Nov 8, 2011
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Stronger dollar to hurt Fossil Q4 profit

Nov 8, 2011

Fashion accessories maker Fossil Inc (FOSL.O) said a stronger dollar will eat into its earnings for the current quarter, taking the gloss off a better-than-expected quarterly profit driven by higher sales in Asia and Europe.

Fossil apparel

The company's shares, which have shed more than a quarter of their value since touching their life-high in July, were down nearly 7 percent at $90.70 in pre-market trading on Tuesday morning. They closed at $97.20 on Monday on Nasdaq.

Fossil, which sells watches, leather goods, sunglasses and apparel, has warned of pressure on its margins this year as it faces higher costs of raw materials such as steel and aluminum.

Most retailers are raising prices to counter rising labor and material costs but some are finding it hard to convince recession-wary shoppers to shell out more on their purchases.

Rival watchmaker Movado Group Inc (MOV.N) has been offering new products and increasing marketing spending to attract customers.

Fossil's gross margins for the third quarter fell to 55.9 percent from 57.0 percent last year.

The company, which sells its namesake brand as well as Michael Kors and Armani, said a stronger dollar will diminish the value its fourth-quarter international sales.

The company cut its earnings outlook for the period to $1.75-$1.78 a share from $1.78-$1.82 a share. Analysts had expected $1.78 a share, according to Thomson Reuters I/B/E/S.

International sales bring in about half of total sales in Fossil's wholesale segment. The wholesale business accounts for nearly 80 percent of the company's total sales.

The company, which has not missed analysts' profit estimates for more than three years, posted third-quarter net income of $69.6 million, or $1.09 a share, topping analysts' forecast for $1.03 a share.

Revenue rose 22.7 percent to $642.9 million, edging past market expectations of $642.2 million.

(Reporting by Meenakshi Iyer in Bangalore; Editing by Viraj Nair)

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