Fossil Tops Profit Expectations in Quarter

Strong watch sales propel the accessories firm, which sees an opening in the Asian market.

Better watch sales propelled Fossil Inc. to stronger-than-expected second-quarter gains — and the company sees an opening in the Asian market, where luxe brands are boosting their prices.

This story first appeared in the August 8, 2012 issue of WWD.  Subscribe Today.

Net income attributable to Fossil rose 11.5 percent to $57.3 million, or 92 cents a diluted share, from $51.4 million, or 80 cents, a year earlier. Earnings per share came in 14 cents better than the 78 cents analysts projected, pushing the stock up 31.5 percent to $91.77, its biggest jump in more than 19 years as a public company.

Sales for the three months ended June 30 increased 14.3 percent to $636.1 million from $556.7 million. The April acquisition of Skagen Designs added $25.2 million to the second-quarter sales line.

Worldwide sales of watches increased 23.3 percent in constant dollars with contributions from most of the firm’s major brands.

“At just less than $3 billion in sales projected for 2012 we’ve nearly doubled our top line in just three years time,” said Kosta Kartsotis, chairman and chief executive officer, on a conference call with analysts. “Our aim has been to develop great product, augment our global infrastructure and a faster growth across our multiple channels of distribution.”

The company’s biggest opportunity for growth is in Asia.

“Over the last several years, there’s been a large white space developing in Asia for watches and accessories as luxury brands continue to elevate prices due to the strong demand for these categories,” Kartsotis said. “Specifically for watches, as the prices and demand have risen for Swiss watches, [it] has created a large opportunity for our products in the region.”

For the full year, Fossil said its adjusted EPS would range from $5.29 to $5.34, ahead of the $5.28 Wall Street had penciled in.

Even so, Kartsotis acknowledged that the company was, in effect, reducing its guidance for the second half. “Most of this is due to the U.S. dollar being much stronger,” the ceo said. “In addition to that, there is a lot of uncertainty and lack of visibility in the global marketplace.”