883569--3/5/2008--FOSSIL

related topics

{customer, product, revenue}

{operation, international, foreign}

{product, market, service}

{acquisition, growth, future}

{stock, price, operating}

{property, intellectual, protect}

{competitive, industry, competition}

{operation, natural, condition}

{stock, price, share}

{provision, law, control}

{system, service, information}

{control, financial, internal}

{cost, regulation, environmental}

Risk Factors Relating to Our Business Our success depends upon our ability to anticipate and respond to changing fashion trends. Our success depends upon our ability to continue to develop innovative products. We have recently expanded and intend to further expand the scope of our product offerings and new products introduced by us may not achieve consumer acceptance comparable to that of our existing product lines. The effects of economic cycles, terrorism, acts of war and retail industry conditions may adversely affect our business. Seasonality of our business may adversely affect our net sales and operating income. Our business could be harmed if we fail to maintain proper inventory levels. The loss of any of our license agreements, pursuant to which a number of our products are produced, may result in the loss of significant revenues and may adversely affect our business. Our license agreements may require minimum royalty commitments regardless of the level of product sales under these agreements. Fluctuations in the price, availability and quality of raw materials could cause delays and increase costs. We rely on third-party manufacturers and problems with, or loss of, our suppliers or raw materials could harm our business and results of operations. Access to suppliers that are not Fossil subsidiaries is not guaranteed because we do not maintain long-term contracts but instead rely on long-standing business relationships, which may not continue in the future. If an independent manufacturer or license partner of ours fails to use acceptable labor practices, our business could suffer. We extend unsecured credit to our customers and are therefore vulnerable to any financial difficulties they may face. We do not maintain long-term contracts with our customers and are unable to control their purchasing decisions. Our ability to continue our sales growth is dependent upon the implementation of our growth strategy, which we may not be able to achieve. Our plan to significantly increase our store base may not be successful, and implementation of this plan may divert our operational, managerial and administrative resources, which could impact our competitive position. Our direct to consumer business segment operates in the highly competitive specialty retail, e-commerce and catalog industry and the size and resources of some of our competitors are substantially greater than ours, which may allow them to compete more effectively. We could be negatively impacted if we fail to successfully integrate the businesses we acquire. Our competitors are established companies that may have greater experience than us in a number of crucial areas, including design and distribution. We have key facilities in the United States and overseas, the loss or regulation of any of which could harm our business. Our implementation of a new enterprise resource planning system could disrupt our computer system and divert management time. Changes in the mix of product sales demand could negatively impact our gross profit margins. Our industry is subject to pricing pressures that may adversely impact our financial performance. Our failure to protect or enforce our intellectual property may harm our business. Our products may infringe the intellectual property rights of others, which may cause us to incur unexpected costs or prevent us from selling our products. An increase in product returns could negatively impact our operating results. There are inherent limitations in all control systems, and misstatements due to error or fraud may occur and not be detected. Factors Relating to Our International Operations Factors affecting international commerce and our international operations may seriously harm our financial condition. We depend on independent distributors to sell our products in certain international markets. Foreign currency fluctuations could adversely impact our financial condition. Because we are dependent on foreign manufacturing we are vulnerable to changes in economic and social conditions in Asia and disruptions in international travel and shipping. Risks associated with foreign government regulations and U.S. trade policy may affect our foreign operations and sourcing. Risks Relating to Our Common Stock Many factors may cause our net revenues, operating results and cash flows to fluctuate and possibly decline which may result in declines in our stock price. Two principal stockholders own a significant amount of our outstanding common stock. Our organizational documents contain anti-takeover provisions that could discourage a proposal for a takeover. Future sales of our common stock in the public market could adversely affect our stock price.

Full 10-K form ▸

883569--3/5/2008--FOSSIL_INC