Fossil Inc. Profits Jump in Q3

Fossil Inc. posted a nearly 20 percent jump in third-quarter profits beating analysts’ expectations.

NEW YORK — Fossil Inc. posted a nearly 20 percent jump in third-quarter profits Tuesday, beating analysts’ expectations, but the watchmaker reduced its fourth-quarter earnings guidance to reflect a weaker economy and pressure from the strengthening U.S. dollar.

For the quarter ended Oct. 4, net income for the Richardson, Texas-based company increased 19.8 percent to $36.5 million, or 54 cents a diluted share, from $30.5 million, or 43 cents a share, in the year-ago period. Net sales grew 14.3 percent to $409.8 million from $358.6 million. Analysts estimated EPS of 49 cents on sales of $402 million, according to Yahoo Finance.

Fossil said the translation from foreign currencies into a weaker dollar helped boost earnings.

Sales in the international wholesale division rose 15.8 percent, or 12.1 percent excluding the currency impact, aided by sales in the European wholesale segment, which grew 12.4 percent, or 8.2 percent excluding currency impact.

Direct-to-consumer sales rose 22.4 percent, or 22 percent excluding favorable currency translation, while e-commerce sales surged 33 percent. Same-store sales were up 3.2 percent, or 2.7 percent excluding the impact of currency.

“Since the end of the third quarter business conditions have grown more challenging,” said Mike Kovar, executive vice-president and CFO. “Global economies have weakened, but even more significant to our business model is that the U.S. dollar has strengthened appreciably against most other currencies.”

Accordingly, the company lowered its fourth-quarter EPS guidance to 70 cents from its previous level of 94 to 97 cents. The revised figure includes a 21-cent reduction based on the anticipated effect from the strengthening of the U.S. dollar since August. Analysts had expected fourth-quarter EPS of 73 cents on sales of $492.9 million.

“Notwithstanding currency, the fundamentals of our business remain strong,” Kovar added, noting that the company was well positioned to pick up market share during the holiday season.

Shares of Fossil rose 84 cents, or 5.61 percent, to end Tuesday’s session at $15.82.

Net income for the nine months increased 30.9 percent to $91.8 million, or $1.33 a diluted share, from $70.2 million, or $1.00, for the comparable 2007 period. Revenue rose 15.4 percent to $1.12 billion, from $969.9 million.

Fossil produces watches and various categories of accessories and apparel under its own brand names, including Fossil and Relic, as well as under licenses with brands including Emporio Armani, Michael Kors and DKNY.