Fossil CEO sees smarter watches - not smartwatches - as the future

New connected accessories are launching by the end of 2015
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Fossil's most important category of wearable in the long term will be its existing watches made smarter, according to its CEO Kosta Kartsotis.

Fossil's boss was speaking in a conference call to report on its Q2 earnings and even though Fossil is preparing for a dip in sales of its wristwatches by 4% to 8% in the next year, Kartsotis seemed bullish about success this year and next.

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He didn't refer to the Apple Watch by name but he did acknowledge what some analysts are noticing - that the Apple Watch appears to be stealing sales from traditional timepieces, especially at lower prices.

"We always expected that 2015 would be challenging," he told shareholders. "That's certainly has proven to be the case with currencies, the entrance of new competitors, brands moving, economic choppiness in some markets.

"I think technology and this whole idea of wearables has taken some of the oxygen out of the Swiss business," he added.

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Kartsotis did give us a few more details on the different launches to expect from Fossil in the wearable tech space in the next six months. It has developed its initial Fossil branded smartwatch line for this autumn, with a digital display and running some version of Android, which it expects to drop in October or November. "We think over the next couple years it will get better as we get smaller and more robust. We think it's got long term legs as it continues to improve," he said.

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The second category Fossil is working on is its non-display items, essentially smart jewellery, and bracelets were specifically mentioned here. It's not clear yet whether these will launch in 2015 or beyond.

But Kartsotis said that the "most significant long term" of the three categories of wearables will be "what we call smarter watches which is just adding chips and extra functionality to existing watches". These will launch this year and comprise a watch that looks like an analog wristwatch but tracks activity and "has notifications", though we're not sure in what form.

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"To a certain extent you could say what we're doing is moving towards where some day every watch we make will have some type of technology in it," said Kartsotis. "We believe a branded fashion experience will be the catalyst to further accelerate the connected accessory trend and that we are uniquely positioned to leverage our capabilities and technology partnerships to be a leader in this space."

We should also expect Michael Kors and Emporio Armani branded smartwatches and smart jewellery by the end of 2015 - the Fossil Group licenses these accessory brands.

Source: Barron's

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