Fossil Group Inc.
) reported second-quarter 2013 adjusted earnings of $1.15 per
share which beat the Zacks Consensus Estimate of 93 cents by
23.6%. Earnings also topped the year-ago earnings of 92 cents per
share by 25.0% and also surpassed management's guidance range of
89 cents-94 cents.
Double-digit sales growth and gross margin expansion aided by
several operational initiatives taken up by the company boosted
earnings in the quarter. The shift of some marketing expenses to
the third quarter added a huge 8 cents to the earnings
Quarter in Detail
Fossil's net sales during the quarter increased 11.0% year
over year to $706.2 million, exceeding the Zacks Consensus
Estimate of $691 million. Net sales increased across all
geographic regions. The company witnessed double-digit growth in
watch and jewelry categories. Strong sales of core brands like
FOSSIL(R) and SKAGEN(R) also boosted sales during the quarter.
However, sales in other categories including eyewear and leather
businesses declined in the quarter. Unfavorable exchange rates
reduced the company's export sales by $2.3 million in the
Gross margin inflated 190 bps to 57.9% driven by improved
liquidation strategy, positive pricing, booming retail business
and strategic acquisitions. Operating income went up by 21.4% to
$106.9 million from the prior-year quarter. Operating margin
inflated 130 basis points (bps) to 15.1% backed by higher sales
and solid gross margins in the quarter.
Net sales from the
wholesale segment increased 4.2% on a constant currency basis to
$260.7 million, primarily driven by robust sales gain in the
watch portfolio and jewelry. However, lower shipments of leather
and eyewear partially offset the results.
Net sales in
grew 15.0% year over year on a constant currency basis to $170.7
million, driven by increases in watch sales and jewelry
categories. However, reduced shipments in the leather and eyewear
businesses offset the sales increase. Strong sales in Germany and
the U.K. as well as in the company's third-party distributor
markets boosted sales during the quarter. On the other hand,
France experienced a significant decline in sales owing to
ongoing macroeconomic headwinds.
Net sales in the
segment increased 17.7% on a constant currency basis to $96.2
million, driven by increases in the company's watch sales. China,
Japan and India contributed significantly to the sales gain
during the period.
Net sales in
segment grew 16.1% year over year on a constant currency basis to
$178.6 million, primarily attributable to global retail store
sales growth. Growth in watches and a modest increase in the
leather business also fueled the sales increase, along with
higher sales from the company's repositioned jewelry
Other Financial Updates
During the second quarter, Fossil bought back 1.7 million
shares at a total cost of $169 million. As of Jun 29, 2013,
Fossil had $843 million left under its share repurchase plan.
Fossil raised its earnings guidance for full year 2013. The
company now expects earnings in the range of $6.15 - $6.35 per
share, higher than the previous expectation of $6.00 - $6.26 per
share. Fossil expects sales to increase in the range of 11.0% to
12.0% higher than the previously announced estimate of a range of
10% to 11%. Operating margin is likely to be in the range of
16.75% to 17.25% slightly up from the previously-announced range
of 16.5% to 17.0% for 2013. The increased guidance reflects
continued momentum of the Fossil brand and new product launches
For third-quarter 2013, Fossil expects sales to increase
approximately 12.5% to 13.5%. The company expects earnings in the
range of $1.30 to $1.37 per share and operating margin in the
range of 15.0% to 15.5%.
Other Stocks to Consider
Fossil carries a Zacks Rank #3 (Hold). Other diversified
retail wholesalers worth considering include
Express Inc. (
Gap Inc. (
Abercrombie & Fitch Company (
All these companies carry a Zacks Rank # 2(Buy).
ABERCROMBIE (ANF): Free Stock Analysis Report
EXPRESS INC (EXPR): Free Stock Analysis
FOSSIL GRP INC (FOSL): Free Stock Analysis
GAP INC (GPS): Free Stock Analysis Report
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