Reform Act of 1955 and involve a number of risks and uncertainties. The actual results of the future even
Slide 3: Company Overview
Jon O ENT fh A Company Overview
Slide 4: Company Highlights
Global accessory leader Globally recognized brand portfolio High margin business Broad distribution platform Proven international track record Growing and profitable retail segment Solid operating results and cash flow Company Highlights
Slide 5: Fossil Direct, Accessories, Jewelry, Watches
FOSSIL DIRECT ACCESSORIES The Model JEWELRY WATCHES
Slide 6: Watch and Jewelry Category Advantages
Portable Predictable Profitable Watch and Jewelry Category Advantages
Slide 7: Watch and Jewelry Vertical Infrastructure
Watch and Jewelry Vertical Infrastructure Design Assembly / Mfg Distribution Retail GLOBAL
Slide 8: Fossil Accessories Expanding Product Line
Handbags Small leather goods Belts Jewelry Eyewear Footwear (2009) Fossil Accessories Expanding Product Line
Slide 9: Fossil Accessories Strengths and Strategies
Design Sourcing Brand diversification Scalable growth Fossil Accessories Strengths and Strategies
Slide 10: Fossil Direct Stores – Web - Catalog
Fossil Direct Stores – Web - Catalog Direct distribution for core businesses Strong financial metrics Excellent use of capital Global footprint – early mover advantage Accelerates global brand communication
Slide 11: Fossil Direct Stores Growth by Concept
Fossil Direct Stores Growth by Concept 2006 Total Revenue 104 119 136 171 198 Total Doors 2002 2003 2004 2005 2006 Accessory Apparel Outlet Accessories 34% Outlet 50% Apparel 16%
Slide 12: Fossil Direct Accessory Stores
Strong 4 wall metrics High ROI Positive Comps Scalable Fossil Direct Accessory Stores Non-Watch 42% Watch 58%
Slide 13: 2006 Highlights
2006 Highlights Fossil brand watch business growth Global jewelry business growth of 47% Adidas launch Marc by Marc Jacobs launch Acquired Mexico distributor Introduced Fossil catalog Reduced inventory levels below prior year Repurchased 3.6 million shares of common stock
Slide 14: 2007 Key Initiatives
2007 Key Initiatives Capitalize on the Fossil brand Drive margin improvement Achieve peak profitability
Slide 15: Capitalize on the Fossil Brand
Capitalize on the Fossil Brand Domestic and international wholesale growth Global Accessory Store retail build-out New product extensions
Slide 16: Drive Margin Improvement
Drive Margin Improvement Product design & engineering Supply chain management Product cost reductions Speed to market Maximize inventory usage Global pricing strategy
Slide 17: Achieve Peak Profitability
Achieve Peak Profitability Leverage infrastructure Expense control Balance Sheet control
Slide 18: Financial Summary
Financial Summary
Slide 19: Net Sales Growth
Net Sales Growth ($ in Millions) $1,043 $1,214 $957 $781 $663 17.4 15.7 18.0 20.7 19.4 19.1 19.4 22.2 10 Year 2006 2005 2004 2003 CAGR % Increase 27.6 20.0 38.5 25.3 Direct 20.1 6.2 26.9 34.4 Intl Wholesale 7.5 7.9 13.2 3.0 US Wholesale 2006 2005 2004 2003 Historical Growth Net Sales 17.8% 22.5% 16.
Slide 20: Historical Growth Gross Profit and Operating Income
Historical Growth Gross Profit and Operating Income Gross Profit ($ in Millions) Operating Income ($ in Millions) 50.2 51.3 52.5 51.0 50.4 2006 2005 2004 2003 2002 Gross Profit Margin % 2006 2005 2004 2003 2002 10.2 10.4 13.7 13.5 14.3 Operating Margin % 2006 2005 2004 2003 2002 12.6 14.0 14.3 14.1
Slide 21: Current Performance
Current Performance Year-To-Date Net Sales ($ in Millions) 16.8% Gross Profit ($ in Millions) Op Income ($ in Millions) 18.1% $1.58 FY ’07 Guidance $0.57 1st Half ’07 $0.31 1st Half ’06 Diluted E.P.S. 69.7% 9.1% 6.3% Operating Income 50.2% 49.7% Gross Profit 1st H ‘07 1st H ’06 Margin $260 $307 1/2
Slide 22: Current Performance Diluted E.P.S. – Proforma
Current Performance Diluted E.P.S – Proforma $0.62 $0.10 <$0.05> - $0.57 2007 $0.24 Adjusted Diluted E.P.S - Option review costs <$0.02> Normalize tax rate to structural rate <$0.05> Q1 ’06 Additional week Proforma Adjustments: $0.31 Year-to-date through Q2 2006
Slide 23: Current Performance Selected Financial Information
12 16 $0.69 48 650 10 238 151 170 1st Half 2007 51 32 $2.16 148 602 11 228 155 140 2006 25 53 Capital expenditures 16 27 Depreciation and amortization expense $0.31 $0.48 Cash flow / share 21 35 Cash flow from operations 534 526 Stockholders’ equity 52 9 Short-term debt 265 241 Inventories - net 128
Slide 24: Five-Year Plan
Jon O ENT fh A Five-Year Plan
Slide 25: Five-Year Plan
Extensive process Detailed results Organic growth Accelerated retail store rollout Five-Year Plan
Slide 26: Five-Year Plan The Process
Five-Year Plan The Process Top down Collaborative input Accounting litmus test Bottom up By country, by product line By distribution channel Expense analysis
Slide 27: Five-Year Plan The Process (cont)
Five-Year Plan The Process (cont) Net sales and product margins Specific expense review Advertising Payroll Rents Depreciation / Amortization Trend-based expense review Historical review % over prior year % of sales
Slide 28: Five-Year Plan Significant Assumptions
Five-Year Plan Significant Assumptions No acquisitions Level foreign currency exchange rates Limited product extensions Limited brand extensions Limited new licensed brands Retail store comp of 5% Internal funding of growth Effective income tax rate 2008 - 2012 at 37% Consistent share count outstand
Slide 29: Five Year Plan Output
Five Year Plan Output Plans from more than 70 countries Incorporating over 100 profit centers Resulting in over 1600 individual sales plans by product Over 200 people participated worldwide Sales and Margins by country, by channel, by product line, by brand Comprehensive expense plans
Slide 30: Financial Projections
Financial Projections 2012 69.2M 68.8M Shares Outstanding $3.82 $1.13 Diluted E.P.S. 10.5% 6.4% NI Margin 22.5% 264 78 Net Income 16.9% 10.2% OI Margin 23.0% 425 123 Operating Income 54.2% 50.2% GP Margin 14.3% 1,360 609 Gross Profit 12.9% 2,510 1,214 Net Sales CAGR 2012 2006 ($ in millions except s
Slide 31: Financial Projections Net Sales By Region
Financial Projections Net Sales By Region 19.2% 305 106 Asia Pacific 12.9% $2,510 $1,214 Total 8.4% 126 78 Other 14.8% 912 398 Europe 10.8% $1,167 $632 United States CAGR 2012 2006 ($ in millions) 2006 2012 United States 52% Europe 33% Asia Pacific 9% Other 6% United States 47% Europe 36% Asia Pacif
Slide 32: Financial Projections Net Sales By Channel
Financial Projections Net Sales By Channel 23.8% 712 198 Retail Door Counts 12.9% $2,510 $1,214 Total 21.4% 707 221 Direct 11.6% 1,060 550 Intl Wholesale 9.0% $743 $ 443 US Wholesale CAGR 2012 2006 ($ in millions) 2006 2012 US Wholesale 36% Intl Wholesale 46% Direct 18% US Wholesale 30% Intl Wholesa
Slide 33: Financial Projections Net Sales By Product Line
Financial Projections Net Sales By Product Line 12.9% $2,510 $1,214 Total 19.0% 124 44 Other 13.2% 92 44 Eyewear 20.4% 272 89 Jewelry 10.1% 435 244 Leather 12.3% $1,587 $ 793 Watch CAGR 2012 2006 ($ in millions) 2006 2012 Watch 65% Other 4% Jewelry 7% Eyewear 4% Leather 20% Watch 63% Leather 17% Jew
Slide 34: Financial Projections Net Sales By Owned vs. Licensed
Financial Projections Net Sales By Owned vs. Licensed 2006 2012 $1,296 $2,510 $1,214 Total 435 872 437 Licensed & Other $861 $1,638 $ 777 Owned Inc. 2012 2006 ($ in millions) Licensed & Other 35% Owned 65% Owned 64% Licensed & Other 36%
Slide 35: Financial Projections Gross Profit
Financial Projections Gross Profit Gross profit drivers: Sales volume increase (87% of the increase) GP Margin improvement (13% of the increase) Gross profit margin drivers: Sales mix Margin Maniacs 400 bps 54.2% 50.2% GP Margin 123.3% $1,360 $609 Gross Profit % Inc. 2012 2006 ($ in millions)
Slide 36: Financial Projections Operating Income
Financial Projections Operating Income Operating expense factors: Retail store expansion Infrastructure leverage $935 $486 Operating Expense -270 bps 37.3% 40.0% OP Expense % 670 bps 16.9% 10.2% OP Inc Margin $425 $123 Operating Income 2012 2006 ($ in millions)
Slide 37: Financial Projections Earnings per Share
Financial Projections Earnings per Share EPS Factors: Effective tax rate Outstanding shares 16.9% 12.8% ROIC 22.5% CAGR $3.82 $1.13 Diluted Earnings Per Share 410 bps 10.5% 6.4% Net Income Margin 2012 2006
Slide 38: Q&A
Q&A
Slide 39: Brand Story
Jon O ENT fh A Brand Story
Slide 40: Fossil Brand Net Sales - Fossil vs. Other Brands
Fossil Brand Net Sales - Fossil vs. Other Brands 2006 12.9% $2,510 $1,214 Total 11.0% 1,122 600 Other Brands 14.6% $1,388 $614 Fossil Brand CAGR 2012 2006 ($ in Millions) 2012 Fossil Brand 50.4% All Other 49.6% Fossil Brand 55.3% All Other 44.7%
Slide 41: Fossil Brand Net Sales by Channel
Fossil Brand Net Sales by Channel 2006 14.6% $1,388 $614 Total 23.8% 642 178 Direct 11.2% 392 207 Intl Wholesale 7.5% $354 $229 US Wholesale CAGR 2012 2006 ($ in Millions) 2012 US Wholesale 37% Intl Wholesale 34% Direct 29% US Wholesale 26% Intl Wholesale 28% Direct 46%
Slide 42: Fossil
Uy Fossit FOSSIL:
Slide 43: 1. The Early Retro (1980's)
1. The Early Retro (1980's) ileal what\)indogg, are you? Ga =H
Slide 44: 2. Retro Americana (Early 90's)
2. Retro Americana (Early 90’s)
Slide 45: 3. Truly Inspired (2002—2005)
3. Truly Inspired (2002—2005)
Slide 46: 4. Modern Vintage (2006—Current)
4. Modern Vintage (2006—Current)
Slide 47: Modern Vintage: Fossil's design language
Modern Vintage Fossil’s design language
Slide 48: The Modern Vintage Continuum
The Modern Vintage Continuum Nostalgic Warm Artistic Familiar Details Comfortable Personality Vintage Modern New Clean Functional Creative Simplicity Classic design Mass production Fossil Modern Vintage
Slide 49: The Eames
http://ww1.prweb.com/prfiles/2006/09/29/0000444805/EAM1CHOTXFAKRWROSEWOOD.JPG The Eames
Slide 50: Philip Johnson
Philip Johnson
Slide 51: Pierre Koenig
Pierre Koenig
Slide 52: Eero Saarinen
Eero Saarinen
Slide 53: Arne Jacobsen
Arne Jacobsen
Slide 54: George Nelson
George Nelson
Slide 55: Alvin Lustig
Alvin Lustig a Masi
Slide 56: Mark + Julie: Fossil's core customers 25-35
Mark + Julie Fossil’s core customers: 25-35
Slide 57: Mark + Julie are: Youthful
Mark + Julie are: Youthful
Slide 58: Mark + Julie are: Brand loyal
Mark + Julie are: Brand loyal
Slide 59: Mark + Julie are: Modern
Mark + Julie are: Modern
Slide 60: Fossil
FOSSIL |
Slide 61: Slide 61
Slide 62: Slide 62
Slide 63: Fossil
=B\ <= \) SS a FOSSIL
Slide 64: Slide 64
Slide 65: Slide 65
Slide 66: Slide 66
Slide 67: Slide 67
Slide 68: Slide 68
Slide 69: Slide 69
Slide 70: Slide 70
Slide 71: Slide 71
Slide 72: Slide 72
Slide 73: Fossil
Uy FOssit
Slide 74: Fossil Watches
Jon O ENT wi FF Fossil Watches
Slide 75: Fossil Watches 2006 Net Sales by Region
Strong markets Under penetrated markets Untapped markets Fossil Watches 2006 Net Sales by Region Europ e United States Asia Pacific 7% Other 6%
Slide 76: Fossil Watches
Fossil Watches i. ileal what\)i(J0.92 are cna | FOSSIL
Slide 77: Fossil Watches
Fossil Watches Worldwide design and production capability Forefront of design tools and technology Extensive global wholesale distribution Real-time communication across all channels of business
Slide 78: Fossil Watch Design
Fossil Watch Design Team of designers and production specialists Focused time-line for product maximization Advanced design tools
Slide 79: Fossil Watch Global Relevance
Fossil Watch Global Relevance Worldwide collaboration Cross - channel communication Customer focused
Slide 80: Fossil Watch Global Distribution
Fossil Watch Global Distribution Department stores Specialty retail Independents Travel retail
Slide 81: Fossil Watch Holiday Newness
Fossil Watch Holiday Newness
Slide 82: Fossil Accessories
Jon O ENT wi FF Fossil Accessories
Slide 83: Fossil Accessories
Fossil Accessories Seasoned design and management teams Top tier factories World wide sourcing capabilities High operating income
Slide 84: Women's Leather
Women’s Leather Fossil’s largest accessory business Handbags Small leather goods Belts
Slide 85: Women's Handbags
Women’s Handbags Largest accessory business Top tier department store supplier Fills unique product niche
Slide 86: Women's Small Leather Goods
Women’s Small Leather Goods Compliment to handbags Includes multiple classifications Largest branded department store resource
Slide 87: Women's Belts
Women’s Belts Original accessory business Completes leather product offering Largest department store supplier
Slide 88: Eyewear
Eyewear Men’s and Women’s Trend driven Highest accessory operating income
Slide 89: Men's Leather
Men’s Leather Small leather goods, belts, bags Fashion leader Top tier department store supplier
Slide 90: Repositioning The Fossil Brand
Repositioning The Fossil Brand Getting in the circle Fifty*Four Men’s and Eyewear upgrade
Slide 91: Accessory Distribution
Accessory Distribution Domestic wholesale Fossil direct International
Slide 92: Fossil Store Growth
Fossil Store Growth Door count Penetration improvement Bounce back into department stores
Slide 93: Fossil International Growth
Fossil International Growth Success of newest Fossil store Wholesale opportunity
Slide 94: Future Growth
Future Growth Costume Jewelry Cold Weather Footwear
Slide 95: Retail Stores
Jon O ENT fh A Retail Stores
Slide 96: Fossil Store Count By Concept
Fossil Store Count By Concept Global 184 228 323 712 2006 2007 2008 2012 Accessory Apparel Outlet Other
Slide 97: Fossil Apparel Stores
Fossil Apparel Stores FOSSIL
Slide 98: wn oO = io) a4 n To c © bs a Multi
wn oO = io) a4 n To c © bs a Multi
Slide 99: n o S £ n ~ =) (e) FOSSIL
n o 2 S £ n ~ 2 =) (e) FOSSIL
Slide 100: Accessory Store Growth Strategy
Accessory Store Growth Strategy
Slide 101: Store Performance Accessory Stores (US Only)
Store Performance Accessory Stores (US Only) 6.2% First Half 2007 Comp % 25.9% Trailing 12 Four-wall Contribution Margin 3.02 Inventory Turn 76% IMU % $72,000 Inventory at Cost $549 Ave Sales Per Sq Ft 1846 Ave Store Sq Ft
Slide 102: 2006 Global Category Performance (Accessory Stores Only)
2006 Global Category Performance (Accessory Stores Only) Watches 57% Leathers 30% Jewelry 3% Other 2% Eyewear 8%
Slide 103: Dallas Guidance
Dallas Guidance Regional Management Local Execution Global Advantage
Slide 104: Infrastructure Milestones
Infrastructure Milestones SAP Retail Standardized key performance indicators Global POS selection process Real Estate criterion, selection, evaluation process Rolling 18 month integrated merchandising calendar Company alignment to support accessory growth
Slide 105: Brand Milestones
Brand Milestones Mark and Julie
Slide 106: Welcome Home
Welcome Home FOSSIL . a What\)liG2are your Gasary WS
Slide 107: Cologne, Germany
Cologne, Germany son eigg ames
Slide 108: Arrowhead, Arizona
a aa on Arrowhead, Arizona FOSSIL
Slide 109: Team
Team Created regional Real Estate/Construction teams around the globe Experienced team of real estate, construction and store design team Real Estate
Slide 110: Process
Process Real Estate Committee Regular Real Estate meetings Target list of locations by country and city Consistent review of stores performance Real Estate
Slide 111: Accessory Store Count By Region
Accessory Store Count By Region 72 113 198 530 605,000 259,100 153,700 107,600 Sq. Ft. 2006 2007 2008 2012 North America Europe Asia/ Pacific
Slide 112: Retail Growth North America
Retail Growth North America • 2006 • 2012
Slide 113: Retail Growth Europe
Retail Growth Europe • 2006 • 2012
Slide 114: Retail Growth Asia
Retail Growth Asia • 2006 • 2012
Slide 115: Retail Growth Australia
Retail Growth Australia • 2006 • 2012
Slide 116: New Store Economics Accessory Stores (US Only)
New Store Economics Accessory Stores (US Only) 25 Months Payback 47.4% Cash ROI 23.0% Four-wall Contribution Margin $35,000 Pre-opening Expenses $72,000 Net Inventory At Cost $550,000 Net Build Out $1,020,000 Ave Store Sales 605 Ave Sales Per Sq Ft 1,685 Ave Store Sq Ft
Slide 117: Q&A
Q&A
Slide 118: Web & Catalog
Jon O ENT fh A Web & Catalog
Slide 119: Web
Web +700 Million Impressions +1.8 Million Visitors / Month +1.0 Million Opt-In Email Addresses Catalog Stores Web
Slide 120: ' "<cllia
' "<cllia what\)i(J0.92 are cna | FOSSIL
Slide 121: New Handbags
NEW HANDBAGS. FOSSIL FREE SHIPPING FREE SHIPPING FREE SHIPPING
Slide 122: Slide 122
Slide 123: FOSSIL Damen Herren
FOSSIL Damen Herren FOSSIL
Slide 124: FOssiIL
FOssiIL FOSSIL
Slide 125: “GrTeanOs tuAiLs carAioa sifi-ur
[ = “GrTeanOs tuAiLs carAioa sifi-ur ileal What\)i9 10.92 are <2 | FOSSIL
Slide 126: Slide 126
Slide 127: Men's Watches
Men's WATCHES |; c
Slide 128: na cate wach Sa oortty
na cate wach Sa oortty FOSsIL
Slide 129: FOSsIL
FOSsIL
Slide 130: what\)i(J0.92 are cna | FOSSIL
' <li what\)i(J0.92 are cna | FOSSIL
Slide 131: Catalog
Catalog Stores Web Catalog 2006 - 4.6 Million Circulation 2007 - 7.0 Million Circulation 700K Name House File
Slide 132: What) 70.92 are your (rossi)
What) 70.92 are your (rossi)
Slide 133: Catalog Stores Web
Catalog Stores Web
Slide 134: Core Competencies
Core Competencies
Slide 135: Strategic Brand Portfolio
Strategic Brand Portfolio BURBERRY EMPORIO™ARMAN FOSSIL
Slide 136: Strategic Brand Portfolio
Strategic Brand Portfolio ci) MICHELE MARC BY MARC JACOBS
Slide 137: Strategic Brand Portfolio
Strategic Brand Portfolio What
Slide 138: Global Distribution
Global Distribution
Slide 139: Design and Development
Design and Development
Slide 140: Design Competency
Design Competency Differentiation by Design - A core founding principle
Slide 141: Design Competency Design Disciplines
Design Competency Design Disciplines Graphic Design Package design Photography/digital imaging Leather accessories design Eyewear design Watch/industrial design Jewelry design Environmental design Apparel design
Slide 142: Design Competency Talent
Design Competency Talent World Class design talent Recruiting from top schools / internship program Cross pollination of talent
Slide 143: Design Competency Culture
Design Competency Culture Creative working environment Fosters collaboration Talent retention
Slide 144: Design Competency Design Management
Design Competency Design Management Research Trend Direction Design/Business Strategy Concept/Technical Execution Point of Sale DESIGN PROCESS
Slide 145: Design Competency Research
Design Competency Research Global trend research Trade fairs Core brand team council
Slide 146: Design Competency Trend Direction
Design Competency Trend Direction Trend direction communication Mark & Julie - Modern vintage focus Design confidence
Slide 147: Design Competency Design/Business Strategy
Design Competency Design/Business Strategy Collaboration of Design, Merchandising & Sales Shared Design trends,selling & competitive information Design confidence, trend right / commercial product
Slide 148: Design Competency Design & Sampling
Design Competency Design & Sampling Focused design / relevant solutions Structure enhances speed-to-market Strategic technologies
Slide 149: Design Tour
Jon O ENT fh A Design Tour
Slide 150: Thanks For Stopping By!
Jon O ENT wi FF Thanks For Stopping By!