Fossil Acquires Wearable Tech Company

Fossil Group Inc., the parent company of Fossil Corporate Markets (asi/55145), announced last week that it has acquired wearable technology company Misfit for a total of $260 million, and will incorporate the firm’s technology into its watches next year. “For years, we have leveraged our competitive strengths … to be a global leader in watches,” said Fossil CEO Kosta Kartsotis in a statement. “While we’ve led in so many ways, we haven’t been a leader in technology on the wrist, until now.”

Accentuating the company’s desire to embrace new high-tech opportunities, the Texas-based Fossil separately reported a 14% decline in net sales for the fiscal quarter that ended October 3. The company further suffered a 17% net-sales decline for watches in the quarter compared to last year’s third quarter, with decreases in its licensed watch category (brands such as DKNY, Michael Kors, Adidas and more) offsetting growth in its Fossil and Skagen brands. In October, Fossil revealed its new Q line of watches, with multiple items integrating activity tracking into analog timepieces. Next year, Fossil will incorporate Misfit’s technology into its Fossil and Skagen brands and a portion of its licensed portfolio.

“We are thrilled to join forces with Fossil Group to usher in the next era of wearables where elegance, beauty and long-lasting wearability are paramount,” said Sonny Vu, the founder of Misfit who will become Fossil’s president and chief technology officer of connected devices. “Together, we will introduce products that blend Misfit’s seamless, intuitive technology and user experience with the design, style and branding that is the hallmark of Fossil Group.”

Fossil’s net income decreased by $46.2 million – a drop of nearly 45% – in the quarter. The company attributed the decline to the negative impacts globally of the strong U.S. dollar. The company’s jewelry and leathers segments decreased by 5% and 3%, respectively. As customary, Fossil did not break out ad specialty sales in its earnings statement. “While our results for the third quarter were within our expectations, we are not satisfied with our overall performance,” Kartsotis said.

Looking ahead, Fossil expects net sales for 2015 to decrease between 8% and 10.5%, but also says that its future prospects are bright. “We believe the substantial capabilities we acquire with Misfit and the many opportunities it creates, combined with our diversified business model, solid financial position and cash flow generation, set us up to win over the long-term and drive value for our shareholders.”