UPDATE 3-Robust watch sales drive Fossil Q1 beat, shares rise

* Q1 EPS $0.53 vs est $0.32

* Raises FY10 EPS view to $2.55-$2.65 vs est $2.34

* Sees strong growth for Michael Kors in Europe, Asia

* Sees China, Korea, Japan, India as long-term growth mkts

* Shares rise as much as 13 percent (Recasts; adds conference call details, analyst comment, updates share movement)

By Shradhha Sharma

BANGALORE, May 11 (Reuters) - More consumers turned to watches to make a fashion statement, fueling a robust first quarter for Fossil Inc (FOSL.O), and the watchmaker said it expects the trend to boost sales for its Michael Kors brand in Europe and Asia.

Shares of the company, which also sells jewelry, leather goods, belts, sunglasses and apparel, rose as much as 13 percent to touch a high of $42.59 Tuesday on Nasdaq.

"Watches have simply emerged as the key fashion accessory," SunTrust Robinson Humphrey analyst Robin Murchison said.

Michael Kors continued to be Fossil's fastest-growing watch brand in the United States, Chief Operating Officer Mike Barnes said on a conference call with analysts.

He added that first-quarter shipments for the brand had tripled, boosted by "new door growth and great comparable sales results in existing doors."

Analyst Murchison termed the brand as an "affordable luxury."

While the Michael Kors brand's average retail price is in the mid-$200 range, consumers are continuing to buy at all price points, including those over $400, COO Barnes said.

"The introduction of the brand into our international markets is in the early stages right now and we expect strong growth in Europe and Asia as the brand continues to gain momentum." Overall watch sales at Fossil jumped 50 percent during the first quarter, as the company saw sales volume growth across all of its major brands, including its namesake and Michele brands.

"We were able to capitalize on the favorable watch cycle that began during the holiday season. As watches gain share in the broader accessories category, we also gain share in watches," Chief Executive Kosta Kartsotis said on the call.

He added that Fossil sees China, Korea, Japan and India as markets that offer long-term growth opportunities.

Richardson, Texas-based Fossil said it also expects to see continued gross margin improvement over the balance of 2010, primarily due to a higher mix of direct-to-consumer and wholesale watch sales. [ID:nWNAB9145]

SOLID OUTLOOK

Earlier on Tuesday, Fossil raised its full-year earnings view to between $2.55 and $2.65 a share, up from an earlier forecast of $2.25 to $2.35 a share.

It also expects 2010 sales to rise 14 percent to 16 percent. [ID:nWNAB8965]

Analysts on average were expecting 2010 earnings of $2.34, on revenue of $1.69 billion, according to Thomson Reuters I/B/E/S.

Fossil also forecast second-quarter earnings of 32 cents to 34 cents a share, above analysts' estimates of 29 cents a share. The company sees sales in quarter rising 20 percent to 22 percent. For the first quarter ending March 31, it earned 53 cents a share, up 26 cents a share, a year earlier. Net sales at the company, which competes with Movado Group Inc (MOV.N), soared 22 percent to $393.2 million.

Analysts on average were looking for earnings of 32 cents a share, on revenue of $362.7 million.

The stock, which has risen 76 percent in the last 12 months, has outperformed the S&P 1500 Apparel, Accessories & Luxury Goods Index .15GSPTEXT, which rose 59 percent.

Shares of the company were up $3.54 at $41.40 in afternoon trade. (Reporting by Shradhha Sharma in Bangalore; Editing by Anne Pallivathuckal)