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Watch maker Fossil Inc Q4 profit declines

Feb '06
Fossil Inc, which makes fashion watches, sunglasses and other accessories, has reported fourth quarter net sales and earnings for the thirteen-week period and fiscal year ended December 31st 2005.

The net sales for the fourth quarter increased 1.8 percent to $324.2 million compared to $318.4 million in 2004. Gross profit was $160.5 million, or 49.5 percent of net sales, compared to $172 million, or 54.0 percent of net sales, in 2004.

The operating income totaled $33.4 million, or 10.3 percent of net sales compared to $48.3 million or 15.2 percent of net sales in 2004; and net income was $22.2 million, or $0.31 per diluted share compared to $35.1 million or $0.47 per diluted share in 2004.

Mike Kovar, Fossil's Chief Financial Officer, said, "Fourth quarter results reached the high end of our revised estimates of $0.28 to $0.31."

"While we are pleased that the final results settled in on the high end of the range, it still does not diminish our disappointment in not reaching the original earnings target. Shortfalls in our fashion watch product sales in the US and internationally combined with lower consolidated gross profit margins were the principal contributing factors. We did experience sales growth in other watch categories, accessories and our retail stores,” Kovar said.

“Most notably, in watches we achieved a 19 percent increase in luxury watches with strong gains for our MICHELE, BURBERRY and ZODIAC brands while sales from our accessories business and company-owned retail stores continued to grow at a double-digit pace. As we begin fiscal 2006, we are enthusiastic regarding our new product launches. ADIDAS watches, MARC JACOBS watches and MICHELE and DIESEL jewelry are expected to be solid contributors in 2006," added Kovar.

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