Fossil Inc (FOSL): Time to Buy?

There’s nothing not to like about watch-maker Fossil’s (FOSL) latest earnings report. And investors found plenty to like, as share prices jumped by $3 in early trading.

Fossil (Nasdaq: FOSL) beat earnings expectations for the first quarter 2010 today by $0.21, earning $0.53 per share, and exceeded last year’s earnings per share figure of $0.26 for the same period.

Revenues came in 21.7 % higher for Q1 2010 to $393.2 million, and the company raised its 2010 outlook to $2.55 -$2.65 per share from $2.34.

And net income more than doubled, increasing 107.3% to $35.9 million versus last year’s number of $17.3 million for the same period. Watch sales increased by 50% across all Fossil brands.

The retail apparel company cited significant growth in international markets as well as its wholesale business, innovative design, and a healthy product mix, for its strong profitability and gains in market share. Retail sales, online sales, and catalog activities also showed growth.

“Our strong balance sheet puts us in a great position to continue to fuel the momentum we are currently experiencing,” Mr. Kovar, Fossil’s executive VP and CFO, said. “While we expect to see improving operating leverage during 2010, we will also continue to invest in our businesses to support our long term growth goals, expand our market share and broaden our global footprint. We expect fiscal 2010 to represent a strong year for Fossil.”

Comments: The technicals for FOSL look excellent. The company has a strong brand and executes well across all distribution channels. Improving economic conditions and a weak dollar will continue to fuel Fossil’s growth, but if economic conditions weaken, expect momentum to decrease. It may never be a bad time to buy Fossil, but the share price is close to its 52-week high, so look to buy on a pullback to lower your risk.

Disclosure: No position in FOSL.

Carolyn Austin is the writer for our new Real Estate Cheat Sheet Premium service. Click here to learn more or get your free copy now.