Monthly Archives: August 2015

Fossil falters but watches tick on

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Fossil Inc. has seen its sales and profits fall at the same time that the fashion watch category has grown. Fashion watches are a growth category at retail, with Anne Klein, Guess, Timberland and Joe Boxer brands selling well. Fossil reported a 38.6% drop in profits for the quarter ended Sept. 30, 1995. Retailers say Fossil overproduced its successful licensed watches and has been introducing too many styles. The best performers in the category are those that are dominant in a particular niche.

Fashion watches, traditionally a leading category at retail for holiday, are turning in a strong performance this season despite recent stumblings from one of the field’s biggest players.

Fossil Inc., which has been one of the brightest stars in the business for the last five or so years, hit a snag recently and experienced slowdowns in sales and profits. Executives at the company noted that this was not completely unexpected, since it had intentionally cut back on its production of licensed products and even announced that it anticipated a resultant downtrend.

This has not been lost on retailers. While some said they continue to do strong business with the brand, others have been having their problems.

“Fossil had really captured the market in licensed products at one point, but then they got to a stage where the were producing such big quantities of them that the merchandise just wasn’t that exclusive anymore,” said one merchant from a major department store company who asked not to be named.

“They have also become much too overassorted in their core watch line,” the merchant added. “They introduce way too many new watch styles at every market, and it has caused them to lose their focus. In this business, staying in a niche is the best thing for a vendor, and if Fossil had stuck more closely to their retro theme, everyone would have been better off.”

In Fossil’s most recent third quarter ended Sept. 30, profits fell 38.6 percent and sales dropped 2.2 percent; for the nine months., earnings dropped 10.6 percent to $8.2 million, but sales were still ahead 17.3 percent, reaching $122.4 million. Prior to this, quarterly increases in both sales and profits had regularly been in the 20 to 25 percent range or more for the last several years.

Nonetheless, the fashion watch category has continued to grow at retail and a number of stores said they experienced double-digit growth for the fall season and are expecting the same for the holiday period.

“Fashion watch business has been extremely good,” said Kim White, merchandise manager ofwatches and jewelry for Federated Merchandising, the buying office arm of Federated Department Stores, Cincinnati. “We’ve had tremendous increases in the last two to three years.”

White said that her current top lines are: Anne Klein and Anne Klein II, “which are our number-one growth resources”; Guess, “our number-one volume resource,” and Timberland and Joe Boxer, both produced under license by Timex.

These vendors have been selling well White said, because they have pursued a specific segment of the business aggressively.

“To do very well. a vendor has to want to own a certain corner of the market,” she noted. “Then, if a company does do that, we as merchants have to respond by taking the merchandise and exploding it onto the consumer through presentation and marketing. The philosophy for retailers has to be, `How fast can we get the business and distort it?”’

However, trying to keep up with these demands was one of the roadblocks that Fossil ran into, according to Richard Gundy. executive vice president of the company.

“The reason we cut back on our production of licensed products by about 60 percent this year was because they were not being viewed as very collectible anymore.” Gundy noted.

“Our original idea for the licensed lines was to do limited editions in very small amounts and keep the demand high, but the stores started asking us to make more and more of them so that consumers would buy more.” he added. “But then, at the end of a season, they would have inventory left over and no one would want to buy it because it just didn’t look that exciting anymore.”

In order to replace volume that has been lost with the cutting back of the licensed lines. Gundy said, Fossil has introduced several new lines since the beginning of the year. The new FSL line, for instance, is made up of high tech look, sport-oriented watches. It was introduced at retail this fall.

Fossil’s strategies have been paying off in at least some cases. Dave Harris, senior vice president and general merchandise manager of accessories for Carson Pirie Scott, said that both the licensed limited-edition goods and the new merchandise have been selling well.

“Fossil is still our number-one brand,” Harris said. “I think the situation they’ve come into recently is fairly predictable, and all it means is that the brand is maturing. I just think they need to concentrate more on accelerating new products.” Harris added that his other best-selling lines include Anne Klein II, Liz Claiborne and Joe Boxer.

“We’ve been tracking gains in the mid-teens all fall in the fashion watch category, and I think we’ll end up having another outstanding holiday season as well,” Harris said.

“We’ve been far exceeding our plans in fashion watches,” said Lizabeth Bailey, divisional merchandise manager for fashion watches, jewelry and accessories at Bloomingdale’s. “It’s true that Fossil is not running the same kind of increases it used to, but that’s because it’s already a well-developed business.”

Bailey said that the strongest recent performances have come from Fossil, Guess, Anne Klein and Anne Klein II, Joe Boxer and Swiss Army watches.

Bailey, as well as other merchants, also pointed out that Swatch, a line that had its own share of woes just a year and a half ago, has seen a major revival.

“Swatch really made some changes in marketing and management.. they introduced new products such as the Irony line that have really led to a comeback,” Bailey said.

Martin Grossenbacher, president of Swatch U.S.. acknowledged that his firm had suffered a loss of market share due to a sloping off in demand for the company’s core product, the whimsical plasticwatches that had been building its business since the mid-Eighties.

“We decided to take a new direction in product and introduce watches that were more conservative and classic,” Grossenbacher said. The result was the Irony line, which has metal cases instead of plastic ones and more simple, straightforward styling and colors than the core products do.

“Of course, we still offer the same fun, brightly colored watches that we always did, but now we have a wider selection, so that consumers can come to us for both their casual and more seriouswatches,” Grossenbacher said.

He noted that the firm also opened a new design lab here about six months ago in order to better tune into trends in the U.S. market. It also operates a design lab in Milan.

“On a worldwide level, we are still gaining market share,” he said. “In the U.S., we have had our ups and downs and the last up was around 1991 and 1992,” he said. “But right now our U.S. business is up 30 percent from the same time last year, and I think we’re swinging back in a positive direction. In any case. we are committed to the U.S. market for the long term.”

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Ultima Brands, U.S.A. set to unveil Fendi watches

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Ultima Brands, U.S.A. Inc., will unveil its line of Fendi watches next week. The line represents the first U.S. licensing agreement for Italian-based Fendi.

Thomas Venables, president of Ultima, which is responsible for manufacturing and distributing thewatches, expects to sell about 200,000 watches worldwide the first year.

Initially, Bloomingdale’s will have the exclusive on the watches for the month of September.

Venables said the women’s and men’s watches are designed by the Fendi sisters and coordinate with Fendi’s leather goods.

The 18 karat goldplated watches, wholesaling from $125 to $375, come in bracelet styles or with a leather strap. The line, produced in Switzerland, consists of eight styles in 74 different versions. New designs will be added yearly in August.

Venables said the watches will be sold in fine jewelry departments and in Fendi boutiques. Thewatches are being shown in the Ultima showroom at 153 East 61 St.

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Status, style score at Basel

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Status and style proved to be the primary focus of watchmakers and jewelers at the 1996 World Watch, Clock and Jewelry Show in Basel, Switzerland. Emphasis was placed on white precious metals such as white gold and platinum in lieu of stainless steel, new accent colors, and vintage-style watches featuring many models with contrasting color faces and Arabic numerals.

With the watch field becoming increasingly crowded, fashion and prestige captured the traffic at the mammoth World Watch, Clock and Jewelry Show here last week.

Exhibitors gave the buyers several new trends to lure a consumer hungry for luxury products and names. Here’s what the buyers saw:

* White precious metals like platinum and white gold becoming more prominent as makers traded up from sportier stainless steel.

* New accent colors including pink and rose gold, and even copper.

* A variety of vintage-style watches, many with Arabic numerals and contrasting color faces.

Further underscoring the growing role of fashion, men’s watch makers were making specific models for women, rather than just downsizing their men’s styles. In jewelry, key looks went in two opposite directions — dainty, small designs and bold, graphic pieces.

The eight-day fair, which closed Thursday, featured 2,433 watch and jewelry exhibitors, nearly 80 percent of which came from outside Switzerland. Exhibitors from Italy and Germany, mainly jewelers, accounted for more than half the total. Buyer attendance figures were not available at press time, but organizers assessed the turnout as about the same as last year, or roughly 80,000.

Some exhibitors said they they felt business was a bit slower this year, particularly with European customers from markets like France and Germany, where retail business is still sluggish. Many added, though, that they saw an increase in buyers from Southeast Asia, a trend being witnessed at many other recent trade shows in Europe, and throughout the fair, watch-makers with some sort of cachet talked about strong business.

Retailers confirmed the growing inherent appeal of the luxury product, both in jewelry and watches.

“The return to precious stones rather than semiprecious is prominent,” said Stephen Magner, vice president of watches and jewelry for Neiman Marcus.

“We are also seeing a lot more fashion, with pastel-colored stones, like peridot and pink tourmaline,” added Timothy Braun, Neiman’s fine jewelry buyer.

As for the switch to white gold and platinum in watches, Magner said it reflected that “customers like the look of stainless steel, but they want the gold.”

“White gold, white metals and square watches,” were among the key elements recapped by Carolyn Kelly, fine jewelry buyer for Saks Fifth Avenue. She added that while the Swiss franc is still high against the dollar, the the franc dropped 20 percent this year in the dollar’s favor. While price doesn’t determine Kelly’s buying choices, she said the better exchange makes for easier buying.

As for the appetite for status and brand identity, Christian Viros, chief executive officer of Tag Heuer, put it this way: “We need people to be able to say, `Ah, yes, this is a Rolex, that’s a Cartier.’ The industry has experienced a period of fast growth. The enthusiasm for watches led to new brands coming to the market — like mushrooms after the rain. But these will disappear because they are only selling product and not an image as well.”

“This is not to say that we are only selling image,” Viros continued. “You also need a high-quality product. People are worried about the future and are looking for `refuge’ brands that have a trustworthy image,” he added, noting that Tag Heuer headquarters, foreign subsidiaries and distributors spent $18 million on advertising and marketing last year. This year, Tag Heuer is adding sponsorship of the prestigious Whitbred around-the-world yacht race to its roster of sports marketing agreements.

Select distribution is another key point, Tag Heuer executives noted. The watch company has progressively reduced its number of doors in the U.S. from 3,000 about 10 years ago to 1,000. U.S. sales continue to grow, however, and will end this up around 15 to 20 percent higher than last year, said Fred Reffsin, president of Heuer Time & Electronics Corp., the U.S. subsidiary.

The pull of fashion was demonstrated at the display of Gucci watches, made in Switzerland under license to The Severin Group based in Irvine, Calif.

The Gucci stand was packed, and despite the trend to white gold replacing stainless, the interest there was largely due to the new stainless steel “G” watch, inspired by designer Tom Ford’s Gucci G motif. The watch, which comes in three sizes for men, women and juniors, is priced to retail at $895 with the steel bracelet, or $695 with a black patent leather strap. A spokeswoman said that the watch will be the focus of the company’s watch advertising campaign due to appear in the next few months.

The watch licensee has been enjoying the fruits of Gucci’s corporate restructuring and current popularity, noted company executives. Severin Wonderman, chairman, gave credit to Ford, noting that the designer understands “what Gucci is all about. It’s gotten back to being fun.”

Asserting that the watch license was a mainstay while Gucci was going through some rough times a couple of years ago, Severin said that the Gucci watch brand is racking up a retail volume of about $500 million.

Watch competition is particularly tough in the low-to-moderate sector of the market. Oris, of Holstein, Switzerland, is banking on its sporty image and it’s focus on stainless steel, mechanical automaticwatches to boost its sales, according to Mark Wasserman, president of Oris USA.

“We are not a recognizable brand. Most people have `kind of’ heard of us,” Wasserman said, “We want to be known as a fine automatic watch that’s reasonably priced given the Swiss manufacture.”

Oris introduced several new watches at Basel, including the Big Crown Chronograph, featuring an oversized crown, like those used on old pilot watches. The larger crown enabled pilots, wearing heavy gloves, to manipulate their watches more easily. The chronograph is a combined chronograph and chronometer, Wasserman noted.

Oris currently has 70 accounts in the U.S., a number Wasserman hopes to raise to 100 by the end of this year. Oris watches retail from $400 to $2,000.

Among the watchmakers out to change their image of being strictly dedicated to men’s styles was Audemars Piguet, based in Le Brassus, Switzerland. All the vitrines of Audemars Piguet’s booth featured women’s watches, even though women’s time-pieces represent less than 20 percent of unit sales.

“For the last three years, we have started to take the energies and talents of the firm to work on developing ladies’ watches,” said Larry Kreilser, chief operating officer of Time Products, North America, the U.S. distributor of Audemars Piguet and Blancpain in the U.S., and several other luxury brands, including Piaget and Vacheron Constantin in the UK. Like other traditional men’s watch makers, AP wants to better balance sales in favor of women because they buy more watches than men. These companies also want to show they have the know-how to make women’s watches.

Audemars Piguet launched Opera, a gold bracelet watch with a diamond bezel and lugs, featuring ruby and sapphire cabochons, to retail at $24,000. Opera, along with the Carnegie watch launched last year, will be part of a major retail push with Neiman Marcus next fall, which will even feature trunk shows, Kreisler said. Neiman Marcus’s Tim Braun confirmed these plans.

“We want to show women how to accessorize their fashions with luxury watches,” Braun said.

Other watch companies courting the women’s watch business included Blancpain, with a new retro military watch called Fly Back, introduced for men and women; Omega’s continued push with the Constellation watch, using supermodels Cindy Crawford and Elle Macpherson as spokeswomen; Breitling’s perpetual jeweled watch, and Jaeger-Le Coultre with a women’s diamond Reverso.

Bulgari, which showed its watches outside the Basel show halls in a historic mansion nearby, also offered more women’s watches, featuring colored precious and semiprecious stones.

Jewelry at Basel has a lower profile than watches, but it’s a growing segment. The jewelry manufacturers, along with component makers and stone traders, are housed in a smaller show down the street from the main European watch hall.

“Platinum is definitely strong, but the main thing I noticed is that the U.S. jewelry makers are so far behind the Europeans in terms of design and technology,” said David Connally of David Connally Inc., a jewelry manufacturer from Marbledale, Conn., visiting the Basel show for the first time. “The Europeans are also able to make their goods combining good prices with quality and style.”

The trend toward small-scale jewelry was seen at such jewelers as David Yurman, whose bold, silver cabled looks were shrunk down to more delicate dimensions.

“We have introduced scaled-down, more simple looks. Our neckwire is in a much smaller width,” explained Kate Harrison, director of product development for the New York-based designer’s company, who said the hope is that the small sizes will attract a younger customer.

Wellendorff Haute Couture in Gold, from Pforzheim, Germany, also went to smaller dimensions. Best known for their silk-cord-inspired necklaces and bracelets, Wellendorf showed reduced silhouettes, daintier chokers and bracelets in white gold.

In contrast, there were strong graphic looks like the wide rings in pink gold featuring big inset dots in white or black enamel from Maria Grazia Cassetti, of Florence, Italy. Link bracelets in large honeycomb or other geometric patterns, with matching earrings and other accessories, were shown by companies including Chopard and Italian maker Alessandro Biffi, featured in the World Gold Council’s trend showcase.

Statistics presented by such organizations as the World Gold Council and De Beers Central Selling Organization helped give the mood a lift, pointing to increased sales for gold, platinum and diamonds in most markets last year. Demand for gold in the U.S. was up 6 percent, while in the UK, gold sales rose 13 percent; in Italy, 5 percent, and in France, 3 percent. Sales declines were experienced, however, in Germany and Greece, as well as several Southeast Asian markets.

Platinum sales reached a world record of 1.49 million ounces, up some 40,000 ounces compared with 1994. The sharpest rise was in North America, which posted an increase of 18 percent.

Sales for diamonds also scored record levels, according to De Beers, posting an increase of 6.6 percent, with the strongest increases in the U.S., Japan and Southeast Asia.

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