Fossil Looks Increasingly Attractive
Himanshu is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The luxury watch retailer Fossil (NASDAQ: FOSL), made a strong comeback after a disastrous first quarter whith strong growth drivers in its arsenal. It posted an awesome quarter last week which beat estimates and sent the stock price soaring. Investors indeed had a genuine reason to be joyful since the delight came after lackluster results which had almost halved the company’s stock price three months ago.
What Worked For the Company during the Quarter?
Fossil has started following the strategy of giving great discounts to the customers twice a year. This led to increased interest of shoppers to buy Fossil’s products which range from as low as a $7 to as much as a $2000 watch. In fact, here lies the forte of the watch giant since its broad range of offerings helps it in catering to all kinds of shoppers. Hence mind blowing sales drove revenue north to $636.1 million.
Growth drivers aplenty…
Fossil’s strategy of acquiring Skagen Designs to strengthen its position in Europe worked wonders. The acquisition, completed last year, was the star during the quarter as it drove sales in each segment. In fact, the main motive of using Skagen’s popularity in Europe was to push for sales in the region which comprises 30% of its revenue. This not only helped Fossil this time to witness good times in the region where every other retailer has been finding it difficult to survive but also looks as a long term growth potential.
Moreover, Fossil has a strong weapon in its arsenal. It makes watches for brands such as Michael Kors (NYSE: KORS), which has been on a hot streak since its IPO, which might seem to be an absurd statement in today’s times of failed IPO’s such as that of Facebook (NASDAQ: FB), Zynga and Groupon.
Kors has been growing at a rapid pace with as much as 100% growth in its stock price. Its trendy watches are irresistible for the shoppers making it to be an investors’ favorite. Why I pointed this out was to highlight the demand for Fossil’s manufactured products which will continue to do well in the future. Also, although Facebook has been a cause of worry for investors, I believe it has had a positive effect on Fossil. I recently bought my Fossil watch through an ad on Facebook, and I believe the social network is a solid platform for the company to advertise its products.
The watch maker has also been eyeing to expand its footprint in China where its arch rival Movado (NYSE: MOV) has been enjoying the largest presence. Moreover, Movado has been continuously putting efforts in product innovation which have been paying off. It will be interesting to see how this competition takes a turn. On one hand Movado offers an extensive range of expensive watches, and on the other Fossil has a wide range of collection catering to almost all the segments.
Emerging markets have room for penetration and this is what Fossil is eying. It has smartly strategized to expand in Asia, especially China where it believes there is scope for expansion and huge demand for its products. This can act as a winning point for Fossil in the long term. The market for Fossil’s products has been showing signs of strong recovery especially with positive results registered by Europe. If a company can manage the most uncertain market then I believe there can be no stopping its success.
Moreover, a weak outlook because of strong dollar cannot stop a strong company to perform well. Its acquisition of Skagen and its broad target market will continue to benefit the watch giant giving its results favorable outcomes. It looks to be a great performer in the long term. Investors should certainly keep an eye on this watch maker.
justhimanshu has no positions in the stocks mentioned above. The Motley Fool owns shares of Facebook, Fossil, and Movado Group. Motley Fool newsletter services recommend Facebook and Fossil. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.