Fossil Earnings: Falls Short on Revenue Estimate, Stock Sells Off Hard

Fossil Inc. (NASDAQ:FOSL) reported its results for the first quarter. Fossil is a global design, marketing and distribution company that specializes in consumer fashion accessories.

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Fossil Earnings Cheat Sheet for the First Quarter

Results: Net income for Fossil Inc. rose to $58.1 million (93 cents per share) vs. $55.8 million (86 cents per share) in the same quarter a year earlier. This marks a rise of 4.2% from the year-earlier quarter.

Revenue: Rose 9.8% to $589.5 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Fossil Inc. beat the mean analyst estimate of 92 cents per share. It fell short of the average revenue estimate of $617.6 million.

Quoting Management: “While our First Quarter earnings were on target with our guidance, net sales came in slightly below our expectations. We experienced a sequential quarter improvement in sales growth from our Asia Pacific wholesale business, continued strength across our North American watch business and strong same store sales comps across our global retail base, especially when considering the strong double-digit comp performance in the prior fiscal year first quarter. However, in Europe, a softening macro environment toward the end of the First Quarter and changes in our merchandising and assortment strategies across certain categories negatively impacted both our wholesale and retail sales in that region,” stated Mike Kovar, Executive Vice President, Chief Financial Officer and Treasurer, Fossil, Inc. “While we are cautious about the European economy and its impact on our financial results, we remain confident that continued strength in watch sales, same store sales and square footage growth in our retail business, the continued rollout of concessions in Asia Pacific and the integration of Skagen Designs, Ltd., the purchase of which was effective April 2nd, will result in double-digit sales and earnings growth for fiscal 2012.”

Key Stats:

The company has now seen its net income increase for three consecutive quarters. In the fourth quarter of the last fiscal year, net income rose 22% and in the third quarter of the last fiscal year, the figure rose 2.1%.

The company has now topped analyst estimates for the last four quarters. It beat the mark by 10 cents in the fourth quarter of the last fiscal year, by 6 cents in the third quarter of the last fiscal year, and by 5 cents in the second quarter of the last fiscal year.

Gross margin shrank 0.4 percentage point to 55.8%. The contraction appeared to be driven by increased costs, which rose 10.8% from the year earlier quarter while revenue rose 9.8%.

Revenue has risen for the last four quarters. Revenue increased 18.5% to $830.8 million in the fourth quarter of the last fiscal year. The figure rose 22.7% in the third quarter of the last fiscal year from the year earlier and climbed 34.9% in the second quarter of the last fiscal year from the year-ago quarter.

Looking Forward: Next quarter’s results are expected to be more favorable for the company. Over the past sixty days, the average estimate for the second quarter has reached 95 cents per share, up from 93 cents. The average estimate for the fiscal year is $5.57 per share, a rise from $5.43 ninety days ago.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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