This Fashionable Company Appears to be Defying Macro Trends

If you want to buy a nice watch, but you don't want to spend a fortune, then your best bet might be Fossil (NASDAQ: FOSL  ) . This is more important than you might realize, and might just lead Foolish investors to a great investment opportunity. 

Price Points
Fossil's products, which also include various accessories and clothing, mostly range from $85 to $600. It doesn't matter if you're shopping at J.C. Penney, Kohl's, Nordstrom, or Saks Fifth Avenue. Regardless of your retailer of choice, you're likely to find what you need. If you're lucky enough to have a Fossil retailer near you, then your shopping needs (or desires) will be made easy.

The varying price points for Fossil products allow the company to target a broad range of consumers. This actually allows Fossil to steal market share during difficult times because most of its competitors target only high-end consumers. However, this doesn't necessarily mean the stock is good to own if the market begins to misbehave.

Corporate Strategy
Fossil operates Wholesale and Retail operations in 130 countries. In addition to growing its global presence, Fossil has managed to design innovative watches that focus on unique designs and the use of new materials. Combined with affordability, this has differentiated Fossil from its peers.

Innovation and affordability has also led to continuous net sales growth. Better yet, Fossil raised its 2013 EPS guidance to $6.15 to $6.30 from $6.00 to $6.26, and it upped its sales growth guidance to 11% to 12% from 10% to 11%.

Another positive is quality debt management, Fossil sports a debt-to-equity ratio of 0.30. This is above the industry average of 0.20, but it's certainly not a cause for concern. Unlike many of its peers, Fossil doesn't pay a dividend, which helps keep debt to a minimum.

Recent Results
Fossil's net sales popped 11.4% for the second quarter year over year, thanks to growth in both Wholesale and Retail. Watch and jewelry sales shot higher, seeing 15.2% and 23.9% sales growth, respectively. Leather and eye-wear haven't performed as well, suffering sales declines of 5.1% and 39.2%. However, watches are by far the biggest segment and hold the most importance.

Net sales have also been impressive on a geographical basis. In North America, sales increased 4.2% to $260.7 million. Any improvement here is important, because North America represents 36.9% of sales. Europe is a distant second, representing 24.2% of sales. Interestingly, Fossil managed to grow European sales by 15% to $170.7 million in the teeth of an austere environment. Asia Pacific represents 13.6% of sales, and it has been the most impressive region for growth, with sales jumping 17.7% to $96.2 million.

All of this is impressive, but Fossil did increase its total store count to 493 from 427. And if you look at total store comps, sales declined 0.1%. 

Concerns and Competition
According to The Wall Street Journal, more than half the jobs taken in July were in the retail and restaurant industries, which pay below $20 per hour.

With consumers seeing declines in disposable income levels, they're less likely to spend on what they want. Instead, they're spending on what they need. The good news is that if consumers are looking for a fashionable and affordable watch, they might look at Fossil first.

For instance, the average consumer isn't going to look at a high-end Movado (NYSE: MOV  ) watch. At the moment, Movado is performing well, partially thanks to stock and real estate appreciation, which led to disposable income for investors. 

The problem with investing in Movado instead of Fossil is that if the stock and real estate markets begin to suffer, then much of this disposable income is lost, which will likely lead to a decrease in sales for Movado watches. While Fossil isn't resilient either, the middle-income consumer is already suffering. This consumer hasn't seen gains from investments, so at least we already know where the Fossil consumer stands.

If you're looking for another company with a focus on fashionable trends, (especially in America and Europe), then you might be tempted to consider the more apparel-focused Guess?  (NYSE: GES  ) . Like Fossil, Guess? upped its full-year EPS guidance. Guess? now sees $1.78 to $1.92 instead of its earlier forecast of $1.70 to $1.90. But this is mostly due to cost-cutting and expense management, not revenue growth. Unlike Fossil, and mostly due to a weak consumer in China and Southern Europe, Guess? has lowered its full-year revenue guidance to $2.56 billion to $2.59 billion from $2.57 billion to $2.61 billion.

Conclusion
Based on the company's strategy and various price points, Fossil is likely to be the most resilient company in this group. Fossil offers fashionable products at reasonable prices, is performing well on the earnings front, and despite a cautious consumer at the present time, should remain a long-term winner going forward. All of this adds up to Fossil being worth a Foolish look.    

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