Shares of Fossil Inc. fell more than 25 percent in pre-market trading today after the accessories and watch vendor delivered lower-than-expected full-year guidance, due in part to costs related to its Skagen Designs Ltd. acquisition in January and sluggish sales in Europe.


Net income for Fossil rose 5.2 percent to $61.1 million, or 93 cents a diluted share, in the first quarter compared with year-ago income of $58.1 million, or 86 cents a share. Quarterly sales increased 9.8 percent to $589.5 million, from $537 million a year earlier.


But the vendor managed to beat analysts’ earnings estimate of 92 cents a share and sales projections of $617.6 million.


Mike Kovar, executive vice president and chief financial officer, said the brand missed its internal sales target during the first quarter due to the slowing European market.


“In Europe, a softening macro environment toward the end of the first quarter and changes in our merchandising and assortment strategies across certain categories negatively impacted both our wholesale and retail sales in that region,” Kovar said. “While we are cautious about the European economy and its impact on our financial results, we remain confident that continued strength in watch sales, same-store sales and square-footage growth in our retail business, the continued rollout of concessions in Asia-Pacific and the integration of Skagen Designs Ltd., the purchase of which was effective April 2, will result in double-digit sales and earnings growth for fiscal 2012.”


Still, Fossil lowered full-year earnings guidance to between $5.30 and $5.40 a share, down from the $5.40 to $5.50 a share it expected earlier. The brand said that while this includes a 22-cent benefit from Skagen, it is offset by transition costs of 15 cents a diluted share. Fossil also lowered second-quarter guidance to between 77 cents a share and 79 cents, citing costs.


Wall Street was looking for second-quarter EPS of 94 cents and full-year EPS of $5.56 a share.

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