Fossil Quarterly Profit Beats, Fiscal Outlook Raised

By Features FOXBusiness

Fossil (FOSL) revealed on Tuesday a stronger-than-expected increase in third-quarter profit as sharply higher sales helped to offset rising expenses, and the company lifted its fiscal view.

Continue Reading Below

The Richardson, Texas-based watchmaker said it earned $69.6 million, or $1.09 a share, compared with $68.2 million, or a dollar a share, in the year-earlier period.

The results were ahead of average analyst estimates polled by Thomson Reuters of $1.03 a share.

Revenue for the three months ended Oct. 1 was up 22.7% to $642.9 million from $523.8 million a year ago, just below the Street’s view of $642.2 million. The quarter marked Fossil’s eighth consecutive of global double-digit same store sales growth.

"Against a backdrop of strong sales growth last year, we generated broad-based, double-digit sales growth across our major product categories, brands and geographies,” Fossil chief financial officer, Mike Kovar, said in a statement.

While sales climbed across all of its geographic regions, wholesale sales were strongest in Europe and Asia, while retail sales were highest in Asia and North America. Global watch and leather sales helped drive the sales gains, Fossil said. 

Continue Reading Below

Despite the improvements, though, the company’s operating margins thinned due to a $53.2 million increase in total operating expenses that lifted those costs as a percentage of sales to 37.4% from 35.8% in the year-earlier period.

Costs were pushed higher on marketing and infrastructure expenses that helped expand its presence in Asia. The company also spent $3.2 million to move into its new corporate headquarters during the third quarter.

However, the maker of Zodiac and Michele watches expressed optimism ahead, lifting its fiscal view to between $4.50 and $4.53, up from its earlier guidance of $4.44 to $4.50 a share. Wall Street is currently expecting a narrower fiscal profit of $4.46 a share.

For the current quarter, Fossil sees fourth-quarter earnings in the range of $1.75 to $1.78 a share on sales growth of 20%. Wall Street sees earnings in the current period of $1.78 on sales of $853.3 million.

What do you think?

Click the button below to comment on this article.