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Three Reasons to Buy Fossil Inc (FOSL)

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I can’t remember exactly where designer watches come in Maslow’s hierarchy of needs, but I’m sure they’re in there somewhere. That might explain how Fossil Inc (NASDAQ:FOSL) has managed to make such a strong and extended run. The stock is up 12% this year, and 50% over the last 12 months. All that growth has pushed Fossil’s P/E to 18, but it’s still substantially cheaper than many of the luxury brands it mingles with.

That in itself isn’t a good reason to buy Fossil Inc (NASDAQ:FOSL), but it does make it more attractive. In addition, the watch retailer also has strong sales growth and excellent brand tie-ins. Here’s a rundown of the three reasons I like Fossil, right now.

Fossil Inc (NASDAQ:FOSL)

Retail sales rising
Fossil Inc (NASDAQ:FOSL) is a wholesaler first — we’ll cover that next — but it also runs a successful retail business. Last quarter, the company boasted a 4.3% increase in comparable sales, bucking the cold-weather downer that many retailers saw. That increase resulted in retail sales accounting for almost a quarter of total sales, and highlighted the strength that Fossil’s own brand has.

As a retailer, Fossil Inc (NASDAQ:FOSL) has worked to grow the share of its income generated in its own stores. That has led the company to expand its product line, and it now carries bags, jewelry, and other accessories. While not every category has made a splash each quarter, the company has managed to make itself a force to be reckoned with in the mall. Comparable sales have now grown for the last 20 quarters. That’s a trend investors can get behind.

Wholesale growth
On the wholesale side of the business, Fossil Inc (NASDAQ:FOSL) is really playing to its strengths. Last quarter, wholesale revenue rose 13.5%, with the European division seeing the strongest growth. That business competes most directly with the Movado Group, Inc (NYSE:MOV), which produces watches for most of the designers that Fossil doesn’t cover. To compare, Movado’s revenue was up just 6.1% last quarter. Fossil’s edge came from the company’s strong portfolio of brands — which is what we’re going to call a segue.

Strong brand portfolio
The company produces watches for Michael Kors Holdings Ltd (NYSE:KORS), DKNY, and Adidas, to name a few. That stacks up against Movado Group, Inc (NYSE:MOV)’s collection of Tommy Hilfiger, Hugo Boss, and Coach, Inc. (NYSE:COH). Recently, Kors has been driving the train at Fossil Inc (NASDAQ:FOSL). Management on both sides of the partnership called out the strength of the business, with Kors calling out watches as one of its biggest business drivers. Watches have helped Michael Kors Holdings Ltd (NYSE:KORS) push its comparable sales along at breakneck speed, and that’s not going to stop anytime soon.

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