What Happened To Fossil Watches?

[Music] as they have grown in power tech companies such as apple and fitbit have also sought to conquer a small strip of real estate on your wrist the watch the global watchmaking industry has certainly seen its fortunes change since the introduction of the smartphone and as demand for fitness trackers and smart watches grow however watches have not totally disappeared higher-end swiss-made watches have thrived in recent years serving customers eager for beautifully made timepieces that exemplify traditional analog craftsmanship in a highly digitized era other legacy watchmakers have had to adapt and give customers a new reason to keep timepieces on their wrists and one company that has especially suffered is fossil fossil was once a high-flying brand as recently as 2014 it had 3.5 billion dollars in annual sales shares hit a high of 139.20 on april 5th 2012. the company's worldwide net sales fell 27 from 2019's 2.2 billion dollars to 1.6 billion dollars in 2020 and shares have crashed to around twelve dollars as of may 24 2021 it closed and net 30 stores in 2020 and said it expects to shrink its store count by another 65 to 75 total in 2021. in addition to its own brand fossil group also owns the michelle misfit relic skogen and zodiac names and it makes watches for a number of companies armani exchange bmw skechers diesel dkny emporio armani kate spade new york michael kors puma and tory burch the company has been licking its wounds and repositioning itself in a tumultuous time when smart watches are taking over the segment of the market brands like fossil once owned i'm not saying it's going to disappear but it's a tough sell these days you know especially in that smart watch price band it's you're really fighting upstream there fossil has brought its own smart watches to market initiated a multi-year turnaround plan grown its e-commerce business and focused on growing markets in china and india but will that be enough [Music] one of the things that distinguishes watches is how they work two of the major categories are quartz watches and mechanical watches for a long time all watches and clocks were mechanical mechanical watches use gears and springs to keep pace with time then in 1969 japanese makers such as seiko began introducing quartz-based watches these watches are electronic and typically battery powered the battery sends electricity to a quartz crystal which vibrates at a very steady frequency world standard of accuracy and that frequency is used to measure time quartz made watches a lot cheaper a lot more available and a lot more accurate than mechanical watches the years that followed are sometimes called the quartz crisis or quartz revolution the 1980s saw the rise of the fashion watch perhaps best exemplified by the swatch brand which made low-priced quartz-based watches that often came with eye-catching designs and bright colors throughout the 80s the swatch praise grew and grew and you saw these plastic 40 or less quartz fashion watches but there was a collectibility to it and a lot of them were started trading at a thousand dollars five thousand dollars twenty thousand dollars it was crazy it was in this environment that fossil was founded in 1984 by tom carsodius a greek american businessman the business began by selling inexpensive watches made in asia the company was named after a nickname tom kartsotis and his brother had had for their father as the fashion watch craze continued fossil watches developed their own cult following i remember in the late 80s early 90s there was really a collectibility around fossil you had collector groups you had people that collected the tins that they came in in fact if you go to fossil headquarters in dallas there's a whole wall of these tins that people have collected over the years and breakfast clubs that got together and talked fossil the company is based in richardson texas and in december 2019 employed a total of 10 200 workers in 2020 fossil made cuts to its workforce and as of january 2021 employed about 7 500 people including approximately 5 300 employed by foreign subsidiaries kartsotis left the company as its chairman in 2010 when he left to found shinola detroit a company with somewhat similar products that advertised itself as a made in america brand cart sodas brother costa who had joined the company in 1988 took over the role of chairman in the last several years watches have consistently comprised about 80 percent of fossil total sales as of 2021 its watch business can be divided into traditional watches smart watches and hybrids which are watches that look analog but carry smartwatch features fossil also makes and sells accessories such as jewelry handbags small leather goods and belts for both their own brands and license brands these have accounted for anywhere from about 16 percent to nearly 20 percent of annual sales since 2017. there is also a tiny licensed eyewear business which accounted for approximately a half a percent of sales in fiscal year 2020. fossil sells its products across 140 countries through 23 company-owned sales subsidiaries and through a network of approximately 75 independent dealers in addition to its headquarters in texas the company has offices in hong kong and switzerland most of its watches are made in asia and sourced through a hong kong subsidiary in fiscal year 2020 about 43 of fossils global watch production was assembled or sourced through wholly or majority owned factories down slightly from 47 the previous year sales fell more than 27 in fiscal year 2020 compared with 2019 and nearly 13 in that year compared with 2018. the company had a net loss of 96.1 million dollars in 2020 and 52 million dollars in 2019 compared with just three and a half million in 2018. fossil said in its 2019 10k that changing consumer interests and shopping patterns have led to a challenging environment watch wholesales to retailers have been soft in both the u.s and europe as consumers increasingly prefer connected watches group sells a mid-priced watch which puts it in a crowded market and one that is struggling with the growth of smart watches apple makes more watches than every other brand combined that smart watch purchase certainly does cannibalize that that fashion watch purchase so if you're a consumer standing in a in a busy department store watch department it's almost like being in a casino where there's sensory overload there's shiny little objects everywhere and those fashion watches are competing for those smart watch dollars and they're just not winning the fight to be sure smart watches and other connected devices that can keep time are a potential threat to all watchmakers but luxury watchmakers have fared pretty well by serving a different kind of demand for something that represents heritage analog technology and old-school craftsmanship upscale mechanical devices appeal to customers perhaps because they are not high-tech products with a mechanical watch that's a generally hand-assembled living breathing mechanical watch that's powered by its wearer so with proper service by a watchmaker that watch can last for generations so that becomes a companion of yours that you wear on your wrist throughout your life's trials and tribulations and and it becomes part of your story so i think more and more consumers are becoming aware whether it's through social media or better messaging from the brands collector groups that you know gee rather than a fashion watch which is kind of disposable maybe i should invest in a mechanical watch a whole ecosystem of enthusiasts collectors publications and dealers have coalesced around luxury watches there's a strong secondary market and even old ones can sell for remarkably high prices watches are one of those product categories that doubles as a hobby there's dedicated communities around it i really have to give websites like ho den ki a shout out here because it has really built a loyal following built its own community and it has really great educational and entertaining content for both novices and experts it isn't a perfect benchmark but one indicator of the overall health of the watch market is the health of exports from switzerland in 2019 swiss wristwatch exports reached a historic low of 20 million units a 13 decline from 2018 and below the depths seen during the financial crisis that began in 2009 it is also worth pointing out that the apple watch alone outsold the entire swiss watch industry in 2019 with 30.7 million units however the value of swiss wristwatch exports increased to 20.5 billion francs about a 3 percent increase over 2018 that increase was almost entirely due to the growth of high cost mechanical precious metal or bi-metal watches priced at over 3 000 francs everything else declined especially steel watches and quartz-based timepieces of course 2020 was a different story attributed almost entirely to the coronavirus pandemic wristwatch exports were valued at 16.1 billion francs a decline of 21.4 percent compared with 2019. the number of wrist watches sold fell 33 percent to 13.8 million units about a half century since the quartz crisis decimated the swiss watch industry high-end mechanical watches are thriving the quartz watches that once threatened them with extinction are the ones that are now struggling faced with their own high-tech challenger and getting a piece of the smartwatch market is tough when you think of the smartwatch you also think of its integration with your phone and your computers the consumers tend to trust a technology company in that sense so you're going to go to apple because you've got the iphone you know your apple file apple user same with samsung it's going to integrate with your galaxy phone in addition to tech there are ongoing troubles facing shopping malls as of january 2021 fossils international company owned store count numbered 152 retail locations and 121 outlet stores brick and mortar shopping makes up a considerable share of fossil sales fossil did not respond to a request for comment so what is fossil doing to turn its business around the company has a four point plan underway the first is to boost what it calls innovation and storytelling basically develop new products and market them there is also from a design perspective a lack of newness kind of in the watch category it is an investment to come up with you know new cases new styles and i'm sure until they see that demand they're not going to make that investment in addition to the you know headwinds of the smartwatch second is stepping up its digital business as customers increasingly shop for goods online third it is focusing on growing markets in india and china and fourth it is tightening its supply chain lowering costs and improving its overall competitiveness fossil began its new world fossil initiative in 2016 a multi-year restructuring plan meant to free up funds for investments in digital marketing and new products the company finished the first stage of the plan in the third quarter of fiscal year 2019 and delivered 200 million dollars of run rate cost savings over a three year period the company is now in the second stage which it calls new world fossil 2.0 it involves reducing costs and focusing on key growing markets particularly in asia and new products especially its connected watches the company said in may of 2021 that the plan generated 50 million dollars in expense savings in 2019 175 million dollars in 2020 and 53 million dollars in the first quarter of 2021. in a presentation in september 2020 fossil said it believes its total addressable market will grow from 145 billion dollars in 2019 to 185 billion dollars by 2023 that is for everything watches leather and jewelry but will it be enough can a fashion brand make it in this era where the watches that are selling are high-end timepieces or computers there are some successful direct to consumer brands that might show the way such as olivia burton and mvmt or movement which was bought by the movado group in 2018. mvmt or movement is a great example it started as a direct to consumer brand and built a following online through instagram in addition to having a great assortment at a good price point and now under movado it's really succeeded in men's and women's and been more accessible at mass market there are also some well-known legacy brands that have managed to generate some interest and buzz among mechanical watch lovers and enthusiasts one such company is timex which sells a lot of lower priced quartz watches at retail much the same way fossil does and then there's the timex that's doing really cool stuff that's bringing lifelong lovers like me back to the brand so in 2017 timex came out with their first mechanical hand wound watch since 1982 and many of us were just dumbfounded for 199 we got this hand wound mechanical reissue of the of the classic marlin watch it is just a sliver of timex's business but it is making the brand intriguing to collectors who care about watches like timex fossil does have a recognizable name that in its way does resonate with consumers fossil is a heritage brand it might not be at that luxury level of course of a rolex but it is a story brand and consumers perceive it as good quality timepieces three out of the five top watch brands in sales are exclusively smartwatch makers apple samsung and fitbit but smart watches brock says can be a kind of gateway drug to the world of watches which can benefit companies that make a compelling product most smartwatch wearers report that owning a smart watch now will not prevent me from buying either now or in the future traditional watch fossil's plan is to revamp its business enough to survive the question remains if it can reverse its declines and lure buyers away from gleaming new products made by apple samsung and other massive tech firms you

Channel: CNBC

Views: 1,223,504

Rating: 4.8591905 out of 5

Keywords: CNBC, business, news, finance stock, stock market, news channel, news station, breaking news, us news, world news, cable, cable news, finance news, money, money tips, financial news, Stock market news, fossil watches, watches, luxury watches, watches for men, watches for women, watches rolex

Id: BlGalsye6pY

Length: 15min 37sec (937 seconds)

Published: Thu Jun 03 2021

Reddit Comments

[u/oblee]

shitty company held accountable for shitty actions. Wild.

[u/B3ARDGOD]

Mentions declining sales like it's a fucking mystery but somehow doesn't mention that all their smart watches are faulty, held together with inferior glue and eventually the charging rings will fall off.

[u/Dannykirk8]

CNBC says that smartwatches will not prevent consumers from going to mechanical designer watches. Let me tell you after owning my first smartwatch in 2015. A Huawei W1 I can tell you I will never go back to a mechanical designer regular watch and I love my fossil made watches! Then in a another sentence they say and show that Apple has out sold all the mechanical designer watches. So who is going back to a regular watch?

[u/Classic_Mirror1367]

WearOS is already full of bugs but on top of that Fossil also made faulty watches with many defects

[u/SquareBanana]

Gonna provide the necessary balance. I have a Gen 5 Carlyle and it's honestly great. Feels orders of magnitude higher quality than the TicWatch Pro 2020 I had before, and the Sony Smartwatch 3 I had before that.

My Carlyle looks like a non-smart watch; genuinely stylish enough to fit in in the boardroom. But it also does everything Wear OS does. And the rotating crown input is fantastic - all watches should have one. Usually lasts all day for me; I usually take it off to charge at night (though it charges to full in perhaps an hour?).

Had mine 6 months and no sign of any hardware faults. It's is the best thing about it for me in all honesty - I've had a couple of Wear OS issues like Strava failing to get GPS lock, but the hardware looks and feels impressively high quality.

[u/DaKilla666]

Wear OS HAPPEN

[u/jordanlund]

That's fascinating, but it makes sense that the people who see a watch as a fashion accessory or a status accessory would go Apple over anything else.

[u/cianuro]

I have a drawer full of broken fossil watches that answers the question. Shame on me for buying all that crap. Absolute tat. Never, again ever.

[u/ActuallyThatOtherGuy]

I swear it's not a mystery. Even before Smartwatches became a thing smartphones had already replaced watches for an absolute ton of people and Fossil had already switched to simply coasting on their brand. They seem to have been trying a bit harder but they are far from the times where they made themselves famous.