Fossil net leaps 86.6%

Buoyed by robust demand for watches, Fossil Inc. reported fourth-quarter earnings vaulted 86.6 percent on a 27.3 percent sales gain.

In the quarter ended Jan. 2, earnings rose to $12.7 million, or 58 cents a share diluted, from $6.8 million, or 32 cents, a year ago. Sales ran up to $101.1 million from $79.4 million.

John Talbot, vice president of marketing, said Fossil continued to benefit from strong demand forĀ watches, noting department stores were allocating more space to the category, and new specialty concepts such as Watch World and Watch Station were expanding.

If you look at malls, there’s just a lot more space dedicated to watches than there was five years ago. It’s not just market share gains that we’re seeing, but gains in an expanding marketplace,” Talbot said.

In the U.S., watch sales grew 34.9 percent in the quarter to $46.3 million, reflecting significant volume increases in the Fossil brand as well as the continued roll out of the licensed Emporio Armani watch line. Other products, primarily sunglasses and leather goods, nudged up 7.3 percent to $16.5 million.

Store sales gained 31.1 percent to $9.7 million from $7.4 million. Randy Kercho, chief financial officer, said same-store sales advanced 19 percent at Fossil’s mall stores and climbed 9 percent at its outlet stores.

Fossil now has nine mall stores and 28 outlet stores. It added three mall stores and one outlet last year.

In Europe, sales jumped 50.3 percent in the quarter to $21.8 million, but sales to other international regions slid 12.1 percent to $7.2 million, reflecting weakness in Asia.

Gross margins improved to 49.4 percent from 48 percent, reflecting strength in the U.S. dollar against the Japanese yen and an increase in Fossil’s sales mix of watches and products sold at its own stores. Selling, general and administrative expenses were reduced to 22.3 percent from 23.7 percent, reflecting increased leverage against sales increases.

In the year, earnings rose 69.8 percent to $32.2 million, or $1.48 a share, from $18.9 million, or 91 cents, a year ago. Sales climbed 24.5 percent to $304.7 million from $244.8 million.

In the U.S., sales of watches jumped 35.3 percent to $137 million, other products gained 9.2 percent to $52 million and stores’s sales increased 30.5 percent to $26.1 million. Internationally, European sales advanced 38.7 percent to $62.7 million, but sales in other regions slumped 12.7 percent to $26.9 million.

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