With the rise of smartphones, people have said that watches are no longer needed. But luxury watch maker Fossil Group Inc (NASDAQ:FOSL) has proven that consumers still want stylish timepieces. With a profitable first half of 2013, the company knows that there is more to a watch than telling time.
What’s a watch?
Watches are also a fashion accessory — specifically, one of the only such accessories that men can wear. Most men don’t wear earrings, rings, or necklaces as part of an outfit, but a watch will accompany a suit tastefully.
Glancing at your watch is more polite than taking out your phone. When someone looks at their watch, they can only be checking the time. On a phone, they could be texting, checking Facebook, or doing any number of things considered rude during a meeting.
Roughly 90% of Americans use cell phones, and only 19% wear watches. But 19% is still 42 million consumers who want a watch — and that doesn’t include the massive international market.
Fossil Group Inc (NASDAQ:FOSL) produces fashion accessories for men and women, including handbags, belts, and jewelry, and yes, watches. The company owns the brands Fossil, Michele, Relic, Zodiac, and the recently acquired SKAGEN. During the first quarter of 2013, Fossil saw earnings per share increase 25% to $1.15, beating analyst estimates of $0.93.
The most recent quarter marked one year since Fossil Group Inc (NASDAQ:FOSL)’s acquisition of SKAGEN. The company spent 2012 integrating its acquisition, and now SKAGEN has begun adding to sales and margins. Fossil Group Inc (NASDAQ:FOSL) is using the brand’s designs to expand in Europe, where SKAGEN saw double-digit increases in sales last quarter. Fossil Group Inc (NASDAQ:FOSL) recently launched a SKAGEN jewelry branch as an additional growth driver.
Internationally, Fossil Group Inc (NASDAQ:FOSL) is working to capture more of the Asian market. It’s developing infrastructure to support the growing businesses that are fueled by the growing Asian middle class. This emerging class is drawn towards watches and other accessories made by global brands. The Asian market led Fossil’s international growth with a 18% increase in sales during the most recent quarter.
Specifically in China, the company operates directly in “first tier” cities such as Beijing and Shanghai, and works with partners in to get products to the remaining second- and third-tier cities. It is important to reach those smaller cities because their demand for luxury brands is growing at a yearly rate of 8.4%, compared to 4.8% in first tier cities.