UPDATE 4-Fossil net tops view, boosts FY outlook; shares up

Tue Nov 13, 2007 12:44pm EST

Related Topics

(Recasts with sales in first paragraph, adds byline)

By Aarthi Sivaraman

NEW YORK Nov 13 (Reuters) - Watchmaker Fossil Inc (FOSL.O) reported a better-than-expected quarterly profit on Tuesday, thanks to strong international sales and boosted its full-year earnings forecast above Wall Street expectations, sending its shares up nearly 11 percent.

"While we have experienced moderate growth in the United States, we are continuing to reap the benefits of our global business platform as we experienced strong growth in Europe and other parts of the world," Chief Executive Kosta Kartsotis said during a conference call.

Sales grew 18.4 percent in Europe excluding the impact of currency conversion, thanks to higher sales volume of its namesake and licensed brand watches and jewelry. Other international sales grew nearly 40 percent excluding the currency impact, Fossil said.

Revenue was also helped by a same-store sales increase of 5.9 percent, a higher number of company-owned stores in the period, better sales of its namesake and Relic brand of handbags, and new products and cold-weather accessories.

Those factors helped boost overall third-quarter sales by 19.6 percent, to $358.6 million.

The company also looked poised for a strong fourth quarter, given its strength in international markets, Cowen & Co analyst Elizabeth Montgomery wrote in a research note.

Net income in the third quarter, ended Oct. 6, rose nearly 42 percent to $30.5 million, or 43 cents a share, from $21.5 million, or 31 cents, a year earlier.

The latest results included a charge tied to its probe of stock option grants. Wall Street's average earnings forecast was 34 cents a share, according to Reuters Estimates.

OUTLOOK, NEW STORES

For the fourth quarter, Fossil forecast earnings of 67 cents a share, in line with analysts' average estimate, according to Reuters Estimates. It said it expects net sales to rise 13 to 15 percent.

For the full year, it raised its earnings forecast to $1.67 per share, or $1.79 per share excluding expenses related to the review of its stock options. The forecast trumped analysts' average estimate of $1.58.

The increase in profit would be spurred by retail expansion, international growth and expansion of the Fossil brand, the company said.

The outlook also "reflects the current prevailing rate of the U.S. dollar compared to other foreign currencies, primarily the euro and pound," Fossil said in a statement.

Fossil had previously forecast earnings of $1.72 per share excluding the options review charge.

The company said its board authorized the repurchase of up to 2 million shares and said it entered into a new licensing agreement with Burberry through 2012.

The Richardson, Texas-based company intends to open between 80 and 85 stores in 2008. It also forecast annual sales growth of 13 percent to reach total sales of $2.5 billion in 2012.

Shares of Fossil were up 10.9 percent at $37.59 in afternoon Nasdaq trade, after earlier rising to $38.24. The shares have traded in a 52-week range of $39.43 to $20.59.

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.