Diluted EPS Totals $0.26, Exceeding Guidance        Raises Fiscal 2009 Diluted EPS Guidance to $1.50 to $1.70                      Global Retail Comps Up 5.1% 

RICHARDSON, Texas, May 12, 2009 (GLOBE NEWSWIRE) -- Fossil, Inc. (Nasdaq:FOSL) (the "Company") today reported net sales and earnings for the thirteen-week period ended April 4, 2009 ("First Quarter").

First Quarter Results (2009 vs 2008):

   * Net sales decreased 9.3% (2.1% in constant dollars) to $323.0    million compared to $356.2 million;  * Gross profit fell 12.8% to $169.4 million, or 52.4% of net sales,    compared to $194.3 million, or 54.5% of net sales;  * Operating income decreased 51.5% to $23.8 million, or 7.4% of net    sales, compared to $49.1 million, or 13.8% of net sales;  * Net income declined 42.7% to $17.3 million compared to $30.2    million; and  * Diluted earnings per share decreased 39.5% to $0.26 on 66.7 million    shares compared to $0.43 per diluted share on 69.8 million shares. 

Mike Kovar, Executive Vice President and Chief Financial Officer stated: "We are pleased with our First Quarter performance considering the challenging environment. We believe our performance reflects the ongoing strength of our owned global distribution model, our compelling brand portfolio and value positioning. This along with prudent expense and inventory management discipline led to our better-than-expected First Quarter results. As anticipated, our wholesale shipments in the quarter were negatively impacted by the difficult economic environment globally and we also faced considerable headwinds from currency. Notwithstanding this, our brands and businesses continue to remain vibrant and are positioned for market share gains. As we begin the second quarter, we remain positive regarding our ability to attain our annual goals as certain of our retail partners are beginning to see signs of stabilization and as our own FOSSIL accessory stores continue to post comparable store sales increases."

Operating Results

On a constant dollar basis, worldwide net sales decreased 2.1% during the First Quarter primarily driven by a 7.2% decline in the Company's wholesale businesses, partially offset by solid double-digit sales increases in the direct to consumer business. In comparison to the prior year quarter, the translation impact of a stronger U.S. dollar during the First Quarter reduced the Company's reported net sales by approximately $25.6 million. During the quarter each of the Company's product categories and geographic regions within its wholesale distribution channel were adversely impacted by the challenging global economic conditions. The worldwide economic downturn has negatively affected consumer demand, resulting in weaker retail sales and inventory level reductions by many retailers. However, the Company's direct to consumer segment reported strong results against this difficult backdrop. Direct to consumer sales increased 19.8% (25.6% in constant dollars) in comparison to the prior year quarter, primarily as a result of a 31.4% increase in the average number of company-owned stores open during the First Quarter and constant dollar comparable store sales gains of 5.1%. Net sales from the Company's e-commerce businesses also increased 26.4% during the First Quarter.

On the wholesale side, European net sales decreased 20.5% (6.3% in constant dollars) principally due to sales volume declines in FOSSIL(r) and EMPORIO ARMANI(r) watches and jewelry and DKNY(r) watches. These decreases were partially offset by sales volume growth in BURBERRY(r) watches and sales from DKNY(r) jewelry that was launched during the third quarter of 2008. Other international wholesale sales declined 20.2% (14.3% in constant dollars) during the First Quarter primarily as a result of declines in shipments to third-party distributors. Sales from the Company's Asia Pacific wholesale operations, excluding shipments to third party distributors, increased by 7.1% as the Company continues to expand its offerings and market share despite difficult economic conditions across much of this region. Domestically, the Company's wholesale watch and accessory businesses experienced sales volume declines of 1.0% and 6.7%, respectively. The slight sales volume decrease in watches was generally spread across all major brands, partially offset by sales volume growth in MICHAEL KORS(r) and the mass market distribution channel. The increase from the mass market business primarily reflects a timing shift from sales that occurred during the second quarter of the prior year. The sales volume decline in the domestic accessories businesses was primarily driven by reduced eyewear and women's handbag shipments, partially offset by sales volume growth in FOSSIL accessory jewelry and sales related to FOSSIL men's footwear launched during the First Quarter.

Gross profit of $169.4 million represents a decrease of 12.8% over the $194.3 million in the prior year quarter as a result of a decline in net sales and gross profit margin contraction. Gross profit margin decreased 210 basis points to 52.4% in the First Quarter compared to 54.5% in the prior year quarter. The decrease in gross profit margin was primarily driven by a stronger U.S. dollar which impacted gross profit margin unfavorably by over 300 basis points and an increase in low margin sales through off-price liquidation channels. Partially offsetting these declines in gross profit margin was an increase in the sales mix of higher margin direct to consumer segment sales. During the First Quarter, direct to consumer sales increased to 20.6% of consolidated net sales in comparison to 15.5% of consolidated net sales in the prior year period. Gross profit margin was also favorably impacted by a reduction in shipments to third party distributors that generate lower gross profit margins than the Company's consolidated historical gross profit margin.

First Quarter operating expenses as a percentage of sales increased to 45.1% compared to 40.7% in the prior year quarter. Total operating expenses increased by approximately $400,000 in the First Quarter to $145.6 million and included a $9.6 million favorable impact from the translation of foreign-based expenses as a result of the stronger U.S. dollar as compared to the prior year quarter. On a constant dollar basis, the increase in operating expenses was primarily driven by an $11.4 million increase in the Company's direct to consumer segment as a result of the Company operating an additional eighty plus new stores compared to the first quarter of 2008. Additionally, approximately $1.5 million in severance charges were incurred during the First Quarter from implementation of various cost savings measures.