Fossil Profit Tops Estimate; Stock Up - Update

(RTTNews) - Fashion accessories maker Fossil Group Inc (FOSL) Tuesday reported an increase in profit for the third quarter, led by demand for its watches and jewelry products, partly offset by weak margins and reduced demand for leather items. Both earnings and sales for the quarter topped Wall Street estimates.

Fossil detailed some weak guidance for the fourth quarter, and for the full year, tightened its earnings outlook and slashed the sales range.

Fossil shares gained 15 percent in after-hours trade on the New York Stock Exchange, following the announcement.

Fossil, based in Richardson, Texas, reported third-quarter net income of $103.7 million or $1.96 per share, compared with $89.7 million or $1.58 per share last year. On average, 16 analysts polled by Thomson Reuters expected earnings of $1.82 per share for the quarter. Analysts' estimates typically exclude special items.

Sales for the quarter rose to $894.5 million from $810.4 million a year ago, topping analysts' expectations of $879 million.

Sales in its wholesale segment, comprising North America, Europe and Asia Pacific, rose 10 percent. Direct to consumer sales climbed 11 percent.

The company's global comparable store sales for the quarter declined slightly, with a drop in North America largely offset by increases in Europe and Asia Pacific.

Gross margin for the quarter fell 50 basis points from last year to 56.9 percent, driven by the impact of increased promotional activity, and operating margin decreased 10 basis points to 17.3 percent.

For the fourth quarter, Fossil expects earnings of $2.91 to $3.21 per share on sales growth of 3 to 6 percent. Analysts currently expect earnings of $3.16 per share on sales growth of 7.7 percent.

For fiscal year 2014, the company now anticipate earnings of $7.00 to $7.30 per share on sales growth of 8.5 to 9.5 percent. Earnings were earlier expected in the range of $6.95 to $7.35 per share on sales growth of 8.75 to 10 percent.

Analysts currently expect earnings of $7.16 per share, on sales growth of 9.6 percent for the year.

Also Fossil said it has renewed its global licensing agreement with Michael Kors Holdings Ltd (KORS), a luxury lifestyle brand.

Michael Kors first partnered with Fossil in 2004 to design and distribute watches under the Michael Kors label. The relationship expanded to encompass jewelry in 2010 and the two companies are currently collaborating to grow the men's watch business.

On November 10,the board of Fossil authorized a new $1 billion share repurchase program that expires in December 2018.

FOSL closed Tuesday at $103.75, up $0.53 or 0.51%, on a volume of 1.3 million shares. In after hours, the stock gained $15.91 or 15.33% at $119.66.