(By Balaseshan) Fossil Inc. (NASDAQ:FOSL) reported a 4.2% increase in the first quarter earnings helped by sales growth across its segments. However, the company guided second quarter and fiscal 2012 below Street's view, sending its shares down 16.99% in premarket.
Earnings for the first quarter were $58.14 million or $0.93 per share, up from $55.82 million or $0.86 per share last year.
Sales increased to $589.53 million from $536.98 million. Analysts had expected a profit of $0.92 per share on revenue of $617.64 million.
On a constant dollar basis, worldwide sales rose 11.1% on top of strong double-digit gains in the last year. Across the company's operating segments, sales growth on a constant dollar basis ranged from 4.7% to 18.8% based primarily on watch and leather product sales increases.
North America wholesale sales increased to $225 million from $206.8 million, while Europe wholesale sales rose to $152.9 million from $151.8 million. Asia Pacific wholesale sales increased to $76.7 million from $64.2 million.
Total wholesale sales rose to $454.6 million from $422.8 million, while direct to consumer sales increased to $134.9 million from $114.2 million.
Gross margin declined 40 basis points to 55.8% from 56.2%, due to negative impact of foreign currency exchange rate changes, an increase in factory labor and certain component costs and a higher percentage of sales to third party distributors.
Operating margin fell to 14.1% from 17.2%, primarily as a result of decreases in gross profit margin and operating expense leverage.
Looking ahead into the second quarter, the company expects earnings of $0.77 to $0.79 per share and sales growth of about 16% with constant dollar net sales increasing 19%, while Street predicts profit of $0.94 per share on revenue growth of 17%. Net sales of Skagen, included in this estimate, are expected to benefit overall sales growth by 6%.
While the company expects Skagen to deliver about $0.03 of operational earnings for the second quarter, it is also expecting transaction related costs and other transition/integration activities to negatively impact second quarter earnings per share by about $0.07.
For the fiscal 2012, the company anticipates earnings of $5.30 to $5.40 per share and sales growth of about 16% with constant dollar net sales increasing about 18%, while Street predicts profit of $5.56 per share on revenue growth of 16.90%. Net sales of Skagen, included in this estimate, are expected to benefit overall sales growth by 5%.
Within this fiscal 2012 earnings estimate, the company is including an earnings per share benefit of $0.22 related to Skagen operational activities, partially offset by transaction and other transition/integration costs of $0.15 per share.
FOSL closed Monday's regular session down 2.65% at $125.77. The stock has been trading between $69.57 and $139.20 for the past 52 weeks.