Fossil Inc., a leading mid-priced fashion brand watchmaker, is “selectively” laying off hundreds of employees here and overseas, to cut costs. It is reportedly eliminating up to 260 positions, or 4 percent of its approximately 6,000 employees. In addition, all executive officers and senior vice presidents are taking a pay cut, the company said Tuesday.
The jobs are being erased throughout Fossil’s operations, including corporate, seasonal employees who work peak times, and international operations. It has also put a freeze on hiring; and suspended merit pay increases, bonus payments, and 401k contributions.
The cost-saving actions are a “response to the current economic environment and reduced visibility to top line revenues,” said the company’s fiscal 2008 fourth quarter and full-year earnings report. They follow a 12.9 percent decline in fourth quarter net income (to $46.3 million) for the Richardson, Texas, firm, due largely to the impact of a stronger U.S. dollar on foreign sales, it said. (Over half of Fossil’s revenue is made abroad.) For all of fiscal 2008, net sales rose 10.5 percent (to $1.58 billion) and net income increased 12 percent (to $138.1 million).
Together, the payroll cost cuts should save about $16 million annually, Fossil said. They follow a previously announced reduction in its retail store growth plans, and “substantial” cuts to previously planned capital expenditures.
For fiscal 2009, Fossil expects its e-commerce business to keep growing, but anticipates lower net sales and operating income overall for the much of 2009. Still, “with over $175 million in cash, no outstanding borrowings under our revolving credit facility and a strong cash flow model, we are well-positioned to meet the demands of this uncertain environment,” said Mike Barnes, Fossil president and chief operating officer.
Fossil designs, produces, markets and distributes proprietary and licensed fashion watches, jewelry and accessories worldwide, with most sales coming from watches. Brands include its own Fossil, Relic and Michele names, as well as licenses for Giorgio Armani, Michael Kors, Adidas, Burberry, Marc Jacobs, and Donna Karan. It also does private-label watches for Target and Wal-Mart. Fossil Inc. sells through department stores, jewelry and watch stores, and specialty retailers in the United States and in 90 countries; 320 company-owned and operated retail stores; international e-commerce websites; and its own U.S. e-commerce Web site.