By  on March 28, 1994

NEW YORK -- While most of its growth is expected to come from new products and international expansion, Fossil Inc. still sees lots of room for its core Fossil brand fashion watches to expand market share in department stores.

"Our philosophy -- as Ralph Lauren has proved -- is you can do more business in those doors by becoming more important to those doors," said Tom Kartsotis, Fossil's chairman, chief executive officer and founder. "I think that's a big part of our growth going forward," he said.

Kartsotis spoke recently in New York at a consumer products and retail conference held by Montgomery Securities.

Besides its growth strategy for Fossil -- which includes expansion plans for Europe and Asia and a continued push into the hot licensed products area -- Kartsotis talked about the potential for private label watches, leather goods and the company's lower-priced Relic watch brand.

Kartsotis also said Fossil is in talks concerning a TV shopping venture and expects to be on the air sometime this year.

The Dallas-based company, which went public in April 1993, recently reported earnings shot up 62.9 percent in the year ended Dec. 31, to $11.5 million, or 91 cents a share. Sales jumped 42.3 percent, to $105.1 million. Most of the growth came from Europe and in licensed and private label products.

Kartsotis said the company's Fossil brand, which accounts for about 70 percent of sales, was "extremely strong" in 1993.

"Its our most developed business, but it is still growing at a 10 percent rate," he said.

One of the keys to Fossil's success has been its close work with department stores to protect the brand, coupled with its own marketing efforts, he said. To prevent the brand from being marked down, Kartsotis said Fossil gives away, with watch purchases, such items as T-shirts, beach towels, caps and pens.

He also noted that the Fossil brand is not sold to J.C. Penney Co. or promotional retailers like Mervyn's to protect its established department store business.

"As a result, stores are more apt to emphasize the importance of Fossil," he said, adding that this has led to special promotions in many department stores. He noted that last June, for example, Macy's New York flagship created a main-floor promotion with the theme of a Fifties-style hamlet called "Fossil Town USA."Macy's is planning a similar promotion this year for Fossil's 10th anniversary.

Kartsotis pointed out that the lower-priced Relic watch brand, started in 1990, sells to middle market retailers such as Penney's, Sears, Roebuck & Co., Kohls and Montgomery Ward, and it "has done extremely well for us."

Another plus for Fossil, according to Kartsotis, is an in-house team that supplies the graphics for its packaging, design and advertising.

"This is becoming a big weapon for us as the fashion watch business is turning into show business," he said.

Among the biggest growth areas last year was the company's collectors business.

Fossil started its collectors business early last year with a Nolan Ryan commemorative watch sold with an autographed baseball. Encouraged by its success, Fossil started selling a Superman watch packaged in a phone booth, a Fred Flintstone watch packaged in a tin lunch box and a Roy Rogers line sold with a matching bandanna. This year, the company plans a Barbie watch packaged in a little hat box and a scarf to commemorate Barbie's 35th anniversary.

The company also signed a deal last year to sell limited edition watches for the National Football League, Kartsotis said.

Fossil's private label business moved ahead last year with new accounts including Warner Bros., FAO Schwartz, Harley-Davidson and Eddie Bauer. Before last year, Fossil's private label business consisted mainly of making Disney watches for Disney stores.

Emboldened by its success in taking on Swatch, long the leading fashion watch brand, in the U.S., Fossil is planning to make a big push internationally. Last year, the company made a major drive into Italy and this year plans to gear up for Asia.

Kartsotis said he also sees significant opportunities in the leather handbag business, where the company uses its own Fossil brand. He said the company's belt and small leather goods business has "picked up pretty quickly."

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