Fossil Group Q3 net sales rise 10 percent

REPORT_ In the third quarter of 2014, the Fossil Group’s worldwide net sales rose 10 percent or 81.3 million dollars, reflecting sales growth in each of the company’s wholesale segments and direct to consumer segment. Its net income for the third quarter was 103.7 million dollars, or 1.96 dollars per diluted share, compared to 89.7 million dollars or 1.58 dollars per diluted share for the third quarter of fiscal 2013. Company has attributed the increase in diluted earnings per share to operating income growth driven by increased sales and the benefit of a lower share base.

Commenting on the third quarter results, Kosta Kartsotis, Chief Executive Officer, said, “The third quarter marked another strong period for our company. We reported better-than-expected top and bottom line results, advanced many of the strategic initiatives that we expect will continue our favorable performance in the future and returned value to shareholders by capitalizing on our strong balance sheet and executing our share repurchase program. We also announced the renewal of our licensing agreement with Michael Kors for ten years.”

The translation impact of a weaker US dollar increased the company’s reported net sales by 2.8 million dollars during the fiscal third quarter. The sales increase reported by the company was driven by strong growth in the company’s multi-brand global watch portfolio as well as growth in the Skagen and Fossil brands. Jewelry sales increased significantly during the quarter, while sales of leathers declined.

Net sales from the North America wholesale segment increased 6 percent, or 19.1 million dollars, compared to the third quarter of fiscal 2013. Growth in watches and jewelry drove the North American sales increase and were partially offset by a decline in leathers. Increases in wholesale shipments to major department store accounts and boutiques in the United States drove the regional performance. Europe wholesale net sales rose 15 percent, or 30.5 million dollars, compared to the third quarter of fiscal 2013. Strong high-teen growth in watches and jewelry drove the European sales increase and were partially offset by a decline in leathers. All European markets posted sales increases, with the strongest performance coming from the United Kingdom, France and Germany.

Asia Pacific wholesale net sales rose 11 percent, or 11.1 million dollars, compared to the third quarter of fiscal 2013. Double digit growth in watches and a positive contribution from leathers drove the increase. The majority of markets contributed to the sales growth, with particularly strong growth in Japan and India. Direct to consumer net sales for the third quarter of fiscal 2014 increased 11 percent, or 20.6 million dollars, compared to the third quarter of fiscal 2013. The sales increase was primarily driven by the expansion of the global retail store base, as global comparable store sales declined slightly, with a decrease in North America largely offset by increases in Europe and Asia Pacific. Comparable sales were relatively flat in watches and jewelry with a slight decline in leathers.

During the third quarter of fiscal 2014, gross margin decreased 50 basis points to 56.9 percent, driven by the impact of increased promotional activity in the outlet channel, partially offset by the favorable impact of regional distribution mix given the growth in international markets.