* Third-quarter adj earnings/share $1.28 vs est $1.16
* Sales $684.2 mln vs est $713.1 mln
* Cuts fourth-quarter revenue growth forecast to 12 pct
* Shares down 12 pct
By Aditi Shrivastava
Nov 6 Fossil Inc cut its
current-quarter sales forecast after reporting
weaker-than-expected revenue for the third quarter as its
strategy to nudge up prices for jewelry failed to resonate with
distributors in Europe.
Fossil is in the process of repositioning its low-priced
jewelry line to be more in sync with the "affordable luxury"
image it has cultivated for its watches and handbags.
The fashion accessories maker cut its fourth-quarter revenue
growth estimate to 12 percent from 16 percent.
Shares of the company, which sells fashion jewelry under its
namesake and licensed brands such as Diesel, DKNY, Emporio
Armani and Michael Kors, were down 13 percent on Tuesday
The contribution of Europe to the company's wholesale
revenue fell to 32 percent in the quarter from 35 percent for
Within the European wholesale business, jewelry sales
dropped 25 percent compared to a year ago.
"We are not expecting improvements in our performance in
Europe wholesale for the fourth quarter," Chief Executive Kosta
Kartsotis said on a post-earnings conference call.
Citi Investment Research analyst Oliver Chen reckons the
company's new jewelry products are now priced 15 to 20 percent
Fossil currently prices its jewelry products between $24 and
$600, according to a regulatory filing by the company.
"The switch (in jewelry business) is causing disruption in
(Fossil's) ability to sell their products to the wholesellers,"
Chen told Reuters.
The lackluster results and forecast follow Fossil's upbeat
outlook in August when it signaled a recovery in demand in
crisis-hit Europe, and bet on the strong appeal of its Skagen
Fossil bought privately held Danish watch maker Skagen
Designs earlier this year to expand in Europe..
The brand contributed $9.8 million to sales in the quarter.
Excluding Skagen, European wholesale sales fell 5 percent.
Fossil, like many retailers of pricier offerings, is
experiencing a slowdown in Europe and formerly hot emerging
markets such as China as consumers cut down on discretionary
spending and look for cheaper alternatives.
Fossil's outlook mirrored that of rival Estée Lauder Cos
Inc, which last week scaled back the top end of its
full-year forecast as it expects weakness in Europe to continue.
The company, whose watches sell for as little as $7 to
upwards of $2,000, said gross margin for the third quarter was
largely flat at 55.8 percent, compared with 55.9 percent a year
Net income attributable to Fossil rose to $76.8 million in
the third quarter, or $1.26 per share, from $69.6 million, or
$1.09 per share, a year earlier.
On an adjusted basis, the company earned $1.28 per share.
Analysts on average had expected earnings of $1.16 per share,
according to Thomson Reuters I/B/E/S.
Richardson, Texas-based Fossil said revenue rose 6.4 percent
to $684.2 million, well below the $713.1 million analysts had
estimated on average.
A stronger U.S. dollar reduced sales by about $22.2 million,
the company said.
Fossil's shares, which have risen 17 percent this year, were
down 12 percent at $82.18 on the Nasdaq.