Q2 2008 Diluted EPS of $0.36
Net Sales Increase 15.2% While Operating Income Soars 51.2%
RICHARDSON, Texas, Aug. 12, 2008 (PRIME NEWSWIRE) -- Fossil, Inc. (Nasdaq:FOSL) (the "Company") today reported second quarter net sales and earnings for the thirteen-week ("Second Quarter") and twenty-six week ("Six Month Period") periods ended July 5, 2008.
Second Quarter Results (2008 vs 2007):
* Net sales increased 15.2% to $353.2 million compared to $306.5
million;
* Gross profit grew 26.4% to $190.3 million, or 53.9% of net
sales, compared to $150.5 million, or 49.1% of net sales;
* Operating income increased 51.2% to $35.0 million, or 9.9%
of net sales, compared to $23.1 million, or 7.5% of net sales;
* Net income rose 71.3% to $25.1 million compared to $14.7
million; and
* Diluted earnings per share increased 71.4% to $0.36 on 69.0
million shares compared to $0.21 per diluted share on 69.7
million shares.
Mike Kovar, Executive Vice President and Chief Financial Officer stated, "We are pleased to report record Second Quarter results, a strong testament to the resiliency of our global business model and the strength of our offerings in a challenging economic environment. During the quarter we advanced each of our key growth initiatives, including expansion of our direct-to-consumer channel, international wholesale businesses and the Fossil brand. We also continued our focus on margin improvement with gross profit margin rising 270 basis points excluding currency benefits. Although the state of the economy worldwide remains uncertain, we will continue to focus on profitable market share growth applying the same disciplines that led to our strong first half performance. We believe that managing our costs and inventory based upon sales trends, while continuing to invest in our long-term growth objectives, has us well positioned to achieve our annual goals."
Six Month Period Results (2008 vs 2007):
* Net sales increased 16.0% to $709.4 million compared to $611.3
million;
* Gross profit increased 25.4% to $384.6 million, or 54.2% of
net sales, compared to $306.6 million, or 50.2% of net sales;
* Operating income increased 51.0% to $84.1 million, or 11.9%
of net sales, compared to $55.7 million, or 9.1% of net sales;
* Net income increased 39.4% to $55.4 million compared to $39.7
million; and
* Diluted earnings per share increased 40.4% to $0.80 on 69.5
million shares compared to $0.57 per diluted share on 69.6
million shares.
Operating Results
During the Second Quarter, consolidated net sales rose 15.2% (9.3% excluding currency impact) to $353.2 million in comparison to the prior year quarter net sales of $306.5 million. Net sales increases were generated in all of the Company's operating segments. International wholesale sales increased 20.4% (9.5% excluding currency impact) and included a 16.8% (2.9% excluding currency impact) increase from the Company's European segment and a 27.1% (21.4% excluding currency impact) increase from the Company's other international segment. Net sales growth internationally was primarily driven by sales volume growth in FOSSIL(r) and licensed brand watches. Domestically, net sales from the Company's wholesale segment increased 1.5% driven by a 2.3% increase in domestic watch sales and a 0.5% increase in domestic accessory businesses. Increases in the domestic watch business were primarily the result of sales volume increases in MICHELE(r), MICHAEL KORS(r) and EMPORIO ARMANI(r) watches. These increases were partially offset by sales volume declines in mass market watches based upon the shift of certain promotional programs into the first quarter this year compared to the second quarter last year. Net sales from the Company's domestic accessories businesses rose as a result of sales volume growth in RELIC(r) handbags and small leather goods and from the continued roll-out of FOSSIL accessories jewelry and the FOSSIL Fifty-Four(r) handbag line, both launched during the second half of fiscal year 2007. These increases were partially offset by sales volume declines in eyewear and the core FOSSIL handbag line. Direct to consumer sales increased 24.8% (22.5% excluding currency impact) primarily as a result of a 27.9% increase in the average number of company-owned stores open during the Second Quarter and comparable store sales gains of 5.7% (4.2% excluding currency impact). For the Six Month Period, consolidated net sales increased 16.0% (9.9% excluding currency impact) principally due to sales volume growth in the international and direct to consumer segments.
Gross profit margin increased by 480 basis points to 53.9% in the Second Quarter compared to 49.1% in the prior year quarter. For the Second Quarter, the Company's gross profit margin was favorably affected by a weaker U.S. dollar, the Company's ongoing initiative to reduce product cost and decrease the proportion of lower margin watch offerings in its various owned and licensed brands and the increased sales mix of higher gross margin international and direct to consumer sales. Partially offsetting these increases in gross profit margin during the Second Quarter was an increase in the sales mix of lower gross margin distributor sales worldwide. For the Second Quarter and Six Month Period, the favorable impact on gross profit margin relating to the weaker U.S. dollar contributed approximately 200 basis points of improvement in gross profit margin in comparison to the prior year periods.
Operating expenses as a percentage of net sales increased 240 basis points in the Second Quarter to 44.0% compared to 41.6% in the prior year quarter. Total operating expenses increased by $28.0 million to $155.4 million in comparison to the prior year quarter and included approximately $7.5 million related to the translation of foreign-based expenses as a result of the weakening U.S. dollar. Operating expenses in the prior year quarter included approximately $4.4 million related to expenses associated with the Company's equity grant review.
