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Fossil Profits Rise

International sales drive growth for Fossil Inc.

Shares of Fossil Inc. rose almost 11 percent Tuesday after the company beat Wall Street’s estimates with a 71.3 percent jump in second-quarter profits.

However, Fossil cautioned analysts that third-quarter earnings would fall below expectations.

For the quarter ended July 5, the Richardson, Texas-based watch and accessories company reported net income of $25.1 million, or 36 cents a diluted share, compared with profits of $14.7 million, or 21 cents a share, for the same period last year. Revenue was up 15.2 percent to $353.2 million, versus $306.5 million for the year-ago period. Driven primarily by the sale of Fossil watches, international wholesale sales increased 20.4 percent, 9.5 percent excluding currency impact, while domestic net sales gained 1.5 percent.

Analysts surveyed by Yahoo Finance expected the company to report EPS of 25 cents on revenues of $356.8 million for the quarter.

The company also said it extended a licensing arrangement with Donna Karan International Inc., signing an agreement to produce and market DKNY jewelry in Europe, Asia and the Middle East. Fossil has had the rights to DKNY watches worldwide since 2000.

“During the quarter we advanced each of our key growth initiatives, including expansion of our direct-to-consumer channel, international wholesale businesses and the Fossil brand,” said Mike Kovar, executive vice president and chief financial officer. “Although the state of the economy worldwide remains uncertain, we will continue to focus on profitable market share growth applying the same disciplines that led to our strong first-half performance.”

For the six months, net income grew 39.4 percent to $55.4 million, or 80 cents a diluted share, compared with $39.7 million, or 57 cents a share, for the same period last year. Sales rose 16 percent to $709.4 million versus $611.3 million, for the same prior-year period.

Fossil anticipates third-quarter diluted earnings per share of 53 cents. Analysts expected third-quarter EPS of 56 cents.

Shares of Fossil closed at $31.94, up $3.10, or 10.8 percent.