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Watch maker Fossil Inc announces Q2 results
09 Aug '05
9 min read
Operating expenses, as a percentage of net sales, increased to 44.6 percent in the Second Quarter compared to 41.1 percent in the comparable prior year period. Included in Second Quarter operating expenses is approximately $1.4 million in additional costs related to the translation impact of stronger foreign currencies into U.S. dollars and $2.2 million in additional advertising expense compared to the prior year quarter.
Excluding the impact of currency and advertising, operating expense increases were mainly driven by increases in (i) payroll cost (ii) rent expense and (iii) depreciation and amortization expense. Payroll costs increases were primarily due to the Company's infrastructure additions, new businesses and new store openings. Increases in rent expense were primarily related to new store openings. Depreciation and amortization expense increases were related to the Company's SAP software implementation, as well as other capital additions made during the last twelve months.
Advertising costs, as a percentage of net sales, increased slightly to 8.2 percent of net sales in the Second Quarter compared to 8.0 percent of net sales in the prior year quarter. For the first six months of the year operating expenses, as a percentage of net sales, increased to 43.1 percent compared to 39.8 percent in the comparable prior year period with increases by expense category similar to those experienced during the Second Quarter.
As a result of the decline in gross profit margins and increases in operating expenses, the Company's Second Quarter operating profit margin decreased to 7.2 percent of net sales compared to 11.7 percent of net sales in the prior year quarter. Second Quarter operating income included approximately $1.5 million of net currency gains related to the translation of foreign sales and expenses into U.S. dollars. For the first six months of the year operating profit margin declined to 8.9 percent of net sales from 12.1 percent of net sales in the prior year period.
Excluding the impact of currency and advertising, operating expense increases were mainly driven by increases in (i) payroll cost (ii) rent expense and (iii) depreciation and amortization expense. Payroll costs increases were primarily due to the Company's infrastructure additions, new businesses and new store openings. Increases in rent expense were primarily related to new store openings. Depreciation and amortization expense increases were related to the Company's SAP software implementation, as well as other capital additions made during the last twelve months.
Advertising costs, as a percentage of net sales, increased slightly to 8.2 percent of net sales in the Second Quarter compared to 8.0 percent of net sales in the prior year quarter. For the first six months of the year operating expenses, as a percentage of net sales, increased to 43.1 percent compared to 39.8 percent in the comparable prior year period with increases by expense category similar to those experienced during the Second Quarter.
As a result of the decline in gross profit margins and increases in operating expenses, the Company's Second Quarter operating profit margin decreased to 7.2 percent of net sales compared to 11.7 percent of net sales in the prior year quarter. Second Quarter operating income included approximately $1.5 million of net currency gains related to the translation of foreign sales and expenses into U.S. dollars. For the first six months of the year operating profit margin declined to 8.9 percent of net sales from 12.1 percent of net sales in the prior year period.
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