NEW YORK — Fossil wants a little of the luxury action.
The $780 million watch behemoth on Tuesday said it would acquire Tempus International Corp., which operates under the Michele Watches moniker, for $50 million in cash.
This story first appeared in the March 24, 2004 issue of WWD. Subscribe Today.
The move gives Fossil immediate entree into the booming market for high-end fashion watches, as well as access to the upscale jewelers channel.
For Miami-based Michele Watches, the company will be able to capitalize on its rapid growth by exploiting Fossil’s expanding global presence without ceding control of the company.
Michele pioneered the better watch segment, which has been attracting a lot of attention with entries from companies such as TechnoMarine and Locman.
“The strength and prestige that Jack Barouh, his family and entire team have developed with Michele provides an added dimension to Fossil,” said Steve Bock, president of Fossil’s luxury division, in a statement.
“I think one of the most important things is that the change is one of ownership only,” said Barouh, president of Tempus. “Myself and the management will continue to operate as usual.”
Michele initially entered the U.S. high-end market in 2000 with its CSX Diamond collection, snagging Neiman Marcus and Bloomingdale’s as its first accounts. Prior to that, said Barouh, the company had concentrated on doing business in Latin America.
However, since the U.S. introduction the brand has achieved rapid growth in the better department store segment. Today, said Barouh, the Michele brand is a top seller across the board. “In the average price point of $1,000 we’ve become the best-selling watch in most of the major department stores we sell to, including Neiman’s, Saks, Nordstrom’s and Bloomingdale’s,” said Barouh. According to Barouh, retail sales with Neiman’s are now in the neighborhood of $8 million.
Despite the strength of the company, Barouh realized in order to capitalize on its growth he would need a partner.
“I wouldn’t say I was actively looking [for a partner],” said Barouh. “While not knocking on people’s doors, I was definitely receiving people’s phone calls.”
Approximately seven months ago Barouh, the third generation of his family involved in the watch industry, had his first meeting with Fossil.
In particular, Barouh felt Fossil could help bring Michele into the global arena. “Our growth has been so fast from 2000 to 2004 that I felt in order to really get this thing going we would need to find a partner who would help us get to that level, and then be able to take it further than that,” said Barouh.
Fossil has positioned itself with a mix of watches ranging in price from $50 to $100 and up. Licensing agreements with Emporio Armani, Burberry, DKNY and Diesel have also been profitable for the company and extended the company’s international presence with noticeable affect.
During Fossil’s fourth-quarter conference call, management trumpeted the strength of its international strategy and its double-digit increases in sales.
Tom Kartsotis, Fossil’s chairman, noted on the call that international sales had ticked up 34.4 percent during the quarter ended Jan. 3.
“Clearly, our ability to adapt our portfolio of watch brands to suit a particular market and country is working,” said Kartsotis.
International sales show no signs of slowing for Fossil. According to Kartsotis, management anticipates international sales to continue to claim a higher percentage of sales “given the vast size of this market.”
For the year, Fossil saw earnings spike 16 percent to $68.3 million, or $1.40 a share, from $58.9 million, or $1.22 a share, a year ago, while sales rose 17.8 percent to $781.2 million from $663.3 million.
Barouh also recognized that Fossil was looking to move into higher-priced items. “Fossil is extremely strong in the fashion watch business,” said Barouh. “I knew I could add a lot to their higher- priced merchandise, which they are moving into.”
Barouh sees Fossil’s desire to establish itself as a lifestyle brand, with its continued movement into accessories and clothing, as an opportunity for Michele.
In the fourth quarter, Fossil’s 119-store retail operation posted a 26.6 sales increase and a 14.9 percent rise in comparable-store sales.
“Through the contacts and the power of Fossil on a worldwide basis we should be able to make inroads into many of the markets we just have not had time to attend to or look at seriously,” said Barouh. He indicated that looking to expand its product offerings beyond watches was of interest. With the “warehouse of talent” at Fossil, Barouh believes Michele would be able to significantly shorten the time and learning curve needed to bring a new product to market.