RICHARDSON, Texas (AP) — Shares of Fossil Inc. fell sharply in premarket trading Tuesday after the maker of watches and fashion accessories reported third-quarter revenue that fell short of Wall Street expectations.
The company, based in Richardson, Texas, also lowered its sales outlook for the fourth quarter, citing weakness in its European wholesale business. When excluding the impact of acquisitions and foreign currency exchange rates, the company said sales for that segment declined 5 percent for the period, largely as a result of a weaker jewelry business.
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Fossil said it believed a weakening economic climate in the region was partly to blame for the contraction, although it said watch sales in the segment rose slightly.
For the quarter, the company said net income rose 10 percent as it benefited from the acquisition of Skagen brand and the opening of more company-owned stores. The company earned $76.8 million, or $1.26 per share, for the period ended Sept. 29. That’s up from $69.6 million, or $1.09 per share, in the year-ago period.
Revenue rose 6 percent to $684.2 million from $642.9 million a year ago.
Analysts expected earnings of $1.16 per share on revenue of $712.7 million
When excluding the impact of acquisitions and exchange rates, the company said organic sales rose nearly 6 percent in the period, driven by watch sales. The gain was partially offset by declines in jewelry and eyewear sales, which Fossil attributed to the repositioning of its brands.
The North American wholesale segment rose 6 percent, boosted by the contribution of Skagen products. In the Asia Pacific region, wholesale net sales rose 24 percent. Direct-to-consumer sales rose 16 percent as it boosted the number of stores.
In the fourth quarter, Fossil expects net sales to rise about 12 percent from a year ago, or 13 percent when stripping out the impact of foreign currency exchange rates. That’s down 4 percentage points from its previous outlook.
Its shares fell $9.12, or 9.7 percent, to $84.97 in premarket trading. They had risen 35 percent from a 52-week low of $62.77 in mid-July. They rose as high as $139.20 in early April.
