Demand for watches lifts Fossil 2Q profit 12 pct

Demand for watches, growth in Asia lift Fossil 2nd-quarter profit 12 percent; shares jump

Associated Press

RICHARDSON, Texas (AP) -- Fossil's second-quarter net income climbed 12 percent, buoyed by growing demand in Asia and strong watch sales. The performance topped analysts' estimates, and shares gained 19 percent before the market open.

The Richardson, Texas, company also lowered its earnings guidance for the year on Tuesday, but it's still above Wall Street's view.

Fossil Inc., which also makes accessories, earned $57.3 million, or 92 cents per share, for the period ended June 30. That's higher than profit of $51.4 million, or 80 cents per share, a year ago.

Analysts predicted 78 cents per share, according to a FactSet survey.

Revenue increased 14 percent to $636.1 million from $556.7 million. Fossil got a $25.2 million boost from watch maker Skagen Designs Ltd., which it acquired in April. Overall watch sales rose 17 percent worldwide, while sales of leather goods climbed 8 percent.

Wall Street forecast $635.9 million in revenue.

Shares rose $13.38 to $83.17 in premarket trading.

The company highlighted its growth in Asia, where revenue rose 24 percent to $84.4 million. The region makes up about 13 percent of Fossil's revenue. European revenue rose 4 percent, and North American revenue jumped 17 percent.

Revenue from the company's own stores rose 15 percent to $154.2 million because the company had more stores open and revenue at stores open at least a year rose 1.8 percent. This metric is a key gauge of a retailer's health because it excludes results from stores recently opened or closed.

Going forward, Fossil now expects earnings, stripping out one-time items, of $5.29 to $5.34 per share for the year. It previously predicted $5.30 to $5.40 per share. Wall Street expects $5.28 per share.

For the third quarter, the company anticipates adjusted earnings of $1.15 to $1.17 per share and an 11 percent revenue increase, or about $714 million. Analysts expect profit of $1.37 per share on revenue of $743.4 million.

In the last three months of the year, Fossil expects revenue to rise 16 percent, to about $964 million. Wall Street predicts revenue of $968.7 million.

Fossil expects stronger revenue for the last six months of the year when not counting the impact of the stronger dollar. In the current quarter, the stronger dollar hurt profit by 4 cents per share.

When the U.S. dollar is rising against the world's other currencies, companies that sell goods internationally take a hit when converting revenue in foreign currencies back into the dollar.

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