Tuesday, Fossil, Inc. (FOSL), a fashion accessories designer and marketer, reported a 34% decline in second-quarter profit hurt by lower net sales. Further, the company provided an outlook for the third and fourth quarters and raised earnings guidance for fiscal 2009. The Richardson, Texas-based company's net income for the second quarter declined 33.9% to $16.62 million or $0.25 per share from $25.14 million or $0.36 per share in the previous year. According to the company, results for the quarter include an unfavorable $0.04 per share impact related to the stronger U.S. Dollar.
On average, seven analysts polled by Thomson Reuters expected the company to report earnings of $0.20 per share for the quarter. Analysts' estimates typically exclude special items. Mike Kovar, executive vice president and chief financial officer said, "Earnings for the second quarter exceeded our expectations as a result of solid comparable store sales gains within our FOSSIL retail stores globally, stringent expense control and our ability to reduce inventory while maintaining our global gross margins."
Net sales for the quarter decreased10.6% to $315.86 million from $353.19 million in the prior year. On a constant dollar basis, worldwide net sales decreased 4.8%, mainly due to an 11.1% decline in net sales from the company's wholesale businesses. Six analysts had consensus revenue estimate of $320.99 million for the quarter. Net sales from U.S. wholesale segment declined 3.2%. Wholesale watch and accessories businesses experienced sales volume decline of 3.5% and 2.6%, respectively.
European net sales decreased 24.1% or 12.1% in constant dollars from the previous year. On a constant dollar basis, watch and jewelry net sales declined 12.2% and 18.5%, respectively.
Direct to consumer segment sales increased 16.8% or 21.1% in constant dollars, mainly due to a 27.5% increase in the average number of company-owned stores open during the quarter and constant dollar comparable store sales gains of 4.9%. Net sales from e-commerce businesses also increased 4.7% or 7.2% in constant dollars. Operating income for the quarter decreased 35.7% to $22.5 million, negatively impacted by about $11.6 million as a result of the translation of foreign-based sales and expenses into U.S. Dollars, Fossil noted.
For the six-month period, the company's net income declined to $33.94 million or $0.51 per share from $55.35 million or $0.80 per share in the same period last year. Net sales were $638.89 million, down from $709.37 million in the preceding year.
Looking ahead to the third quarter, the company said it currently expects reported earnings to be in the range of $0.38 to $0.42 per share and includes a negative currency impact of about $0.05 per share related to the stronger U.S. Dollar. Reported net sales are anticipated to decrease in a range of negative 6% to negative 9%. Analysts are looking for earnings of $0.46 per share on revenues of $377.6 million for the third quarter.
For the fourth quarter, Fossil projects earnings in the range of $0.74 to $0.80 per share. The company currently expects reported net sales in a range of flat to positive 3%. Further, for fiscal 2009, the company raised its earnings outlook to the range of $1.63 to $1.73 per share. Earlier, the company had projected full year earnings of $1.50 to $1.70 per share. Analysts currently expect full year earnings of $1.61 per share.
FOSL closed Monday's regular trading at $27.72 on the Nasdaq.
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