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Fossil Group, Inc. (NASDAQ:FOSL) Q4 2015 Earnings Call February 16, 2016 4:30 PM ET
Eric M. Cerny - Investor Relations Contact
Kosta N. Kartsotis - Chairman & Chief Executive Officer
Dennis R. Secor - Executive Vice President, Chief Financial Officer and Treasurer
Gregory A. McKelvey - Executive Vice President, Chief Strategy Officer & Chief Digital Officer
Omar Saad - Evercore ISI
Ike Boruchow - Wells Fargo Securities LLC
Edward J. Yruma - KeyBanc Capital Markets, Inc.
Cecile Origenes - Cowen & Co. LLC
Simeon A. Siegel - Nomura Securities International, Inc.
Betty Chen - Mizuho Securities USA, Inc.
Shreya Jawalkar - Stephens, Inc.
Erinn E. Murphy - Piper Jaffray & Co (Broker)
Lindsay Drucker Mann - Goldman Sachs & Co.
Dorothy Senghas Lakner - Topeka Capital Markets
Dana L. Telsey - Telsey Advisory Group LLC
Laurent Vasilescu - Macquarie Capital (NYSE:USA), Inc.
Good day and welcome to the Fossil Group's Fourth Quarter 2015 Earnings Conference Call. Today's conference is being recorded.
At this time, I'd like to turn the conference over to Eric Cerny, Investor Relations. Please go ahead, sir.
Eric M. Cerny - Investor Relations Contact
Thank you. Good afternoon, everyone. Thank you for joining us and welcome to Fossil Group's fourth quarter 2015 earnings conference call.
I'd like to remind you that information made available during this conference call contains forward-looking information, and actual results could differ materially from those that will be projected during this call. Fossil Group's policy on forward-looking statements and additional information concerning a number of factors that could cause actual results to differ materially from such statements is readily available in our Form 10-K and 10-Q reports filed with the SEC.
In addition, the company assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Please note that you may listen to a live webcast or replay of this call by visiting fossilgroup.com under the Investors section.
Now, I would like to turn the call over to the company's Chairman and CEO, Kosta Kartsotis.
Kosta N. Kartsotis - Chairman & Chief Executive Officer
Thank you and good afternoon, everyone. I will begin with a few prepared remarks before turning the call over to Dennis Secor, our Chief Financial Officer. Following his prepared remarks, Greg McKelvey, our Chief Strategy and Digital Officer, will join us for the Q&A.
We look back on 2015 as a year of both significant challenges and accomplishments. We anticipated economic, competitive and consumer headwinds, which all materialized and in some cases intensified, putting pressure on sales and earnings. Despite disappointing operating results, our team remained focus on our strategic priorities to strengthen our leadership position in our core business and to extend that leadership further through our investments in wearable technology.
We set course to reposition the company with the necessary platform to accelerate sales and profitability in the future and made significant progress against our goals. We are very proud of the dedication and resiliency our team demonstrated as they rose to meet the many challenges in 2015. Their ability to remain nimble in a quickly changing environment and the strategic actions we have taken over the past year better positioned us to improve our performance in the future.
Through that lens, while a challenging year, it was an energizing year, a year where the entire organization was challenged to re-imagine their role and evaluate processes and procedures to have more of a direct impact on the business. We restructured our operations and teams to be in the best position to compete in this rapidly evolving time in retail and look forward to building on those actions in 2016.
As I mentioned on our call in November, with disruption in the marketplace comes opportunity to take advantage of growth and changing trends. While our performance over the last six years or seven years has delivered strong revenue and earnings growth, our performance in 2015 was below our expectations and more importantly, below where we see the potential of this business. The last time we experienced disappointing trends in the company, we regrouped and refocused our efforts on design and innovation and positioned the company for strong growth. Given the current environment, that has been our objective, and we have made strides to that end.
The determination of our team, the focus on our strategic objectives and our drive for innovation has us positioned for future growth in a rapidly changing world. We will take this time to review the strategic objectives that we laid out for you coming into 2015 and update you on our progress against each. These objectives and priorities will remain our focus for the foreseeable future, and we intend to build on the momentum we gained in each during this past year. We are very focused on these objectives to improve our performance in the future.
First, investing in growing our own brands, Fossil and SKAGEN. We believe this is very important for the long-term valuation of our company and our position in the marketplace. Throughout our history, we have successfully leveraged our strategic and competitive advantages to become the licensee of choice in the traditional watch space. While we will continue to play that role, we believe the long-term value for the Fossil Group is to be a strong lifestyle brand builder and leverage that strength to grow our licensed brands. This past year, we invested in brand building and demand creation activities for our brands, and on a comparable basis to last year, drove 4% growth in Fossil and 15% growth in SKAGEN.
We advanced our CRM capabilities to better understand our customer, their shopping patterns and preferences, and establish a deeper connection with them to provide for continued dialogue, all with the intent to facilitate repeat customer visits and to drive additional sales. In 2015, we completed development of a global customer database to run targeted CRM campaigns around the globe with a focus on understanding all digital and social activity of our customers. The insights gained allowed us to create new social activation programs and in-store events aimed at driving traffic to our websites and our stores. We continue to work towards converting customers into multi-category purchasers and expanding our customer base to help drive growth going forward. We will continue to invest in these initiatives based on the initial success we have seen. You can expect more cross-channel events along with testing of additional social based engagement programs. We believe these efforts will prove crucial as consumer shopping patterns continue to evolve, and of course strategic, given the profitability associated with growing our own brands.
We also have made great strides in increasing brand awareness through product innovation, both in traditional categories as well as the connected accessory space. I'll talk more about the connected accessory initiative in a moment, but we know that innovation across watches, jewelry and accessories will continue to be a source of growth. We saw this for Fossil leathers in our wholesale partners in the fourth quarter, as improved product, better designs and the quality of our products resonate with customers. We intend to build on the categories momentum in 2016. Additionally, our collaboration with opening ceremony is a great example of innovation and newness that can create consumer demand.
Second, investing in our digital capabilities to improve the online experience for the customer and increase our omni-channel capabilities. With changes in consumer shopping preferences, and continued declines in mall traffic, this is a critical component to capturing the customer in the current retail environment. We need to be wherever the customer is and provide them a differentiated and uniquely branded experience beyond the traditional trip to the mall and store experience.
Following the late 2014 re-launch of the SKAGEN website, we re-launched the Fossil website in 2015 in time for the holiday shopping period. The new website is also a key component to advancing our omni-channel capabilities, providing us the opportunity to further develop their relationship with the brand in an effort to drive sales. With the new website, we have given the customer an improved shopping experience, added compelling brand content and stories, and carried these capabilities across an upgraded mobile platform. All of this functionality is supported by a world-class content management system which enables us to update our branded experiences more efficiently and scale globally as we grow our international e-commerce.
Our investments and efforts in this area proved successful, driving double-digit growth across our e-commerce channel in 2015. Given the returns on these investments, and ensuring we continue to evolve with the customer, we look to bolster our digital capabilities through continued investments in our platform and shopping experience. Key functionality coming in 2016 includes more flexible fulfillment options, social integration and referral programs, and continued improvements for mobile. Additionally, we have initiatives targeted to support our Fossil brand focus on gifting and personalization, including custom watch building capability, as well as embossing and engraving capability online, something we executed in the first quarter in time for Valentine's Day gifting.
Third, extending our leadership position in the traditional watch market by continuing to optimize and enhance our portfolio of lifestyle brands. 2015 proved to be a challenging year for the traditional watch category, with technology and new functionality taking mindshare and likely impacting customer purchases. Given those pressures, performance in the category was choppy across regions, and globally actually showed declines towards the end of the year. However, our external data sources continue to forecast growth in the category for the coming years and we believe our portfolio of highly-desirable lifestyle brands will enable us to continue to take share in the space.
This past year, we added two new brands to the portfolio that will benefit us going forward: Kate Spade New York and Chaps, which is a Ralph Lauren brand. These new brands complement the existing brands in the portfolio and represent new opportunities for price points and distribution channels. While we inherited an existing business with Kate Spade New York, immediately reaping the benefit in 2015, most of the year was spent bringing the brand on to the Fossil Group platform. The teams have been designing and producing new styles to take advantage of our global distribution network in an even more meaningful way in 2016. We also look forward to launching the Chaps line later this year.
Managing a portfolio provides a natural element of diversification, but as all brands experience ebbs and flows, it is our responsibility to ensure our portfolio includes the best brands in the fashion lifestyle category. A portfolio is always changing and evolving, trimming and adding. So even as a great brand like Burberry decides to no longer pursue the category and to focus on their soft goods offerings, we have many other brands that can drive growth. We will always direct our resources to the areas of the business that generate the highest returns and will now redeploy those resources to other brands and growth areas of the business while keeping an eye on the potential for bringing new brands into the portfolio.
We believe the new brands I mentioned earlier are very capable of driving future growth. Innovation and design are key elements to driving growth, and our team is focused on elevating our platform of brands with new designs, materials and functionality to capitalize on what is trending in our space, all in an effort to put the traditional watch category back on a path to achieve sustained growth.
Technology is another form of innovation and we are very focused on building our presence in the connected accessory space, our fourth objective. With consumer interest in the category driving the trend and our retail partners seeking to add more technology-infused product to their assortments, we are putting resources behind this initiative in a very meaningful way. Perhaps no other category of our business is moving as quickly as this one. We spent 2015 designing, developing, producing and launching the Fossil Q assortment in time for the holiday shopping period. We are bringing fashion to technology, filling a void within the wearable technology space that will enable increased functionality with a unique fashion and branded experience.
We believe technology has the ability to be the next catalyst in the accessory space and we are positioning ourselves to take advantage of the trend unlike any of our peers. On the heels of our Fossil Q product launch, we made a significant investment behind this initiative with the acquisition of Misfit. With their scalable cloud and app platform and world-class engineering team, we are developing cutting-edge technology-infused products for our brands and are on track to deliver these throughout 2016.
We find ourselves at the epicenter of the convergence of fashion and technology and are focused on continued innovation in the space. Our branding and design capabilities combined with our production and global distribution network have enabled us to become a category leader in traditional watches. Now, combined with our efforts this past year in launching Fossil Q and acquiring Misfit, we have differentiated ourselves from the competition and further enhanced our competitive advantages. The response to our Fossil Q line of the connected devices was strong in the fourth quarter. Our retail partners have given us increased placement and we have plans to introduce more styles into the Fossil brand in 2016, including the Fossil pilot that launched in the first quarter.
The strategic acquisition of Misfit accelerates our ability to become a force in the wearable technology space and ensures a consistent flow of new product with technology, innovation and increased functionality. Misfit further broadens our capabilities and allows us to leverage their cloud and app platform to provide a unique branded experience for our portfolio of brands. We intend to bring fashion to a functional category much like we did in the traditional watch category.
Earlier this year, in conjunction with the Consumer Electronics Show, we announced that we will be launching new products in the connected space throughout 2016. And Misfit also expands our addressable market for 2016 and gives us new doors to distribute existing brands to, and the opportunity to leverage our existing global distribution to broaden the Misfit brand as well. Dennis will go into more detail about what this means to our business model in 2016, but we recognize this is a huge priority for us and it makes sense for us to invest in this area to support future growth.
Our ability to combine the technology that consumers are demanding with the design, style and brands that they've always loved at the global scale necessary to drive the right economics is unparalleled. We believe we are uniquely positioned to lead the convergence of style and technology and become the fashion gateway to wearable technology and the connected device markets. So through the lens of those priorities, we look at 2015 as a solid year, delivering against the strategic initiatives we laid out at the beginning of the year and will continue to focus on these in 2016.
In some ways, this past year felt like the year of a perfect storm given the headwinds and challenges we faced. Unfortunately, those headwinds don't simply disappear with the start of a new year. In fact, some of those macro challenges appear to have increased with the onset of the new year. However, we operate with a little more visibility into these challenges and a better tool set with which to respond.
We face new entrants coming into the watch space with the must-have fashion trend of the year, proving to be technology. This is proving to be a good thing, drawing more and more attention to the accessories category and consumers are now having more options to choose from than ever before, but it was clearly a headwind for us prior to the launch of our connected accessories.
Our results were impacted from prior year comparisons of the exceptional growth and outperformance of Michael Kors, one of the most successful lifestyle brands in this watch space. While a difficult hurdle to overcome in our reported results, we're looking for new ways to drive even further growth in the brand with innovation and design, including technology leading the way. Consumer shopping behavior is changing and evolving quickly. As mall traffic continues to decline, our digital and omni-channel investments should allow us to compete in this new age of retail.
And of course currencies moved against us in 2015 as well. While regional diversification of our business model is typically a point of strength, foreign currency significantly negatively impacted our reported results in 2015 and will persist into 2016. Nearly three full points of our operating margin erosion in the year came from currency alone. Macro uncertainty in many of our key international growth markets, particularly in Asia, also put pressure on our business last year and that doesn't show signs of easing. And finally, restructuring efforts impacted our reported results in 2015. The team embraced our restructuring efforts and endured tough but necessary decisions and changes that align our resources with new opportunities for growth and will make us leaner and more nimble to pursue those opportunities.
In light of all those challenges and despite a year that fell short of our operational goals and typical growth, we delivered sales of roughly $3.5 billion, excluding the impact of foreign currencies and an adjusted EPS of $5.63. Additionally, we continued to return value to the shareholders, repurchasing $229 million worth of stock, just under three million shares, while maintaining a prudent leverage ratio.
Specific to the fourth quarter, we are encouraged with the way we concluded the year, particularly given the performance of our business within key areas of focus for 2016 and beyond. On a constant currency basis, sales declined 2% in the quarter, with all three of our regions improving sequentially from the third quarter. And notably, Europe returned to growth in the quarter. Our multi-brand watch portfolio declined 2% in the fourth quarter in constant currency, also a sequential improvement from the third quarter.
With SKAGEN and Fossil both performing well across categories and regions, we continued to focus on how to improve the performance of many of the licensed brands in the portfolio. Given the strength and desirability of the lifestyle brands in the portfolio, we have the opportunity to drive greater growth, ensuring each brand reaches its full potential, something we are always focused on and where we believe innovation and newness can drive that desired outcome.
So, before I turn it over to Dennis to give you more details on our performance and outlook, I want to recap our priorities for 2016. Our goal is to deliver continuous improvement as we move throughout the year, and the team is very focused on these initiatives, given their potential to drive future growth. First is to optimize our portfolio of lifestyle brands to extend our leadership position in the global watch market. Second is to focus on building out presence in the connected accessory space by leveraging Misfit across our portfolio of brands. And third is continuing to build on the progress made growing our owned brands, Fossil and SKAGEN, as well as advancing our digital and omni-channel capabilities.
In this rapidly changing world, we are very excited about the opportunities for Fossil Group. We remain very optimistic about the future, confident in our long-term strategies and look forward to building on the progress we made this past year regarding our strategic priorities. As 2015 resulted in our first EPS decline in a decade, we recognize it was a difficult year for our shareholders, but we appreciate your support and the long-term horizon with which you invest.
We believe 2016 will be a transformative year in further advancing our wearables initiative and unlocking the potential of Misfit and applying increased functionality and a robust platform across our portfolio of brands. This will enable us to launch innovative new product in time for holiday and to expand on those efforts even more in 2017. Our restructuring efforts have enabled the company to be leaner and more nimble with increased efficiencies that should position the company to tackle the new world of technology. And we believe that our many growth opportunities, combined with our diversified business model, solid financial position and cash flow generation set us up to win over the long-term and drive value for our shareholders.
Now, I will ask Dennis to walk us through the results and the outlook for 2016.
Dennis R. Secor - Executive Vice President, Chief Financial Officer and Treasurer
Thanks, Kosta, and good afternoon, everyone.
We are relatively pleased with our fourth quarter performance as the potential for intensifying headwinds that concerned us going into the holiday season, given our limited visibility, and a lot of market disruption, did not materialize to the extent we felt they might. Overall, fourth quarter net sales decreased 2% and on a reported basis declined 7% to $993 million.
While sales did decline in the quarter, each of our three regions posted sequential improvements and Europe turned to constant dollar top line growth. Off-price sales were also higher than we anticipated. We are encouraged by the continued growth in Fossil and SKAGEN as well as the contribution from newer brands and categories which we intend to build on in 2016.
For the quarter, we delivered diluted earnings per share of $1.46 compared to $3 last year. The EPS comparison to last year's results was negatively affected by several factors, including $0.28 from currencies, $0.14 due to last year's bonus accrual reversal, $0.13 due to a noncash impairment charge, $0.12 for Misfit transaction costs and $0.04 of restructuring charges. Compared to last year, the current quarter benefited $0.12 from a lower tax rate and another $0.09 due to the lower share base.
Beyond the sequential improvement in each region, we were encouraged with the 3% constant dollar growth in the quarter for Fossil, led by growth in watches with leathers and jewelry increasing as well. Sales growth was strongest in Europe and Asia while the Americas experienced a very slight decline. Globally, the retail stores performed well across full price and outlets with improved conversion offsetting continued declines in traffic, yielding an overall comp increase of 1%. Of course, our launch of the Fossil Q assortment was very well received, particularly, the Founder, which is our new smart watch with display.
SKAGEN sales grew 12% in constant dollars with growth across all three categories led by watches. Growth in Europe and Asia was partially offset by a decline in the Americas. In constant dollars, our multi-brand watch portfolio declined 2% compared to last year. Despite a sequential improvement in performance for the portfolio, it is clear that technology continued to put pressure on the traditional watch category during the busy holiday period. And some of our stronger brands in the portfolio continued to be hindered by anniversarying historically strong growth. Excluding Michael Kors, our multi-brand watch portfolio was up slightly, with the benefit of newer brands in the portfolio.
Overall, for the year, reported sales decreased 8% to $3.229 billion. On a constant currency and calendar basis, sales declined 1% with growth in jewelry and leather offset by decline in watches, and growth in Europe offset by declines in the Americas and Asia. Global retail comps increased 1% for the year, with increases in Europe and the Americas offset by a decline in Asia. Fossil grew 4% for the year, while SKAGEN grew 15% for the year. Our multi-brand watch portfolio declined 3% as growth in Fossil and SKAGEN and the addition of Kate Spade New York were offset by declines in most other brands in the portfolio.
In the Americas, fourth quarter reported sales decreased 5% to $518 million, a 3% constant dollar decrease. The decrease was driven by watches and jewelry, partially offset by modest growth in leathers. Excluding Michael Kors, watch sales increased for the quarter in the region. Across brands, constant dollar sales increases for Armani, and the benefit of having Kate Spade New York were offset by declines in nearly all of the brands in the portfolio.
Within the region, growth in Canada across the retail and wholesale channels was offset by a decline in both channels for the U.S. Comp store sales declined slightly as traffic continued to be down in the region. Constant dollar wholesale sales declined during the quarter, largely driven by a weak performance in U.S. department stores where traffic continues to be a challenge and softer trends in the business persist. Overall, for the full year, reported sales in the Americas region decreased 5% to $1.662 billion. On a constant currency and comparable calendar basis, sales declined 2% compared to last year, as growth in the retail channels, including positive comp store sales was offset by a weaker wholesale channel.
In Europe, reported sales decreased 7% to $347 million. Constant dollar sales increased 3%, with increases in all three categories, led by watches. Growth in the region was driven by Fossil and SKAGEN, partially offset by a decline in the licensed portfolio. Within the region, strong constant dollar currency growth in France was partially offset by a decline in distributor markets and a relatively flat performance in larger markets like the U.K. and Germany. In the region, given continued traction from our marketing investments, we drove growth in the retail channel supported by new stores and a solid increase in comp store sales. Our e-comm business also performed well in the quarter, delivering double-digit growth.
Overall, for the full year, reported sales in Europe decreased 11% to $1.070 billion. On a constant currency and comparable calendar basis, sales increased 2% compared to last year, as double-digit growth in the retail channel, including solid positive comp store sales was partially offset by a weaker wholesale channel.
In Asia, reported sales decreased 15% to $127 million while constant dollar sales decreased 9%. The decrease was driven by watches and jewelry, partially offset by modest growth in leathers. Growth in Korea and continued solid growth in India was offset by declines in most markets in the region, including Japan, Hong Kong and China where general economic sluggishness and macro uncertainty has continued to impact our business.
Growth in Fossil, SKAGEN, Michael Kors and the addition of Kate Spade New York were offset by declines in the other brands in the portfolio. Comp store sales were flat in the region. Overall, for the full year, reported sales in Asia decreased 12% to $497 million. On a constant currency and comparable calendar basis, sales decreased 4% compared to last year, as modest growth in the retail channel driven by new stores was more than offset by a weaker wholesale channel.
From a global perspective, within our licensed portfolio, we continued to anniversary strong growth comparisons for the largest brand in our licensed portfolio, Michael Kors. While still a very productive and successful brand, its growth has subsided in recent quarters. For both the fourth quarter and full year, growth in jewelry was unable to offset declines in watches for the brand. Regionally, the brand declined in the Americas, though in constant currency grew in both Europe and Asia. While repeating the tremendous success of this brand is challenging, we continue to believe that there are white space opportunities to energize the brand with our new designs, wearable tech, and men's as well.
In the quarter, gross profit decreased to $526 million and gross margin declined 380 basis points to 53%, 300 basis points of which relates to the stronger U.S. dollar. Our gross margin rate was lower than we had anticipated as our in-store promotions proved very successful in driving customers to our stores. That drove further sales and gross profits, though at the expense of our margin rate. We also sold more through off-price partners than we had planned and took some additional actions to help drive sales of Swiss watches. These same factors, partially offset by the favorable impact of our pricing initiatives and lower product costs, drove the margin changes compared to last year's fourth quarter.
Fourth quarter operating expenses were higher, as planned, increasing $54 million or 14% to $437 million. The largest driver of expense growth related to our increased marketing and strategic investments. We were also anniversarying last year's fourth quarter reversal of incentive comp accruals in the quarter. This quarter, we also recorded $8 million in costs related to the Misfit acquisition and an additional $9 million noncash charge to write down the carrying value of our SKAGEN intangible assets.
This charge resulted from a fairly formulaic accounting calculation that is driven by a comparison of our most recent projected SKAGEN revenues to our initial projections after the 2012 acquisition. Given the stronger U.S. dollar, there is now a gap between those projections which drives this accounting charge. The brand, with its unique aesthetic, continues to drive strong constant currency growth, including a 15% gain for 2015 and we remain very optimistic about its future.
We also recorded $3 million of restructuring costs in the quarter. Offsetting all these increases was a favorable impact of currencies. Our fourth quarter operating expense rate was 44% compared to 35.9%.
Operating income decreased to $89 million, including a $39 million unfavorable currency impact, and operating margin decreased to 9%, including a 320-basis point headwind from currency. Most of the additional operating margin headwind was driven by the expense factors I just discussed along with an 80-basis point headwind from gross margin.
Interest expense increased to $6 million given our higher debt level. Fourth quarter other income increased $5 million to $12 million due to net gains on foreign currency contracts and account balances. Our effective income tax rate for the fourth quarter was 24.2%, lower than last year's 30.4% due to the favorable impact of foreign tax credits recognized during the quarter. Fourth quarter net income decreased to $70 million, largely due to lower sales and operating income, partially offset by lower taxes.
Now, turning to our cash flows and balance sheet. For the full year, we generated operating cash flow of $361 million and drew down a net $180 million on our revolver. We used those funds to invest $231 million in share repurchases, a net $220 million to acquire Misfit, and $80 million in CapEx. We ended the year with roughly $289 million in cash compared to $276 million last year, and debt of $808 million compared to $630 million a year ago.
We ended the year with inventory of $625 million, a 5% increase over last year. The primary driver of the growth is new businesses and brands where we didn't have an inventory position a year ago. Excluding those, our inventories would have been flat. We also have begun using more ocean versus air shipments as a means to reduce freight costs, though this has modestly increased our in-transit inventories. Overall, our inventories are well placed in better selling brands, and as we highlighted last quarter, we are working to reduce our Swiss inventories given the sluggishness in certain markets like Asia.
Accounts receivable decreased by 14% to $371 million and wholesale DSOs improved by five days compared to the prior year. Depreciation and amortization expense totaled $23 million for the fourth quarter and $84 million for the full year.
As we invest more in our omni-channel initiatives, we continue to reduce our store openings. For the year, we opened a net two stores, including 11 in Asia, six in Europe, and in the Americas, we closed 30 stores, primarily full-price concepts, and opened 15 stores, primarily outlets, for a net of 15 closures for the region. In addition, we acquired 24 stores in South Africa where we acquired that business from our distributor earlier in 2015.
Now, let me move on to 2016 and share with you our outlook for the year. We began 2015 anticipating many operational, competitive and financial headwinds, and those all materialized and some even intensified. First, longer-term brand building and omni-channel investments to support Fossil and SKAGEN put pressure on near-term earnings. Second, new consumer demands for tech infused products impacted traditional watches, and we did not yet have an offering to meaningfully meet that demand. The outsized historical performance of one of the most successful lifestyle brands in our portfolio, Michael Kors, created strong pressure on our year-over-year comps. Next, strong growth markets for us like Asia remain sluggish, both economic and political factors affected our business. And finally, the strong U.S. dollar created a huge top and bottom line headwind.
All of these headwinds converged on 2015 and drove sales, margins and earnings down. As a management team, we are certainly not satisfied with results and are working diligently to overcome these challenges, though always with an eye on the future. As we move to 2016, while some of these headwinds persist and the environment remains challenging, we feel conditions are more stable and we have strengthened our hand in many ways.
We're gaining traction in our owned brands. Supported by our increased investments in the back half of last year, both Fossil and SKAGEN accelerated in the fourth quarter and are poised for continued strong growth in many markets. Our acquisition of Misfit fast-forwards Fossil Group into the explosive wearables market, which is estimated to grow at a 36% CAGR to reach $45 billion by 2019. Misfit's scalable tech platform and world-class engineering team, coupled with our existing strategic advantages, position us now to be the leader that can drive the convergence of the growing watch and wearables market.
In 2016, our goal is to expand our Fossil Q business, and bring significantly more wearable styles to market across several brands. The acquisition also gives us a native wearables brand, and we can drive growth with it, leveraging our global distribution and operating platform. We remain a leader in traditional watches, a market that is forecasted for continued growth. The strategic advantages that we have always enjoyed in this market, our design capabilities, global distribution and operating platform, along with our best-in-class supply chain, continue to make us the best partner for the most attractive lifestyle brands in the world. With the additions of Kate Spade New York and Chaps, we continue to strengthen our portfolio to drive growth in our business.
So we've entered 2016 with an improved arsenal to drive growth and help mitigate remaining headwinds. Our historical success with the Michael Kors brand likely represents the largest variability in our business this year, so we believe our new designs, opportunities in men's, jewelry and international markets along with technology can help reinvigorate this brand and change its trajectory. Key markets like China, while challenging in the near term, remain big opportunities for us with strong market demographics working in our favor. And the U.S. dollar remains a strong headwind, even intensifying late last year.
So based on our current plans and assumptions, including prevailing exchange rates, we expect full year revenues in a range between a 1% increase and a 3.5% decline. This includes roughly a 140-basis point currency headwind in our growth rate. Therefore, in constant dollars, our full year revenue assumption would be to range between a 2.5% increase and a 2% decline. We expect revenue headwinds to be strongest in the beginning of the year and then to abate as we move into the second half, given prior year growth comparables and the stronger currency headwinds mainly in the first quarter.
Our opportunity to return to growth will come in the second half of the year, given prior year comparables as well as the timing of our wearables rollout which we have planned for the second half of the year, most notably to support our holiday business. We believe our opportunity to return to growth in the second half largely turns on our ability to use the growth drivers we just described to offset the remaining headwinds in our business.
For the first quarter, we are planning revenues to decline between 7% and 10%. That includes roughly a 230-basis-point headwind from currencies, resulting in a constant dollar decline between 4.75% and 7.75%. Overall for the year, we expect modest gross margin expansion in constant dollars, so given currency headwinds, reported gross margins will likely decline slightly given prevailing rates. We expect that the currency impact will be most severe in the first quarter and lessen, though not disappear in later quarters.
The impact of purchase accounting on our acquired Misfit inventories will negatively impact margins earlier in the year until that inventory is sold through. We continue to expect that wearables will be a drag on our gross margins, especially as we increase penetration in the second half of the year. International sales mix should represent a slight gross margin tailwind, and we are working on a number of initiatives to offset headwinds and drive higher margins.
We expect our cost reduction and sustainability initiatives to benefit us as we move throughout the year, and we are also working with our supply chain partners to affect efficiency gains and to gain benefits from the currency environment in China. We also do not expect the same level of off-price sales. Given timing and how all these initiatives will affect our inventories the most significant offsets and thus opportunity for net margin expansion will be heavier in the second half of the year. For the first quarter, we expect a modest decline in constant dollar gross margin.
Moving to expenses, there are many unusual items in our expense base given last year's Misfit acquisition and our restructuring activities. On this call, we will provide some additional commentary and insight into our cost structure, especially in light of the Misfit acquisition. We're providing this information to help reorient investors and analysts to better understand our cost structure, though we do not undertake an obligation to report on these items in the future. Overall, our goal is to operate with a full-year expense rate that is very slightly higher than last year's, assuming we can deliver our sales goals.
Let me start with the unusual items from last year. In 2015, we invested roughly $25 million in restructuring to optimize both our store fleet and much of our core infrastructure. We are not currently planning a similar restructuring charge in 2016. Last year, we also incurred $8 million in Misfit acquisition costs and recorded a $9 million impairment on SKAGEN intangibles. We expect to operate our core business with significantly lower infrastructure costs versus last year and redeploy those savings to offset the infrastructure expenses for Misfit.
Related to the Misfit acquisition, we expect to record up to $26 million, split roughly evenly between purchase accounting charges to amortize acquired intangible assets and the cost of contingent equity gains whose vesting will dependent on future performance. The cost of these equity grants will not extend beyond three years.
The balance of our year-over-year expense changes will be for marketing and other strategic investments to drive growth and customer engagement. The majority of this will support growth strategies around Fossil and SKAGEN, the continuation of our omni-channel strategy where we are gaining traction online and to support wearables, including app development that can be leveraged across our full portfolio of brands. A substantial part of this will also support growth and awareness of Misfit, as we look to expand its distribution throughout our existing global network and into new channels. Based on our current plans, we expect the strongest impact of the higher marketing efforts in the first three quarters until we anniversary last year's fourth quarter when we enhanced our marketing efforts.
For the first quarter, we expect reported operating expenses, including the favorable impact of currency to be roughly flat, yielding a higher rate given the anticipated sales decline. Therefore, for the full year, we expect reported operating margins to range between 7% and 8.5%. Given roughly a one point headwind related to currencies, this would result in roughly an 8% to 9.5% constant dollar operating margin.
We are expecting full year EPS in the range between $2.80 and $3.60 per share. For the first quarter, we are expecting operating margins to range between 1% and 2.5%, which includes roughly a two point headwinds related to currencies. For the first quarter, we expect EPS in the range between $0.05 and $0.20. Our guidance assumes roughly prevailing exchange rates and some benefit from non-operating currency contract gains given our hedging programs. We are planning with a tax rate of roughly 30%. We are planning CapEx in the range between $75 million and $85 million.
As we mentioned on our last call, given the investment we made in Misfit and the additional leverage we took on to support that, we plan to reduce our share repurchases this year, likely to levels to offset employee equity dilution. We expect interest expense to increase compared to last year given the additional debt we took on last year, especially to complete the Misfit acquisition. We also would not expect to repeat the gain from last year's second quarter settlement of an interest rate swap.
Let me take a moment to discuss the significant impact that currencies continue to have on our earnings. Currencies affect our earnings in three ways. First, there is a translation effect. When the U.S. dollar strengthens, our international sales and earnings are translated into fewer U.S. dollars. Secondly, there is the margin effect. As the U.S. dollar strengthens, the cost of inventory which is generally purchased in U.S. dollars increases in our foreign businesses, driving their margins down. Finally, there are hedging gains or losses. These are recorded below operating income and generally move opposite to the translation and margin effects, but do not completely offset them because we do not hedge 100% of our transactions.
Based on prevailing rates, we would expect the combined translation and margin effects would represent roughly a $0.53 headwind compared to 2015. In addition, given the less severe currency operating headwinds this year, we also expect fewer offsetting net currency contract gains this year, resulting in an expected $0.31 non-operating headwind. Thus, we estimate the year-over-year impact of currencies on EPS will be roughly $0.84 for the full year.
Translation and margin headwinds will be strongest in the first quarter, as will the net hedging gains, yielding roughly a $0.24 net headwind in the first quarter. Assuming prevailing exchange rates, translation and margin headwinds would become less severe after the first quarter, though hedging gains would also decline yielding a roughly consistent net headwind for each quarter.
Before we move to your questions, I want to take a moment to review the changes in our operating model over the last couple of years and discuss our operating margin goals for the future. If we contrast our expected operating margin this year, assuming we achieve the top end of our sales goals, in just two years, our operating margins will have declined about 7.5 points. We are not satisfied with our operating margins, but it is important to understand the principal drivers of the decline and actions we are taking to regain our position over the longer term.
The first driver is currency. About half of that margin compression is the result of the strong U.S. dollar. While we have mitigated some of that decline through hedging, hedging only delays the EPS impact, but does nothing to mitigate margin. And even if and when currencies stabilize completely, there will always be the following year EPS challenge of anniversarying non-operating hedge gain. We've also responded to currency fluctuations through targeted price increases and will continue to seek opportunities to offset the impact of currencies over the longer term, though pricing must always reflect the competitive environment and consumers' willingness to pay.
The other principal driver of the margin compression comes from our strategic growth investment. Compared to 2014, based on this year's plans, we will have invested over two full points of operating margin and brand building and awareness around Fossil and SKAGEN, and in improving our omni-channel capabilities. These investments are already delivering returns as evidenced by our 2015 results, though some of those results have been masked by headwinds in other parts of the business.
The balance of the comparison largely comes from our investments in wearables, most significantly, the impact of Misfit. We expect to drive growth with Misfit as we invest in the brand and expand it over our global distribution. That will take a little time, though, and as we said in our last call, we expect Misfit will be dilutive to earnings throughout 2016. On top of that, the purchase accounting and related contingent equity charge that I described earlier will be fully part of our operating model for the next three years.
So that's where we are now. Let's pivot and look to the future. As we said earlier, we believe that we have strengthened our hand significantly in 2016 to drive growth, first with our owned brands. We're gaining traction in both Fossil and SKAGEN, improving our omni-channel platform to drive sales, and our initial launch of Fossil Q had been very encouraging. Then there's our portfolio. Brands will continue to ebb and flow as they always do. We were already advantaged as the best partner for the best brands in watches, and we believe that advantage will become stronger with our tech capabilities.
Over the next couple of years, we will bring more and more of our brands onto our tech platform. We are at the convergence of watches and technology, and we feel we are unrivaled in our space when it comes to delivering design and innovation across the brands consumers want at scale around the world. On top of that, we have now added an owned native wearables brand, Misfit, which we believe we can grow both through new and our existing distribution.
As we move then over the next three years, our goal is to see accelerating constant dollar sales growth. Our biggest risk, as always, will be to use our growth drivers to more than offset the headwinds that will always be part of our diversified business model. We will continue to identify opportunities to drive gross margin expansion through price and cost initiatives and the further benefits of scale to offset the potential headwinds from technology, given its existing lower margin structure.
Then there's our cost structure. Given substantial progress we've already made, we feel our global infrastructure is largely in place for the next few years. The leverage we can drive by growing our business and managing our infrastructure costs carefully can be significant. And finally, our marketing investment. Our goal after this year would be to generally drive sufficient growth so that our marketing and strategic investments would no longer represent headwinds to our operating margin.
So looking past 2016, we see a path to delivering accelerating sales growth and operating margin expansion. Our longer-term goal is to deliver operating margins more consistent with historical levels. However, over the next three years, we will have to absorb the Misfit purchase accounting and contingent equity costs, and overcoming the currency impact through commercial activities, rather than a significant weakening of the U.S. dollar, will likely take longer.
So with that, we will open the call up to your questions. To be fair to everyone, please ask only a single-part question. If you have more questions, please re-queue after others have asked theirs.
Question-and-Answer Session
Thank you. And our first question comes from Omar Saad with Evercore ISI.
Omar Saad - Evercore ISI
Thanks. Good afternoon.
Kosta N. Kartsotis - Chairman & Chief Executive Officer
Good afternoon.
Omar Saad - Evercore ISI
Can you maybe give us a little bit more detail and expand on the wearables strategy for 2016 and beyond? Kosta, especially if you can give us a little bit more detail around the timing and cadence of the Misfit integration and when you can expect to and how you can expect to integrate the Misfit technology into Fossil products across the different types of wearable products. And then, conversely, the cadence, maybe a little bit more detail on the cadence of how you can apply the Fossil branding, marketing distribution network to the Misfit products and brand.
Kosta N. Kartsotis - Chairman & Chief Executive Officer
Okay, Omar. Thanks. Well, first of all, recent research we've seen shows that the watch business actually declined last year by probably about 3%. But in addition to that, we saw the explosion of wearable technology last year and it's probably anywhere from $10 billion to $15 billion on top of the regular $65 billion that's in watches. So clearly, there's a huge amount of consumer interest to this, all the things we've been talking about. Millennials especially overspend on technology. It's a big macro interest on technology and health and fitness. So for us, what it means basically is there's two big things for us. Our number one objective is to gain share in the traditional watch business. We think the best way to do that is by adding technology. So our launch in the fourth quarter included three different categories.
So they were hybrid watches which are smarter watches, analog watches that have additional functionality and sensors. And then we launched trackers and display watches. And we learned quite a lot. All those categories did extremely well. But the number one objective for us is to gain share in the traditional watch business and to change the way it works.
So by adding over the next several years, additional chips to watches in all brands it gives us, we think, additional innovation. We already know that consumers will spend more for watches that have additional functionality. So it should differentiate us and it can make the category more relevant largely to millennials who haven't worn watches because they grew up with a smartphone. So we think that we can infuse a lot more excitement into the traditional watch business and gain share at the same time. In addition to technology, we also have a lot of other more traditional technologies going in there. New materials and ideas, et cetera, that we're distorting across the platform to gain share in watches. So we think our traditional watch business will continue to grow.
Then on the wearables side, we have both in display watches and trackers, the launches we did last year. But one thing we saw was a display watch in the fourth quarter, especially in December, was the number one style in the company. We also had very strong sales in hybrid as well. So what we've learned already is that clearly you can tell from all the interest in technology that consumers are gravitating to it. So we know we have a pretty exciting prospect in front of us. So our objective in wearables is to add additional fashion and branding and to scale it across our platform. We have significant resources for design and distribution, branding. We have a global customer service and repair network. And now with Misfit we have a native wearables brand that we can expand and it'll reach full potential under our platform.
So the combination of both traditional watches, which is a $65 billion business and gaining share and growing that business making it more relevant and the wearables business which is expected to be $45 billion in 2019, we have a larger addressable market for us. So our objective is to infuse technology into traditional watch business and to infuse fashion and our global resources into wearables. And we think we're on a very strong track.
As far as the timing and the cadence, Greg?
Gregory A. McKelvey - Executive Vice President, Chief Strategy Officer & Chief Digital Officer
Yeah. I'll give a little bit more color on the timing and the overall integration effort with Misfit. Overall, I'd say that our investment thesis and our goals are playing out pretty much as exactly as we thought and hoped. We're ahead of our internal goals on integration and bringing product to market, powered by the Misfit platform. Four specific points. First, all of the supply chain sales and back office integration will be complete in the next six weeks, so by the end of Q1. Second point is that our Fossil Group global sales organizations are already selling in Misfit products across the world in over 40 countries with the focus on the newer product lines of Shine 2 and Ray, so taking new technology into global scale and reaching our distribution network.
Third point is that by spring, by the end of spring, Fossil Q will have a new product line that will be the first product launch entirely designed, developed and supported by the Misfit engineering team and app and cloud platform. So what that means is in approximately five months from the closing of the deal, we will have product in market leveraging Misfit technology and software platform. Fourth is by fall and holiday, all of our wearables will be engineered by the Misfit engineering teams and supported by the Misfit app and cloud platform. So a significant expansion in the number of brands both owned and licensed that we'll be bringing to market across all three of the part – of the product platforms. So trackers, smarter watches or traditional watches with tech integrated and smart watches. We'll have over 100 SKUs in 40 countries, over 10 languages around the world. And all of these products will work on both Apple's iOS mobile phones and Android phones.
Thank you. Our next question comes from Ike Boruchow with Wells Fargo.
Ike Boruchow - Wells Fargo Securities LLC
Hi, good afternoon, everyone. Thanks for taking my question. I guess, Dennis, if we could just go back to some of the comments you made at the end of your prepared remarks, it sounds like you're still very upbeat about the long-term potential of the company and we know the headwinds that you're dealing with this year with FX and the Misfit acquisition and dilution. But some of the comments you made about, I think you said, the next three years, not really to expect much growth. I mean, I'm not – I'm just trying to understand, what exactly did you mean by that? Was it saying this kind of margin structure is where you're going to be for the next couple years and then you'll grow? Just anymore color there would be helpful.
Dennis R. Secor - Executive Vice President, Chief Financial Officer and Treasurer
Yeah. No, I think you must have misinterpreted what we were saying. So as we plan out over the next couple of years, if we start with the top line, we will be continuing to roll out more and more of our brands on to our platform. We are seeing traction that we are gaining with Fossil and SKAGEN and we are investing more in 2016. Misfit is an addition to our arsenal as we have other brands like Kate Spade New York, Chaps. So we feel that we have a whole lot of drivers for growth recognizing that there is always headwinds. So what we are saying is that we see a path now to be able to accelerate the growth as we move from 2016 into 2017 and past. So our goal as a company is to drive growth and use the investments that we have made over the last couple of years to do that.
Now, we have in 2014 and 2015 – I'm sorry 2015 and 2016, we have investing in marketing and our strategic initiatives and that has put some pressure on our operating margins. What we're saying now on the back of that top line growth, we think our infrastructure is largely in place. So that is there to be significantly leveraged as we drive growth to the top line.
In terms of the marketing investments, our goal, once we get past 2016, we'll still see in 2016 some compression of margins to support that. Again, some of that's driving growth that's being masked by other areas. But by the time we get to 2017 the goal would be to be growing our marketing investments roughly in line with the way the top line is moving. So, what that all means is that we see a path to margin expansion coming out of this year, that's the goal of ours. We are not happy with the 7.5 points of operating margin compression that we've seen.
A couple of things that I highlighted are currencies; currencies are roughly half of that two year compression operating margins. While we do look for opportunities to expand through tools like pricing, they are much harder to drive and they're largely dependent on how the consumer react.
So, a weakening U.S. dollar will get us quickly there. After a weakening U.S. dollar, it's going to take us a longer period of time. And then I just want to remind people that the Misfit transaction creates some fixed costs in our cost structure around purchase accounting and those contingent grants that are going to be with us for about three years.
Kosta N. Kartsotis - Chairman & Chief Executive Officer
If you look at the explosion and awareness of wearable technology and the increase in sales from both trackers and smart watches, it's arguably the fastest growing business in the world, huge amount of consumer interest. So our play into both categories of traditional watches and the wearables is really about growth.
Thank you. Our next question comes from Ed Yruma with KeyBanc Capital Markets.
Edward J. Yruma - KeyBanc Capital Markets, Inc.
Hi. Thanks so much for taking my question. Obviously, there's been lots of turmoil in the wholesale channel, particularly at multi-brand retailers. Is it your view that the order trends there have begun to stabilize? And I guess, in the medium-term, are there any other things you can do to reduce your reliance on this channel? Thanks.
Dennis R. Secor - Executive Vice President, Chief Financial Officer and Treasurer
We didn't hear the first part of – could you repeat the first part of your question?
Edward J. Yruma - KeyBanc Capital Markets, Inc.
Yeah. I'm just trying to understand. Obviously, wholesale has been difficult, particularly in multi-brand watch retailers. Do you think that the destocking has largely occurred at this stage, and I guess what can you do longer term to mitigate reliance on the wholesale channel? Thanks.
Kosta N. Kartsotis - Chairman & Chief Executive Officer
Well, the way we look at the watch business in the channel globally is that watch business is relatively soft; and from our perspective, because we have a fashion miss, we don't have enough technology.
So, our mission is to put technology across the platform, and all of our customers are very interested in this, and we think that as we continue to show products and bring out new brands and new devices on the program, not only in traditional watches, but also in wearable technology in both fashion trackers and also display watches. We're going to get an additional amount of space and huge amount of interest.
One of the things about this whole wearable technology thing is a lot of our stores we sell to haven't participated in the explosion of spending it on technology. So again the watch business is up $65 billion, the tech industry spending is trillions, consumers, especially millennials will overspend on technology by a longshot. So, the stores that we sell to, look at it as an opportunity for us to get some of that spending in their store, which could change the situation for them dramatically.
So, they also recognize that the watch business in their store is – although, it's been soft, and that's mostly because of the fashion miss – but they still recognize it as one of the most productive departments in the store, one of the most regular priced businesses, one of the highest gross margin per square foot businesses, but it's not as hot or robust as it was; but it's still, in terms of productivity, one of the best businesses in the store.
So, we have as you mentioned seen – as the business has declined, we have seen some destocking and we think that is going to probably continue through the first quarter and second quarter, until we get increasing amounts of wearable technology in the market. We're not projecting as you can tell from the first half of the year strong sales, but we do think that the wearable technology influx in the back half of the year will change the direction of that.
Thank you. Our next question comes from Oliver Chen with Cowen and Company.
Cecile Origenes - Cowen & Co. LLC
Hi. This is Cecile Origenes for Oliver Chen. Thanks for taking my question. My question is actually on Kors. Could you just maybe comment on what your outlook is maybe for the first half? When do you think trends could start to stabilize? And then, maybe can you just point to some examples of newness that you're driving in the watch collection, and perhaps in jewelry and men's? Thank you.
Kosta N. Kartsotis - Chairman & Chief Executive Officer
Well, for the full-year if you look at the Kors complex of watches and jewelry combined, the business was actually minus 6% for the year in constant currency. In reported, it's minus 11%, which shows the impact on the currency on that business. But, what we're doing right now is we're probably going to have more newness than we've ever had in Kors flowing right now. We've already tested some of it and it has a different look to it. We think it's going to be very strong.
In addition to that, there'll be wearables launch later this year that will be very significant. The Kors business is a leader in the global watch business and huge amount of interest and awareness and we think that it's going to be a big play in terms of wearables.
The other thing to keep in mind is that although the business has come down some, it's still one of the most productive in the industry and definitely in our portfolio it is, and we're continuing to open shops. So we have, at the beginning of this year, we have about 332 watch or jewelry shops. Some of those are watch and jewelry shops, but 332 shops. We're going to build an additional 82 this year.
Also keep in mind that we're still in the early stages of both men's watches and the jewelry industry, the jewelry business for Kors. We are going to be adding an additional layer of jewelry for the Kors boutiques, which is a higher level of jewelry. Some of its silver or gold-plated, really to raise the average unit retail. I think it could have the potential of making that business larger over the long-term, especially in Europe and Asia and these shop-in-shops and in the Kors boutiques themselves. It's a pretty significant opportunity.
And also keep in mind, in Kors, we're just getting started in Asia, as a total. I mean, it's still relatively new. We're seeing traction there. So, long-term, we think the business will continue to grow.
Thank you. Our next question comes from Simeon Siegel with Nomura Securities.
Simeon A. Siegel - Nomura Securities International, Inc.
Thanks. Good afternoon, guys. Kosta or Greg, do you have any data or thoughts on the retention or abandonment rate for the wearables yet? Are you seeing any difference in return rates for wearables versus the traditional watches?
And then just, Dennis, just to clarify, I think you're projecting a negative 140-basis point impact to revs from currency this year. Just looking at the spot rates, I would have thought that would have been flatter for the full-year, so I could be missing something simple there. But I just wanted to confirm that. Thanks.
Gregory A. McKelvey - Executive Vice President, Chief Strategy Officer & Chief Digital Officer
Yeah. This is Greg. I'll answer on the abandonment rate. I would say, we're probably in line with trackers probably in return rates relative to the category and abandonment. But, I would say across all three categories, we are not seeing anything other than data that tells us this is going to continue to be a high growth category for us.
So, consumer interest and awareness is incredibly high. Those that are returning, often they are looking for better functionality. So, things like non-charging. So, they just don't like the habit of frequency of charging and we're solving that with our non-charging product that work on battery watches.
And then some, especially, I would say, outside of our products and other competitors, they are just missing a style and a branding element to the product that again we're solving for. So, we think incremental functionality, better style, better branding, all of which we are significantly improving as we're already engineering our second-generation and third-generation of product. We expect a high rate of adoption and lower abandonment than the category has seen.
Dennis R. Secor - Executive Vice President, Chief Financial Officer and Treasurer
On currencies. I assume when you're talking about the spot rate, you were likely talking – I'm guessing you're talking about the euro. So, the euro actually has been fairly stable, but what we saw at the end of the fourth quarter is the U.S. dollar strengthening against a number of other currencies, a lot of Asian currencies, Canadian dollar, Mexican peso, South African rand. So while you're right, if we were only impacted by the euro, you're assumptions would likely be correct, but it's the larger portfolio of currencies that we operate with.
Thank you. And our next question comes from Betty Chen with Mizuho Securities.
Betty Chen - Mizuho Securities USA, Inc.
Oh, thank you. Good afternoon. I was also curious, in terms of the Q buyers, can you give us any sense of – were they traditional watch wearers upgrading to a wearable technology, or are they completely new to the watch category? If you have that data.
And then can you just remind us, with the wearables margins being slightly lower, at what point can we see that margin start to become more comparable to your fashion watch business? Is that something we could see some improvement by 2017, or really looking beyond that? Thanks.
Kosta N. Kartsotis - Chairman & Chief Executive Officer
On the watches that are hybrids. What we're seeing basically is through all our launch of Q, we got more PR, more press, more page views, more impressions than anything we've ever done. So, the awareness is very high. We know it's driving traffic to our stores and website, so it's probably a combination of both. We're getting new customers because there's a lot of awareness and interest in wearable technology. And this is a unique product and it's kind of the entry level into what's going to be much larger. And we're also getting some customers who are in the store looking at watches and they go, oh, this looks great. It's got technology in it.
So, again the issue is not about cannibalization for us. This business is going to be much, much larger, because it's so much interest in both watches that have technology and also in wearable technology that I think it's going to far offset any cannibalization. We're going to make the watch category more relevant, especially for millennials.
Again, largely millennials grew up with smartphones, they haven't necessarily worn a watch before. So to them it's a whole new thing. And then we're going to – in wearable technology, we're going to have a much larger addressable market. So we think that, both the combination of those two things is going to really offset any cannibalization going forward. But I think both traditional watch business will get much larger and we'll gain share and then we'll have an entrée into the wearable technology business.
Dennis R. Secor - Executive Vice President, Chief Financial Officer and Treasurer
Yeah. As it relates to margins, so what we did say for this year is with tech margins are below our company average margins, although we have a number of initiatives that we are executing on that should help offset those in the back-half of the year. Most of that impact is going to be second-half loaded, because that's where we'd expect to see greater and greater volumes.
As we move past 2016, our expectation overall is through technology improving cost, ultimately coming down and the benefit of our scale that we can see over time. We can see improved margins from where they are right now. Whether that's a 2017 impact or beyond, we'll talk more about details in 2017 when we get there. We still have a lot to learn here. But, we do believe that there should be opportunities over time.
Thank you. Our next question comes from Rick Patel with Stephens.
Shreya Jawalkar - Stephens, Inc.
Hi, thank you. This is Shreya Jawalkar filling in for Rick. Can you talk about the outlook in China? Obviously, it's a tough market out there. But is there anything you can do from a merchandising, marketing or pricing perspective to weather that storm? Thank you.
Kosta N. Kartsotis - Chairman & Chief Executive Officer
Yeah. Obviously, the China market is very difficult. We not only have stores there and operations in China, but also it's affecting Macau and Hong Kong as well. So, having said that, we still are operating over there. We have a great team, they're on a great strategy, we're continuing to be active in the market in setting up distribution, et cetera. The fact remains that still there's going to be hundreds of millions of people that join the middle-class at some point. So, we're continuing to move forward and do the best we can.
And we do think that the entrée of wearable technology into the market could be a catalyst. I mean, they obviously are very interested in technology. There's been some activities over there that give us indication that we could probably distribute wearable technology on a pretty broad basis through e-commerce, et cetera. So, we're studying that; but again, long-term it's still going to be a big catalyst for growth for us.
Thank you. Our next question comes from Erinn Murphy with Piper Jaffray.
Erinn E. Murphy - Piper Jaffray & Co (Broker)
Great. Thanks. Good afternoon. I was hoping you could elaborate a little bit more on the business that you did in the off-price during the fourth quarter. It sounds like you did more than you intended. How much of that drives the improved top-line results in the fourth quarter? And then, is this a channel that you envision having to rely on a little bit more as we round out 2016?
Dennis R. Secor - Executive Vice President, Chief Financial Officer and Treasurer
Yeah, I mean, we ended up liquidating more through off-price partners largely, because throughout the year inventories were higher as we were seeing demand that was falling. And 2015 overall was not a successful year for us on the top line. So, we did use – it wasn't a dramatic amount of additional fourth-quarter off-price, but we did sell a little more off-price than we had planned going into the quarter.
Thank you. Our next question comes from Lindsay Drucker Mann with Goldman Sachs.
Lindsay Drucker Mann - Goldman Sachs & Co.
Thanks. Good evening, guys. I just wanted to ask, in addition on the wearables piece, as you think about the rollout in 4Q for the brands where you do expect to add technology, can you give us a bit of a sense on how many of the units that you'll be selling into department stores or your own retailers, how many you expect you'll be able to add technology to? So, how much this will really affect the assortment?
And then secondly, as you think about price points for the display watches in the sort of high $200s, low $300s, is that about where we should be thinking price points will be across the portfolio, or will you tier by brand to more or less premium?
Gregory A. McKelvey - Executive Vice President, Chief Strategy Officer & Chief Digital Officer
This is Greg. So, I'd highlight, again as it relates to assortment the 100 SKUs that I talked about, across a significant expansion of both owned and licensed brands. You'll see announcements as we go through Basel and then ultimately fashion week in our normal announcement timeframes, where our licensed brands will highlight their individual strategies and all come into full focus for you. But again, pretty significant expansion when you start thinking about 100-plus SKUs.
As it relates to price point, I'd point you to a couple things. Fossil Q is a pretty good baseline for how you should think about price point, relativity when you start to think about Fossil versus Michael Kors, or other licensed brands. On a percentage basis, you should start to see us tier up in a similar way that we tier in our traditional watch category.
The other thing I'd say is, as you look at our pricing strategy for the innovation we're bringing to market in the spring here, you're seeing us bring out new styles at a premium to even our fall and holiday launches. So, even on the same technology base, we're bringing style and innovation in color way and materials that are allowing us to extract a greater premium, even for the Fossil line.
Lindsay Drucker Mann - Goldman Sachs & Co.
And those 100 SKUs, could you put into context like a comparison of how many SKUs you might totally sell?
Dennis R. Secor - Executive Vice President, Chief Financial Officer and Treasurer
One of the things that is going to be an advantage in wearables and tech watches is that it typically, in that industry it's very small number of SKUs that do huge quantities and we're already starting to see that.
As I mentioned, our display watch in the month of December was our number one unit seller. So, we're going to benefit, I think, from us being able to have fewer SKUs in the market that sell a significant quantity and that's obviously a very good thing for our company.
Now, as we mentioned before, we have something like 2,700 SKUs in our total watch business, all brands that yield a couple billion dollars. I think with where technology – what we've seen already before and what we're starting to see now is that we're actually going to reduce our SKU count, which is obviously a good thing.
Thank you. Our next question comes from Dorothy Lakner with Topeka Capital Markets.
Dorothy Senghas Lakner - Topeka Capital Markets
Thanks. And good afternoon, everyone.
Kosta N. Kartsotis - Chairman & Chief Executive Officer
Dorothy Senghas Lakner - Topeka Capital Markets
Just following up on the wearables segment again, I just wondered, you've said 100 SKUs. You've talked about that being across multiple brands. I wonder if you could just, and you've talked obviously about the Kors entry. I wonder if you could give us some idea of timetable. Is this all going to occur in the second half? And how many brands will actually you be able to bring to market in 2016?
Gregory A. McKelvey - Executive Vice President, Chief Strategy Officer & Chief Digital Officer
Yeah. So, you're going to see us drive significant amount of growth in the Misfit brand and in Fossil Q across our global selling organization in the first half of the year. And then you're going to see the significant expansion in the number of brands and SKUs across all three of the product platforms we highlight in wearables in the back half, so that's the – you should see a back half focus when you really start to get to the number of brands and SKUs that we're talking about, fall and holiday.
Thank you. Our next question comes from Dana Telsey with Telsey Advisory Group.
Dana L. Telsey - Telsey Advisory Group LLC
Good afternoon, everyone. As you think about the Michael Kors line and also the Burberry line, which is lapsing, when does smart watch technology get infused there? And also on Burberry, how much revenue does that business take away and are you looking for new multi-brand licenses to license? And just lastly, Swiss watches, given the fact that you've invested in Swiss watch production, is smart watches manufactured in Switzerland and how should we think of that going forward? Thank you.
Gregory A. McKelvey - Executive Vice President, Chief Strategy Officer & Chief Digital Officer
Well, first of all on the Michael Kors wearable technology launch that's going to be in the either third quarter or fourth quarter. We're working on the timing right now. So, as I mentioned before, it'll be a pretty large launch. There'll be a lot of awareness around it and we think it'll be very successful and gain a lot of traction.
Burberry, our relatively small business, small single-digit percent of our business, not growing necessarily. So, we're putting those resources on other brands. We do have Kate Spade and Chaps are both new, Tory Burch is just getting started. Fossil and SKAGEN are doing very well. And our number one thing is continuing to make Fossil, our largest business, a fast grower. And we've made a lot of progress with that, but the increased amount that we've spent on demand creation, we're having a lot of great things happen with the Fossil brand that we think can continue to grow at a strong rate.
And having said that, we'll also continue to look for other big brands that could be significant in our portfolio. One other thing I would mention is that we do have with our largest licenses Kors, Emporio Armani and Diesel, we in the last couple years have signed 10-year licenses with them. So, those will all continue.
On your question about Swiss, one of the things that we've been working on is ramping up our capability for design in our Swiss design center. And they are actually doing a lot of design for us. In our entire portfolio whether the watches are made in China or Switzerland. And they're actually working on wearable technology as well and doing some great stuff over there. Incredible design talent in that office there, so we'll continue to use that.
We don't expect at this point that we would have any Swiss-made wearable technology. That definitely is something that we're looking at because as we said before, there's no reason why eventually every watch we made shouldn't have some type of functionality, a chip in there, sensors, notifications, et cetera. So, that's something we're looking at as well.
Thank you. Our next question comes from Laurent Vasilescu with Macquarie.
Laurent Vasilescu - Macquarie Capital (USA), Inc.
Good afternoon. Thanks for taking my question. I think last quarter, Misfit was guided to generate $30 million in 2015. Can you tell us how Misfit did for the year and what your expectations are for 2016?
And should we assume wearables overall will contribute a mid-single-digit percentage of total revenues for 2016? And then any color on how that percentage should shake out for the first half versus the back half would be great.
Dennis R. Secor - Executive Vice President, Chief Financial Officer and Treasurer
Yeah. We didn't specifically guide to either Misfit or overall tech-infused revenues. But the way we're looking at it, we did share on our last call, Misfit was about a $30 million business last year. That's the base.
Keep in mind, too, that was a base selling all the product. So, we now have the Shine 2. We have the Ray. Our goal this year, as we were talking about earlier, is to drive that through our existing distribution, drive it through new channels. So, that's already ongoing, as is Fossil Q, that's going to be part of our offering all year long.
Later in the year is where we bring more brands on to the platform and drive that. So, you'll see generally technology-infused products will be heavier in the back half of the year than the front half of the year, but we have products in the market all throughout the year.
That concludes today's question-and-answer session. At this time, I would like to turn the conference back to management for additional or closing remarks.
Eric M. Cerny - Investor Relations Contact
Thank you, everyone, for your participation on the call. We look forward to talking to everybody after the first quarter in May. Thank you very much.
Thank you. This does conclude today's presentation. We thank you for your participation.
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Christian Slater is Officially Single
Christian Slater and his wife, Ryan Haddon, are now officially divorced. Slater was seeking sole custdoy of the couple's children, but it's not known at this time if it was resolved. They've been separated since January of 2005, so it's been a long time coming!

subset: commoncrawl


text: Fire Outbreak at C-Way Factory at Ejigbo, Lagos October 27, 2015 622 Share on Facebook Tweet on Twitter A fire outbreak have been reported at the C-Way factory in Ejigbo, Lagos State. The cause of the fire is yet unknown. However, tweets are going around on the fire outbreak which some people reported as "thunderous".


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2014-11-12, 21:54
This is definitely not working. The end time doesn't get updated and as soon as the current position reaches the end time (which in fact isn't the real endtime, since it's a growing file), I'm dropped back to the the recordings menu. This is with nextpvr and the last Kodi beta 2, but I would be surprised if this is working with another backend that use http streams for recordings playback.


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Faithful Angels (Part 1) Series
Contributed by Shawn Drake on Aug 22, 2003 (message contributor)
Summary: This is the 3rd study in the study "Angelology".
FAITHFUL ANGELS (Part 1)
It is believed that all angels were originally created without fault and like Adam in the Garden were placed on some sort of probation. They were theologically, during this time, posse non pecarre (able not to sin). But the probation period ended when Heaven's chief angel, Lucifer, instigated a revolt against God. Lucifer was able to persuade one third of the angels to rebel with him. The angels who followed Lucifer became non posse non pecarre (not able not to sin), while the remaining two third were pronounced non posse pecarre (not able to sin).
From that point on the faithful angels are referred to as holy and elect angels and the fallen angels are known as the devil's angels. This study will identify the ranks and characteristics of the faithful angels.
The Archangels
Michael is always seen as a General of God's Army. He is specifically mentioned in four places in Scripture. In these passages, Michael helps a lesser-ranked angel get through to answer Daniel's prayer (Daniel 10:13, 21). He will stand up for Israel during the tribulation (Daniel 12:1). He disputes with Satan concerning the dead body of Moses (Jude 1:9). He fights against Satan (Revelation 12:7).
Gabriel is always delivering important messages from God. He explained the vision of the Ram and Goat battle to Daniel (Daniel 8:16). He explained the seventy weeks to Daniel (Daniel 9:21). He predicted the birth of John the Baptist to Zacharias (Luke 1:19). He predicted the birth of Jesus to Mary (Luke 1:26). He assured Joseph concerning the purity of Mary (Matthew 1:20). He warned Joseph about the plot of Herod (Matthew 2:13). He tells Joseph about the death of Herod.
Some Bible scholars also believe that Gabriel is the Angel of the Lord seen in the New Testament. If this is true, then Gabriel can be seen in the following occasions. He announced the birth of Christ to the shepherds (Luke 2:9). He strengthened Christ in the Garden of Gethsemane (Luke 22:43). He rolled the stone back at Christ's resurrection (Matthew 28:2). He freed the apostles from prison (Acts 5:19). He sent Philip to the desert of Gaza to meet the eunuch (Acts 8:26). He instructed Cornelius to send for Peter (Acts 10:3). He freed Peter from prison (Acts 12:7). He executed wicked Herod for blasphemy (Acts 12:23). He assured Paul on the deck of a sinking ship (Acts 27:23). He will sound the trumpet at the rapture (1 Thessalonians 4:16).
The Cherubim
The Description Of The Cherubim
1. Each has four faces. The face in front is as a man. The face on the right is as a lion. The face on the left is as an ox. The face in back is as an eagle.
2. Each has two pairs of wings. One pair spreads out from the middle of the back. The other pair is used to cover the body. These wings make a noise like waves crashing upon the seashore.
3. They have the legs of men; but their feet are cloven like calves' feet, which shine like burnished brass.
4. They have four human hands, with one located under each wing.
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Addressing a comment in another forum about my Avatar - It was an Ebay
item that was in auction about 6 years ago. The winning bid NOT MINE went for
$280.xx. Oh how I would have loved to have had this beauty. But it was not
to be - but I did manage to photo it if by chance I could find a seller to
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sporting the hem line out like a tutu then a LOCKING diaper cover ruffles and
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Make some noise and get noticed !
My user name BabyLock defines it all - I like to be LOCKED into my clothing - release
is not what I want - I want to savor every moment in my fantasy finest !
I would be the anti-thesis of the song "Please release me - Let me go" !
With my self-contained potty needs satisfied I could go for quite a bit of time
and distance before needing the clean up act in the big girls potty !
Hope everyone here is having a thrilling ride as much as I am.


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You will receive an email as soon as the condition report is available.
Condition Reports are completed as quickly as possible, in sale order.
Lot 17Tuesday 06 Sep, 2011 - 10.00am
A Gouda pottery vase painted in colours with a stylised pattern, 11.75ins high (some scratching), a ditto vase with matching decoration, 10ins high (chipped), and a similar vase, 13.5ins high (repaired hole to side) (all with painted and incised marks)
Estimate £100 - 150


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Nabbed from Meggie
Egg Nog or Hot Chocolate?
Neither really. Can I have a glass of rose please?
Does Santa wrap presents or set them under the tree?
They're wrapped and put under the tree, but they won't go under the tree this year because due to the Count and his exploring fingers the tree has had to be put up behind the tv
Colored lights on tree or white?
Neither, but the tree is covered with lots of multicoloured decorations
When do you put your decorations up?
Is this apart from the tree? Hmm when they are finished being made really. Which they haven't yet...
What is your favourite holiday dish?
Roast chicken, roast potatoes, and stuffing. And don't forget the veg
Favorite Holiday memory as a child?
Making plans with my sister about who should wake up who if they were awake first. Oh yes and we also used to "wash" the bathroom walls on Christmas Eve to make sure they were clean in case Santa needed to use the bathroom. My mother used Santa as a great way to make us clean our bedroom (which was so untidy we would have to cut paths into it in the evening so we could get to the bedroom door) - everything had to be sorted out and tidied up completely incase Santa needed to check if we had a particular toy. We fell for it for years.
When and how did you learn the truth about Santa?
I had my suspicions when one Christmas Eve I heard my rather drunk father stagger into our bedroom (shared a room with my sister) and slur "where shall I put these?" to my mother. My suspicions were confirmed the next year when my sister and I decided to mark the fruit in the fruit bowl to see if any appeared in our stockings.
Do you open a gift on Christmas Eve?
No, not unless you count a bottle of wine as a gift.
How do you decorate your Christmas tree?
Every year we buy the children a tree decoration each so they go up, as well as any that they have made themselves and then assorted tree decorations we've bought or been given. The tree is tack personified.
Snow! Love it or Dread it?
Love it until it turns to slush then freezes. We were deeply disappointed when a few weeks back the rest of the country got masses of snow and we got nothing.
Can you ice skate?
The last time I tried I could. Mind you that was 16 years ago. Is iceskating something you never forget?
Do you remember your favorite gift?
Sadly no I don't.
What's the most important thing about the Holidays for you?
Spending time with MrV and the boys
What is your favorite Holiday Dessert?
What is your favorite tradition?
Watching a really bad Christmas film on the eve of the 23rd accompanied by biscuits and cheese from M&S
Which do you prefer, Giving or Receiving?
Giving I think.
What is your favorite Christmas Song?
I spend every Christmas singing the few lines of "Santa baby"that I know over and over
Candy Canes! Yuck or Yum?
I suspect yuk
Ever recycled a Christmas present?
Not as a grownup but it probably happened as a child. I know duplicate birthday presents were recycled.


text:
Joanna - Hot anal sex video with sex toy play 2014
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Name: Hot anal sex video with sex toy play
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text:
Hockey registration for the 2017/2018 year will be Thursday June 15 and Tuesday June 20 from 6-9 pm at the HUB.
Mites will continue to pay a reduced rate of $230. If you know anyone with Mite aged children, encourage them to register. They are the future of Belmont Minor Hockey!
Please bring cheques for the following:
Social Bookmarks (What's This?)


text:
Category Archives: Made with paint
cycling inspired art
James Straffon creates art around the classic stylistic elements that became the visual identity of the sport in the days of Merckx and Anquetil. Earlier in the summer a new line of his work was being exhibited at the Paul Smith store in … Continue reading
streetsie artsie stuff from a man named dran.
Paper memories.
Last week Don't Panic hosted an exhibition down at the Truman Brewery in East London to celebrate its tenth year. For me the Don't Panic pack will always be something close to my heart. While its flyers informed me of … Continue reading
Something wonderfully odd about these.
by aussie artist Mark Alsweiler.
Utagawa Hiroshige.
Art buffs turn your noses up now, as I am excitedly giddy to break news of a new (he died in 1858) artist i have unearthed…. [drum roll please]…. Utagawa Hiroshige! Yes clearly the man has been around for yonks … Continue reading
Stuff to stare at.
Latest offerings from one of my favorite artists New York's Marcus Antonius Jansen. Regretably with the $10k plus price tags I've yet to get my hands on any yet. But fear not, there is the most excellent of heists brewing … Continue reading