Fossil Shares Rise On 2014 Outlook, Q4 Revenues Beat View

(RTTNews) - Shares of Fossil Group Inc. (FOSL) gained almost 3 percent in extended trades Tuesday after the fashion accessories and watch retailer reported revenues for the fourth quarter that beat analysts' estimates and forecast financial results for fiscal 2014 in line with analysts' estimates.

However, Fossil's profit for the fourth quarter declined 2 percent from last year and the company forecast earnings for the first quarter below Street expectations.

The Richardson, Texas-based company's fourth-quarter net income was $148.5 million, down from $151.1 million in the year-ago period. However, earnings per share rose to $2.68 from $2.51 in the previous-year quarter on fewer number of shares outstanding. On average, analysts polled by Thomson Reuters expected the company to report earnings of $2.43 per share for the quarter. Analysts' estimates typically exclude special items.

The growth in earnings per share resulted from operating income growth and a reduction in average shares outstanding, partially offset by increased interest expense and a higher tax rate.

Net sales for the quarter grew 12 percent to $1.06 billion from $947.7 million in the prior-year period and beat analysts' consensus revenue estimate of $1.02 billion for the quarter.

The sales increase for the quarter was driven by growth in the company's multi-brand global watch portfolio and modest growth in the Fossil brand, more than offsetting a small decline in Skagen brand sales. Jewelry sales increased significantly, while sales of leathers declined slightly. Net sales of watches rose 14 percent from the prior year.

The translation impact of a weaker U.S. dollar increased the company's reported net sales by about $0.6 million during the latest quarter.

Gross margin for the quarter rose 50 basis points to 57.4 percent, primarily driven by a greater sales mix of higher margin products, a favorable regional distribution mix given the growth in international markets, the acquisition of distributors in Latin America and Spain, as well as foreign currency benefits from a significantly stronger Euro. However, operating margin declined 100 basis points to 20.6 percent.

Wholesale net sales for the quarter rose 13 percent to $782.8 million, with growth in all wholesale segments. Direct to consumer net sales increased 9 percent to $279.6 million, driven by the expansion of the global retail store base, partially offset by a decrease in same stores sales compared to the prior fiscal year period.

Global retail comps declined 1.3 percent, with increases in Europe as well as Asia Pacific and a decrease in North America due to significant traffic declines.

For fiscal 2013, Fossil's net income rose to $378.2 million or $6.56 per share from $343.4 million or $5.59 per share in the prior year. Net sales for the year increased 14 percent to $3.26 billion from $2.86 billion last year.

Street expected the company to earn $6.33 per share for the year on revenues of $3.22 billion.

Looking ahead to the first quarter, Fossil forecasts earnings of $1.10 to $1.18 per share on net sales growth of 12.5 percent to 14.0 percent. Analysts expect the company to report earnings of $1.30 per share on revenue growth of 11.30 percent to $757.98 million.

For fiscal year 2014, Fossil forecasts earnings of $6.90 to $7.30 per share on net sales growth of 8 percent to 10 percent, implying net sales of $3.52 billion to $3.59 billion. Analysts expect earnings of $7.22 per share for the year on sales growth of 9.60 percent to $3.53 billion.

FOSL closed Tuesday's regular trading session at $116.96, up $1.96 or 1.70 percent on a volume of 3.01 million shares. In after-hours, the stock further gained $3.34 or 2.86 percent to $120.30.