Fossil profit beats Street as it sells more in Europe, Asia


Fashion accessory maker and retailer Fossil Group Inc reported a better-than-expected quarterly profit as it sold more watches and jewelry in Europe and Asia, sending its shares up as much as 22 percent.

The company raised its full-year profit forecast to between $6.15 and $6.35 per share from $6.00-$6.26. Analysts on average were expecting a profit of $6.17 per share, according to Thomson Reuters I/B/E/S.

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"Fossil remains one of the few consumer companies delivering strong double-digit growth in earnings and top line ...," BB&T Capital Markets analyst Scott Krasik said, reiterating his "buy" rating on the stock.

Fossil sells watches ranging from $7 to upwards of $2,000 under brands such as Armani Exchange, Marc by Marc Jacobs and Michael Kors.

"We are planning on expanding into additional brands over the next couple of years and mostly for Asia ..." Chief Financial Officer Dennis Secor said on a conference call with analysts.

Europe and Asia wholesale contributed about 38 percent of Fossil's total sales in the second quarter. Gains in Europe also helped Michael Kors Holdings Ltd report a near-doubling in quarterly profit.

Fossil has been repositioning its low-priced jewelry line to sync with the "affordable luxury" image it has cultivated for its watches and handbags.

The revamp worked well with customers as jewelry sales jumped 24 percent, while watch sales rose about 15 percent.

"Our customers have continued to respond very favorably to our Fossil global jewelry assortment, delivering positive jewelry (comparables) in our full-price stores in all regions," Dennis Secor said on the call.

Fossil said on the call that it expects operating expenses to rise this year, with third quarter hurt by marketing and advertising initiatives ahead of the holiday season.

The company forecast profit of between $1.30-$1.37 per share for the quarter, below analysts' expectation of $1.46 per share.

Second-quarter earnings rose to $67.7 million, or $1.15 per share, from $57.3 million, or 92 cents per share, a year earlier. Analysts expected a profit of 93 cents per share.

Sales to wholesale customers in Europe rose 16 percent to $170.7 million, helping overall revenue rise by 11.4 percent to $706.2 million. Analysts were looking for second-quarter revenue of $691.2 million.

Shares of Texas-based Fossil rose to more than a year high of $129.25 on the Nasdaq on Tuesday. They were at $127.23 in morning trade.

(Editing by Sreejiraj Eluvangal and Sriraj Kalluvila)