Fossil Profit Falls, Yet Tops Estimate; Lifts FY Guidance

(RTTNews) - Fossil Group Inc (FOSL) Tuesday reported a lower second-quarter profit, as the fashion accessories company was hurt by weak margins that offset growth in sales. Both earnings and revenue, however, came in well above Wall Street estimates.

Moving ahead, Fossil provided guidance for the third quarter, the midpoint of which is indicated to miss analysts' estimates. For the full year 2014, Fossil lifted its outlook, hoping to benefit from its brands, strong supply chain and distribution network.

Fossil's offerings include fashion watches, jewelry, small leather goods, accessories and clothing.

The Richardson, Texas-based company posted second quarter net earnings of $52.5 million or $0.98 per share, compared with $67.7 million or $1.15 per share last year.

On average, 17 analyst polled by Thomson Reuters expected earnings of $0.96 per share for the quarter. Analysts' estimates typically exclude special items.

Results were hurt by gross margin that fell 40 basis points to 57.5 percent, due to sales in lower margin channels.

Operating margin slid to 11 percent from 15 percent as Fossil expanded its retail stores, infrastructure investments, and spent on marketing.

Meanwhile sales for the second quarter rose 8 percent to $773.8 million from $706.2 million a year ago. Analyst expected sales of $770.7 million

Sales climbed 9 percent in its wholesale segment, comprising North America, Europe and Asia Pacific. Direct to consumer sales were up 12 percent. Demand for watches and jewelry improved, while leathers slid.

A weaker U.S. dollar boosted sales by $11.3 million, Fossil said.

For the third quarter, Fossil projects earnings of $1.77 to $1.84 per share and sales growth of 7.5 to 9 percent. Analysts currently expect earnings of $1.84 per share on sales growth of 8.4 percent for the quarter.

For the full year 2014, Fossil now expect earnings of $6.95 to $7.35 per share and sales growth of 8.75 to 10 percent. Earlier it expected earnings of $6.90 to $7.30 per share and sales growth of 8 to 10 percent.

Analysts currently expect earnings of $7.13 per share on sales growth of 9.8 percent for the year.

As of July 5, Fossil operated a total of 558 stores.

FOSL closed Tuesday at $102.25, down $0.96 or 0.93%, on a volume of 1.2 million shares on the Nasdaq. In after hours, the stock gained $0.50 or 0.49%.