FOSSIL NET UP 21.1 PERCENT, LAUNCHES FIRST APPAREL LINE

Byline: Jennifer Weitzman

NEW YORK — Double-digit growth in accessories and in its core watch business, Fossil Inc. reported, bolstered earnings by 21.1 percent in the first quarter on a sales gain of 24.4 percent.
In the quarter ended April 1, net income rose to $12.6 million, or 38 cents a diluted share, from $10.4 million, or 32 cents, a years ago. Sales soared to $103.6 million from $83.3 million. Fossil’s earnings beat Wall Street’s expectations by 2 cents.
In addition to strong sales in Fossil-brand watches, the company said it generated about half its sales hike from its leather products group and from the launch late this quarter of its DKNY licensed watch line.
Sales from DKNY were $4.3 million. The company said it was pleased with its licensed Emporio Armani watch line, launched in 1997; sales were up 28 percent for total volume of $8.6 million.
According to Randy Kercho, chief financial officer, 83 percent of sales came from Fossil’s wholesale division worldwide, thanks in part to increased shelf space in department stores.
The company reported 7 percent of its sales came from its 17 full-line and 35 outlet stores. Earlier this year, the Richard- son, Tex., company announced plans to expand its full-line Fossil store group to make room for the introduction this fall of its first apparel line for young men and juniors.
The new casual and jeans-wear line was described by Richard Gundy, executive vice president of merchandising, as “equivalent to Abercrombie & Fitch, but more modern, like Banana Republic.”
The six new full-line stores planned for 2000 will average 3,500 square feet, compared with the current average of 2,300 square feet. Two of the 17 existing units are large enough to accommodate apparel, the company said.
Same-store sales rose 9 percent at full-priced stores and 12.5 percent at outlets.
The company said during a conference call that sales of accessories, including sunglasses, leather handbags and seasonal bags, rose 59.6 percent. Added fixtures in its top-volume sites helped the Fossil brand “break out in the sea of handbags,” Kercho said.
Sales in Europe, although hampered by the weakness of the euro, were up 12 percent to 30 percent of the company’s sales.
Fossil said its operating expenses increased to 31.3 percent of sales compared with 29.8 percent.
The increase reflects a jump in display costs incurred in connection with both the DKNY licensed watch line and the continued leather handbag fixture rollout. The company increased spending on brand advertising, including Web site development.
Fossil said it was looking to become more prominent on the Web. It now has relationships with three major portal sites, including a recently inked deal with Yahoo.