Richardson, TX—Fossil Inc.’s first-quarter earnings reported today more than doubled, exceeding expectations thanks to an increase in its wholesale watch and other accessories sales in North America and Asia and improved same-store comps.
The company, which sells watches, jewelry, leathergoods, belts, sunglasses and apparel, posted net income of $35.9 million, or 53 cents a share, up from $17.3 million, or 26 cents a share, a year earlier. Net sales at the company soared 22 % to $393.2 million. Net sales at the company soared 22 percent to $393.2 million. Gross margin rose to 55.8% from 52.4% and retail same-store sales increased 19% on a constant-dollar basis. Wholesale sales climbed 19%. The company’s direct-to-consumer business also saw an increase in sales of more than 30%.
The report marks the fifth straight quarter that Fossil has bested analysts’ forecasts. Most recently, analysts had forecasted earnings of 32 cents on $363 million in revenue.
“Improving economic conditions, global retail comps of 19.4% as well as significant sales increases in our wholesale business proved to be a winning combination,” says Mike Kovar, executive vice president/chief financial officer. “During the quarter, we continued to gain market share by leveraging our global platform and design innovation. This was especially evident in North America and Asia, but we also saw considerable strengthening in our European wholesale businesses.”
Watch Sales Increased by 50%
Fossil’s diversified wholesale base, which runs the gamut from Neiman Marcus and Nordstrom to Target and Wal-Mart, helped, too, experiencing increases in shipments of categories such as watches. Net sales in the North America wholesale segment increased by 29.8% compared with the same quarter in 2009. Replenishment orders, continued innovation and an upturn in the watch category contributed to the sales increase, Kovar says.
Overall, watch sales increased by more than 50% in the first quarter compared with 2009. Sales increased across all Fossil brands. However, the strongest performances came from Michael Kors, Fossil and Michele brands where wholesale accessories sales volume increased by 6.5% compared with 2009 due to increased shipments of Fossil jewelry, men’s leathergoods, and footwear, partially offset by a slight sales volume decline in Fossil’s women’s leather products.
For the full-year, the company is looking for earnings of $2.55 to $2.65 per share, with net sales to be up 12% to 14%.