Fashion accessories designer, marketer and distributor Fossil Inc. said net sales increased by 30.6 percent to $412.6 million in the second quarter of the year. The company credits an improving global economy and an increase in watch sales as the cause for the strong results.
The Richardson, Texas-based company said gross profits for the period rose 41.7 percent $236.9 million, or nearly 58 percent of net sales. Operating income increased by 186.3 percent to $64.3 million, or 15.6% of net sales. And, net income increased by 227.8 percent to $54.5 million.
“An improving global economy, a resurgence in the fashion watch category and our laser focus to be a leader in the introduction of new materials and design innovation combined to deliver a 42 percent increase in our wholesale watch business during the second quarter,” said Mike Kovar, Fossil Inc. executive VP and CFO. “We are seeing balanced growth on a global basis and strong momentum among our major watch brands. In our FOSSIL retail and e-commerce channels, double-digit comparable stores sales, in addition to the strong performance in our Fossil brand watch sales, propelled a 28 percent increase in Fossil branded sales globally. All of this places us in excellent shape as we begin the second half of the year.”
The company, best known for its fashion watches, branded jewelry lines and leather goods, reported strong increases in watch sales globally, and to a lesser extent, the growth of the jewelry category in North America and Europe and the expansion of leather categories internationally.
Net sales from the North America wholesale segment for the period rose 37.percent, led by a resurgence in the overall fashion watch category. MICHAEL KORS, FOSSIL and MICHELE watches experienced the strongest performance. In addition, a steady flow of inventory replenishment as opposed to retailers generally de-stocking a year ago resulted in North American watch shipments increasing by 59.2 percent.
Meanwhile, North America wholesale accessory sales volumes increased 1.9 percent, primarily due to increased shipments of FOSSIL women's leather products and the expansion of the company's footwear and accessory jewelry categories, offsetting by a sales volume decline in men's leather products.
Internationally, European second quarter wholesale net sales rose 30 percent. Wholesale watch shipments increased $18.6 million, or 28.9 percent, in constant dollars, with all major watch brands contributing to this increase. Leather and jewelry categories also contributed solid double-digit increases. The largest net sales contributions were FOSSIL watches and jewelry and licensed brand watches led by EMPORIO ARMANI.
Asia Pacific wholesale shipments in the second quarter increased 28.8 percent, in constant dollars, year-over-year, led by watch and leather sales.
Direct to consumer net sales for the period rose 28 percent, or $22.5 million, on a constant dollar basis. Same-store sales gains of 15.5 percent and an 8.4 percent increase in the average number of company-owned stores open during the Second Quarter. Additionally, net sales from the company's e-commerce businesses increased 44.2 percent.
In its guidance, Fossil said it expects reported net sales to increase in a range of 25 percent to 27 percent with constant dollar net sales increasing in a range of 27 percent to 29 percent, respectively. For the fourth quarter, the company said it expects reported net sales to increase in a range of 14 percent to 16 percent with constant dollar sales increasing in a range of 18 percent to 20 percent.