Fossil (FOSL) Rockets on Improved Earnings

Shares of luxury and fashion accessory maker Fossil Inc. (FOSL: Charts, News) soared +21.98 or +31.49 percent on Tuesday to $91.77 per share, after the company reported second quarter earnings had increased more than 11 percent over the same period one year ago. Tuesday's pre-opening announcement showed the company had earned $57.3 million, or $0.92 per share, versus $51.4 million or $0.80 per share in the same period one year ago.

Sales for the company's second quarter increased by +14.3 percent to $636.1 million, analysts polled by Thomson Reuters were expecting earnings of $0.78 per share on revenue of $634.86 million for 2012's second quarter. Fossil shares rose +30 percent before the opening of trading on Tuesday, and went on to trade over seven million shares for the day. The stock has recovered considerably after the routing it suffered on May 9th, which saw the stock plunge from $136.97 per share to $78.52 per share after the company cut its earnings guidance for the second quarter by $0.10 per share. Daily Chart
Richardson, Texas based Fossil Inc. is a leading manufacturer, designer and distributor of high end consumer fashion accessories. The company manufactures and markets an extensive line of designer watches for brands such as Burberry DKNY and Michael Kors (KORS: Charts, News), Armani and Diesel. The company also produces and markets handbags, belts, small leather goods, sunglasses and other apparel. For the period ending on June 30, 2012, Fossil reported a net sales increase of +14.3 percent to $631.1 million, versus $556.7 million in the second quarter of 2011, with gross profits rising +14.2 percent to $356.4 million, versus $312.0 million one year ago. After the earnings announcement, Mike Kovar, Chief Financial Officer stated that, "Across each of our geographical segments we experienced acceleration in wholesale sales growth in comparison to our first quarter of 2012. Constant dollar sales of watches worldwide increased by 23.2% and included contributions from almost all major brands, including SKAGEN. In Asia, we saw constant dollar sales grow by 27.2% demonstrating the success of our investments in this opportunity and the heightened consumer demand for FOSSIL and our multi-brand watch portfolio. We believe we are well positioned in the second half of the year to execute our growth strategies and capitalize on our owned infrastructure and exceptional talent to further advance our market penetration for fashion watches and accessories worldwide." The company now expects third quarter net sales to grow approximately 11 percent with net dollar sales increasing 15 percent. Fossil's guidance for third quarter earnings is for $1.09 to $1.11 per share, with adjusted earnings of $1.15 to $1.17 per share. In May, Fossil lowered their second quarter guidance to $0.77 to $0.79 per share on a 16 percent rise in revenue, driving the stock down more than 40 percent. Fossil is now projecting 2012 fiscal earnings to be $5.20 to $5.25 per share with adjusted earnings of $5.29 to $5.34 per share. Analysts had predicted yearly earnings to come in at $5.28 per share. Despite the improved earnings, a number of analysts cut their rating on Fossil stock. Citigroup (C: Charts, News) cut the stock from a buy rating to neutral with a target of $100 per share on Tuesday. Other analysts, such as Benchmark Co. have revised their forecasts, lowering their price target from $100 to $85.00 per share while Piper Jaffray (PJC: Charts, News) downgraded the stock from overweight to neutral in a note to investors dated July 24th. Expectations for the third quarter are high for Fossil, but a disappointment could possibly lead to a repeat of the May sell-off. Conversely, the stock could also recover the rest of the ground it lost in May if the company delivers on its Q3 projections. Other News About FOSL Fossil, Inc. Adds to Senior Leadership Team Article on the additions to Fossil's Senior Leadership Team. Fossil's CEO Discusses Q2 2012 Results Text of the conference call after the earnings announcement. Other Stocks in the News EBay Moves Into Amazon Prime Territory Article on the new service EBay is providing that will compete with Amazon. Apple Account Hack Raises Concern About Cloud Storage Wired writer gets hacked raising concerns on the safety of cloud storage. Copyright 2012 by, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA, Inc.) or its employees responsible.

Published on Aug 8, 2012
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

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