Fossil tops 4Q profit forecast

02/15/2012
By Maria Halkias | Staff Writer
The Dallas Morning News
mhalkias@dallasnews.com 
 
Accessory maker sees 5th double-digit sales gain, looks to grow
 
Richardson-based fashion watch and accessory maker Fossil Inc. reported a better-than-expected 22 percent increase in fourth-quarter profit Tuesday.
 
The company also reported its fifth consecutive quarter of double-digit sale increases and a full-year milestone of $2.5 billion in sales, up $500 million from the prior year.
 
And while Fossil tempered its first-quarter forecast, investors didn't seem to care. The company's stock gained $15.32 a share, or 15 percent, to close at $119.82 on Tuesday.
 
Management said that Fossil continues to invest in Asian markets, its handbag business is expanding and it's focused on its best watch brands.
 
CEO Kosta Kartsotis said Fossil is trying to make its big brands bigger. Michael Kors and Armani watches each had sales of more than $300 million last year, he said.
 
In 2011, its Fossil brand surpassed $1 billion in sales, to $1.2 billion. Marc by Marc Jacobs watch sales doubled over the prior year, and Armani Exchange increased 48 percent. Diesel and Burberry were both up at least 30 percent.
 
Fossil handbags are gaining market share in the United States and Europe, Kartsotis said. New stores in France are selling more handbags per location than anywhere else in the world, he said.
 
Fossil ended 2011 with 398 stores. The company is planning to open 70 to 75 more stores and will add another 13 from its pending acquisition of Skagen Designs Ltd.
 
Last month, Fossil agreed to purchase competitor Skagen for cash and stock totaling $236.8 million. It anticipates regulatory clearance by the end of March. Fossil also disclosed that Skagen had sales of $120 million last year.
 
Skagen's watches are "contemporary in look and different than any of the products that we currently make," Kartsotis said. "Our objective is to turbocharge the Skagen watch business while supporting it and expanding its distribution."
 
Fossil said it earned $117.9 million in the fourth quarter, or $1.88 a share, compared with a profit of $96.7 million, or $1.48 a share, in the prior year.
 
Fourth-quarter sales increased 18.5 percent to $830.8 million, from $701.1 million a year ago.
 
Analysts surveyed by Thomson Reuters had forecast a profit of $1.77 a share and sales of $841.1 million.
 
Fossil reported a full-year profit of $294.7 million, or $4.61 a share, versus $255.2 million, or $3.77 a share, in the prior year.
 
The company also gave guidance for the first quarter and full year that fell short of analyst forecasts. It expects sales to increase 15 percent in both periods.
 
First-quarter profit will be in the range of 90 to 92 cents a share. For all of 2012, the company said it estimates earnings in the range of $5.40 to $5.50 a share. That compares with a forecast from Thomson Reuters of 98 cents a share for the first quarter and $5.44 a share for the year. The estimates don't include Skagen. 
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