Fossil to lay off staff and cut payroll expenses

by eyetee | March 2, 2009 12:00 am

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Watchmaker Fossil Inc., is selectively laying off staff across its global operations as part of cost-cutting measures to stave off the worsening economic crisis.

The announcement was made in the Texas-based company’s 2008 fourth quarter and fiscal year end report. Bonus payments and the company’s matching portion of employee 401k plans are also on the chopping block. In addition, a hiring freeze will be instigated and merit pay increases will be suspended, along with salary reductions for all executive officers and senior vice-presidents. Fossil says it expects these payroll expense reductions will save $16 million.

“The challenging global economic environment and the expected continuing impact on discretionary retail companies require us to remain vigilant in managing the relationship between our revenue and operating expense growth,” said Fossil president and chief operating officer Mike Barnes. “With over $175 million in cash, no outstanding borrowings under our revolving credit facility and a strong cash flow model, we are well positioned to meet the demands of this uncertain environment. And while we have initiated cost-cutting measures across the organization, we are continuing to make opportunistic investments to provide an expeditious return to our businesses that we believe will allow us to gain additional market share when the environment normalizes.”

The company announced a 12.9 per cent decrease in fourth quarter net income (to $46.3 million), which it said was due largely to the impact of a stronger U.S. dollar on foreign sales. However, net sales in 2008 rose by 10.5 percent (to $1.58 billion) and net income increased 12 percent (to $138.1 million).

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