Euro jitters vexed global stock markets Tuesday, but Fossil Inc. took a direct hit after it warned of first-quarter sluggishness in Europe and cut its annual profit outlook.

This story first appeared in the May 9, 2012 issue of WWD. Subscribe Today.

Shares of the accessories and watch vendor fell 37.6 percent to $78.52 as the S&P Retail Index declined 1.1 percent, or 6.75 points, to 629.44 and the Dow Jones Industrial Average slipped back below 13,000, falling 0.6 percent, or 76.44 points, to 12,932.09.

Kosta Kartsotis, Fossil’s chairman and chief executive officer, admitted to analysts on a conference call that the firm was “not firing on all cylinders” in the first quarter.

Fossil lowered its full-year earnings guidance to between $5.30 and $5.40 a share, down from the $5.40 to $5.50 it projected earlier. Skagen Designs Ltd., acquired in January, is expected to boost annual earnings by 22 cents a share, a benefit partially offset by transaction costs of 15 cents a share. Wall Street was looking for earnings per share of $5.56.

“Continued weak economic conditions in Europe and parts of Asia, as well as the resultant impact of certain product line adjustment were magnified in what is historically our lowest sales quarter of the year,” Kartsotis said. “While certain geographies are feeling economic pressure, there continues to be strong interest in watches and accessories and considerable white space for us to pursue across our product categories.”

Kartsotis remained optimistic about the firm’s jewelry collections, which include lines from Michael Kors and Skagen. Fossil said it expects to reach $30 million in sales this year from Kors jewelry alone.

For the first quarter ended March 31, Fossil posted a 5.2 percent increase in net income to $61.1 million, or 93 cents a diluted share — 1 cent higher than analysts expected. Quarterly sales increased 9.8 percent to $589.5 million.

Fossil’s troubles reverberated in shares of Michael Kors Holdings, which fell 5.3 percent to $41.75, and Movado Group Inc., down 9.7 percent to $25.61.

In Europe, investors cautiously eyed France’s new antiausterity president, François Hollande, and worried anew that Greece could tear up its bailout deal with the European Union.

The CAC 40 in Paris led the slide, falling 2.8 percent to 3,124.80, followed by the FTSE MIB in Milan, which was down 2.4 percent to close at 13,936.70. The DAX in Frankfurt sank 1.9 percent to 6,444.74, while the FTSE 100 in London retreated 1.8 percent to 5,554.55.

The decliners included Hugo Boss, which tumbled 4.1 percent to 79.13 euros; Burberry Group, 3.8 percent to 14.27 pounds; Luxottica Group, 4 percent to 27.26 euros, and LVMH Moët Hennessy Louis Vuitton, 3.4 percent to 123.20 euros. The euro traded at $1.30 while the pound went for $1.62.

The leader of the Greek left-wing party Syriza has three days to form a coalition government, and has vowed to back out of the austerity deal that Greece brokered with the EU last year and to nationalize the country’s banks.

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