(RTTNews) - Fossil, Inc. (FOSL: News ), a fashion accessories company, reported Tuesday a decline in profit for the third quarter, hurt by stronger U.S. dollar as well as lower net sales, despite strong direct to consumer sales. Quarterly earnings per share and net sales, however, topped the market projections. Further, the Richardson, Texas-based company lifted its fourth quarter and fiscal 2009 earnings forecast, citing the positive momentum at its direct to consumer and watch segments, as well as better currency environment.

Third-quarter net income declined 3.3% to $35.28 million from $36.47 million in the year ago quarter. On a per share basis, earnings fell 3.7% to $0.52 from $0.54 last year. The company noted that the latest quarter results included an unfavorable $0.03 per share impact related to the stronger U.S. dollar.

On average, six analysts polled by Thomson Reuters expected the company to report earnings of $0.42 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter fell 6.9% to $381.36 million from $409.76 million last year, yet beat five Wall Street analysts' consensus revenue estimate of $376.88 million. The translation impact of a stronger U.S. dollar reduced quarterly net sales by about $7 million. On a constant dollar basis, consolidated net sales decreased 5.2% primarily due to an 11.5% fall in net sales from the company's wholesale businesses, partially offset by a 22.4% growth in net sales in its direct to consumer segment.

The company was projecting third-quarter earnings in the range of $0.38 to $0.42 per share, including a negative currency impact of about $0.05 per share related to the stronger U.S. Dollar, and net sales were anticipated to decrease in a range of 6% to 9%.
Commenting on the results, Mike Kovar, executive vice president and chief financial officer, stated, "Our Third Quarter results surpassed our expectations, driven by retail sales stemming from company-owned stores, a more favorable product sales mix and increased expense leverage. Although we have managed our inventories to much lower levels than last year, we remain well-positioned to benefit from any uplift in retail sales during the holiday season."

Segment-wise, Direct to consumer net sales climbed 20.8% on a reported basis, and 22.4% in constant dollars from last year, primarily due to a 21.8% increase in the average number of company-owned stores open during the quarter and constant dollar comparable store sales gains of 6.4%. This was despite the current challenging economic environment and positive retail comps in the prior year quarter. Net sales from the e-commerce businesses increased 7% in constant dollars.

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