Fossil focuses its marketing spend

Fossil, the timepiece and accessories company, will focus marketing expenditure on its most profitable businesses, and aim to drive an immediate return on investment (ROI), as it responds to the varied challenges of inflation and COVID-19 in its different trading regions.

Inflation impacts demand

• Greg McKelvey, Fossil’s evp/chief commercial officer, told investors on an earnings call that various “headwinds” were observable in its various geographies.
• In the Americas, data suggests the “overall market is down”, potentially due to unfavourable comparisons with last year, when US stimulus payments encouraged consumer spending.
• Sunil Doshi, Fossil’s chief financial officer, further noted that the Americans and Europe are facing a surge in the cost of living.
• “Consumer spending in discretionary categories, particularly ours, will experience some pressure due to sustained higher levels of inflation and some normalization of spending,” he said.

The on-going challenges of COVID-19

• In mainland China, there is still “COVID-related disruption” and Fossil will be “watching the market closely as it opens up a bit,” continued McKelvey.
• Markets in Asian countries that often benefit from Chinese tourism could also see knock-on challenges from this situation. Taken together with mainland China, these nations contribute around 50% of Fossil’s sales mix in the region.
• In India, “sequentially the revenues are very strong and we're pleased with the progress that we are seeing from consumer demand in the country,” Doshi said.

The strategic response

• First among four main strategic moves by Fossil in response to this environment is to “plan conservatively and execute aggressively,” McKelvey told investors. “While we are realistic about the headwinds we face in the market, all three regions are well-positioned with both quality and quantity of inventory and will aggressively take advantage of upside opportunity.”
• Secondly, Fossil will focus “on distorting and investing in our most profitable businesses, with increased sales effort, opened by allocation and marketing spend.”
• Thirdly, innovation will still be vital, albeit with an emphasis on “a much tighter assortment for 2023 that will align with our focus brands and category strategies.”
• Fourthly, “from a marketing perspective, given the current environment, we’re focusing on shifting our mix to more immediate ROI [and] conversion-driving digital marketing activations,” said McKelvey. Overall marketing spend should largely remain steady, and the company will “remain agile and ready to increase spend as we see improving trends in the macro [environment] and consumer purchasing behaviours,” he added.
  

Sourced from Seeking Alpha