Fossil, Inc. Reports Record Fourth Quarter and Fiscal Year 2012 Results
Fossil, Inc. Reports Record Fourth Quarter and Fiscal Year 2012 Results
Fourth Quarter Net Sales Increase 14% to a Record $948 Million
Fourth Quarter EPS Increases 34% to a Record $2.51; Adjusted EPS Reaches $2.27
Provides First Quarter and Fiscal 2013 Guidance
RICHARDSON, Texas, Feb. 12, 2013 (GLOBE NEWSWIRE) -- Fossil, Inc.
(Nasdaq:FOSL) (the "Company") today reported its financial results for the
fourth quarter and fiscal year ended December 29, 2012.
Fourth Quarter Operating Highlights
* Net sales grew in all segments, compared to the prior fiscal year period:
* North America wholesale sales increased 15%
* Europe wholesale sales increased 4%
* Asia wholesale sales increased 19%
* Direct to consumer sales increased 20%
* Global retail comps increased 2.4%, the 19^th consecutive quarter of
positive comps
* Operating income increased 17% and operating margin expanded 60 basis
points to 21.6%
Full Fiscal Year 2012 Operating Highlights
* Net sales increased in all segments compared to the prior fiscal year
* Global retail comps increased 3.1%
* Operating income grew 4% and operating margin declined 130 basis points to
17.1%
* Invested $261 million to repurchase 3.0 million shares of Fossil common
stock
* EPS increased 21%, reaching a record of $5.59
The Company reported record net earnings of $151.1 million for the fourth
quarter of fiscal 2012, a 28% increase compared to $117.9 million for the
fourth quarter of fiscal 2011. Diluted earnings per share increased 34% to
$2.51, also a record, compared to $1.87 for the prior fiscal year fourth
quarter.
"We are pleased to report strong fourth quarter sales and earnings, concluding
another record year of growth and significant progress toward our long-term
goals," stated Kosta Kartsotis, Chief Executive Officer. "During the quarter,
we grew sales in each of our major geographies and improved the overall
profitability of our business, validating the strength of our business model
and driven by our compelling portfolio of brands. Globally, consumers
recognize Fossil for design innovation, and that drove our 19th consecutive
quarter of comparable store sales increases. The year was equally strong, with
Asia delivering our highest growth rate, as we continue to focus our resources
on the long-term potential of this region. We achieved our third consecutive
year of double-digit watch sales growth, successfully integrated and
positioned our newly-acquired SKAGEN^® brand for long term growth and added
key management talent to our global team. We managed our resources tightly and
once again generated strong cash flows, allowing us to continue to invest
substantial capital in our share repurchase program."
"Last year's accomplishments position us well for the future," continued Mr.
Kartsotis. "Our global distribution and supply chain, our design and
management talent and our dynamic portfolio of brands afford us a significant
competitive advantage. We see many markets around the world with compelling
prospects to leverage that advantage and gain market share. We remain
positioned to capitalize on our opportunities and deliver sustained and
consistent growth, as we grow our watch business and our FOSSIL^® and SKAGEN
lifestyle brands around the world. We will continue to invest in our
infrastructure and build a world-class management team, dedicated to enhancing
productivity and profitability. Above all, our goal is to build a diversified,
scalable and predictable business model that generates solid cash flows and
delivers outstanding returns for our shareholders."
Operating Results
The translation impact of a stronger U.S. dollar decreased the Company's
reported net sales by approximately $5.8 million and $56.7 million during the
fourth quarter and full fiscal year, respectively. The following discussion of
the Company's net sales is based on constant dollar performance.
Fourth quarter fiscal 2012 worldwide net sales rose 14.8% or $122.7 million,
as sales grew in each segment compared to the prior fiscal year's fourth
quarter. The net sales growth was driven by the continued double-digit
expansion of the global watch portfolio. Additionally, the April 2012 SKAGEN
brand acquisition generated $43.5 million of net sales in the fourth quarter.
Sales in the Company's jewelry category increased modestly, while sales in
other categories, including leathers, declined in the quarter. For the full
fiscal year, worldwide net sales increased by 13.5% or $347.0 million, with
sales increasing in each segment. SKAGEN branded sales contributed $93.8
million to fiscal 2012.
Net sales from the North America wholesale segment in the fiscal 2012 fourth
quarter increased 15.0%, or $46.0 million, which included the anticipated
positive impact of a shift in certain wholesale customer shipments to the
fourth quarter from the third quarter. The North American sales growth
resulted from an increase in watch sales, the addition of the SKAGEN brand,
where sales reached $15.0 million, and a modest increase in jewelry
sales. These improvements were partially offset by lower shipments in other
categories, including leathers. Wholesale shipments increased in the U.S.,
Canada and Mexico as well as to third party distributors.
Europe wholesale net sales rose 7.6%, or $17.0 million, in the fiscal 2012
fourth quarter compared to the prior fiscal year period. Sales growth was
driven by increases in the watch category as well as the addition of the
SKAGEN brand, which generated sales of $19.2 million. Sales in other
categories declined in the quarter, as shipments were affected by overall
economic conditions as well as the repositioning of the FOSSIL jewelry
product. Growth was strongest in the UK and France, while shipments declined
in Germany and Italy.
Asia Pacific wholesale net sales rose 18.6%, or $16.1 million, in the fiscal
2012 fourth quarter in comparison to the prior fiscal year fourth quarter,
including $4.5 million from the SKAGEN brand. The period-over-period growth in
sales was driven primarily by the strong performance of the watch category.
Direct to consumer net sales for the fiscal 2012 fourth quarter increased by
20.4%, or $43.6 million, compared to the prior fiscal year fourth quarter. The
sales increase was primarily driven by expansion of the global retail store
base coupled with a 2.4% increase in comparable store sales. Growth in watches
and leathers drove the sales increase, along with higher sales from the
Company's repositioned jewelry products.
The Company's fourth quarter fiscal 2012 operating profit increased 17.4%, or
$30.4 million, compared to the prior fiscal year period, including a negative
impact of $13.9 million related to foreign currency translation. Fourth
quarter operating margin expanded 60 basis points to 21.6%, compared to 21.0%
for the same period a year earlier. Despite currency headwinds, gross margin
expanded as a result of fewer off-price sales, as the Company grows its outlet
channel, select price increases across certain business, production
efficiencies and the favorable net impact of product and segment mix. In
addition, the Company's operating expense rate increased 20 basis points to
35.3% compared to 35.1% in the prior fiscal year quarter. In the fiscal 2012
fourth quarter, operating expenses increased in comparison to the prior fiscal
year quarter, primarily as a result of the addition of Skagen, expansion of
the Company's store base and infrastructure investments in the Asia Pacific
region and in corporate. Fiscal 2012 fourth quarter operating expenses also
benefited $6.4 million as a result of the revaluation of the Company's
liability related to the Skagen purchase.
For the full fiscal year, operating profit increased 3.6%, or $16.8 million,
compared to the prior fiscal year, including a negative impact of $43.8
million related to foreign currency translation. Full fiscal 2012 operating
margin declined 130 basis points to 17.1%, compared to 18.4% a year
earlier. Full fiscal 2012 gross margin increased slightly as the impact of
outlet expansion, select price increases, product mix, production efficiencies
and the increase in the direct to consumer and Asia Pacific wholesale
distribution channels more than offset the negative impact of foreign currency
translation. The Company's operating expense rate increased for the full 2012
fiscal year, as infrastructure investments to drive growth in newer markets
and support the Company's global initiatives, including the expansion of
retail stores, more than offset leverage on the Company's existing expense
structure.
Other income expense, net, which primarily relates to gains and losses on
foreign currency contracts and account balances was $2.4 million in the fiscal
2012 fourth quarter, compared to a $4.5 million net charge in the prior fiscal
year quarter. For the full 2012 fiscal year, other net income, net was $8.5
million, compared to an $18.0 million net charge for fiscal 2011. The
Company's effective income tax rate declined from 27.3% in the fiscal 2011
fourth quarter, to 25.6% in the fiscal 2012 fourth quarter, including a $10.8
million audit settlement benefit. The full year effective income tax rate
declined from 31.9% in fiscal 2011, to 28.0% in fiscal 2012.
Share Repurchase
During the fourth quarter of fiscal 2012, the Company invested $65.0 million
in repurchasing 744,000 shares of the Company's common stock at an average
price of $87.33 per share. As of December 29, 2012, the Company had remaining
authority to purchase $1.068 billion of its common stock.
Sales and Earnings Guidance
For the first quarter of fiscal 2013, the Company expects:
o Net sales to increase approximately 10%
o Operating margin in a range of 12.5% to 13.5%
o Diluted earnings per share in a range of $0.93 to $0.98
For the full fiscal year 2013, the Company expects:
* Net sales to increase between 10% and 11%
* Operating margin in a range of 16.5% to 17.0%
* Diluted earnings per share in a range of $5.85 to $6.15
The Company's expectations assume that current foreign currency exchange rates
that affect the Company's financial results remain at prevailing levels. The
Company's first quarter and full fiscal year 2013 diluted earnings per share
guidance includes a negative $0.05 per share impact related to this year's
misalignment between the Company's fiscal calendar and the National Retail
Federation calendar, on which many of the Company's customers operate.
Safe Harbor
Certain statements contained herein that are not historical facts constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 and involve a number of risks and
uncertainties. The actual results of the future events described in such
forward-looking statements could differ materially from those stated in such
forward-looking statements. Among the factors that could cause actual results
to differ materially are: changes in economic trends and financial
performance, changes in consumer demands, tastes and fashion trends, lower
levels of consumer spending resulting from a general economic downturn, shifts
in market demand resulting in inventory risks, changes in foreign currency
exchange rates, and the outcome of current and possible future litigation, as
well as the risks and uncertainties set forth in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 2011 and its Quarterly
Reports on Form 10‑Q filed with the Securities and Exchange Commission (the
"SEC").
About Fossil
Fossil is a global design, marketing and distribution company that specializes
in consumer fashion accessories. The Company's principal offerings include an
extensive line of men's and women's fashion watches and jewelry sold under
proprietary and licensed brands, handbags, small leather goods, belts,
sunglasses, soft accessories, shoes and clothing. In the watch and jewelry
product categories, the Company's offerings include a diverse portfolio of
globally recognized proprietary and licensed brand names under which its
products are marketed. The Company's extensive range of accessory products,
brands, distribution channels and price points allows it to target
style-conscious consumers across a wide age spectrum on a global basis. The
Company's products are sold to department stores, specialty retail stores and
specialty watch and jewelry stores in the U.S. and in approximately 130
countries worldwide through 23 Company-owned foreign sales subsidiaries and a
network of over 60 independent distributors. The Company also distributes its
products in over 400 Company-owned and operated retail stores and through
international e-commerce websites and the Company's U.S. e-commerce website at
www.fossil.com, where certain product, press release and SEC filing
information concerning the Company are also available.
The Fossil, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=3296
Consolidated Income
Statement Data (in For the 13 For the 13 For the 52 For the 52
millions, except per share Weeks Ended Weeks Ended Weeks Ended Weeks Ended
data):
December 29, December 31, December December
2012 2011 29, 31,
2012 2011
Net sales $ 947.7 $ 830.8 $ 2,857.5 $ 2,567.3
Cost of sales 408.0 364.9 1,251.0 1,128.1
Gross profit 539.7 465.9 1,606.5 1,439.2
Selling and distribution 255.9 220.2 826.9 715.4
expenses
General and administrative 79.0 71.3 290.8 251.8
expenses
Operating income 204.8 174.4 488.8 472.0
Interest expense 1.5 1.1 5.1 2.4
Other income (expense) – 2.4 (4.5) 8.5 (18.0)
net
Income before income taxes 205.7 168.8 492.2 451.6
Tax provision 52.8 46.0 137.9 144.2
Less: Net income 1.8 4.9 10.9 12.7
attributable to
noncontrolling interest
Net income attributable to
Fossil, Inc. $ 151.1 $ 117.9 $ 343.4 $ 294.7
Basic earnings per share $ 2.53 $ 1.88 $ 5.63 $ 4.66
Diluted earnings per share $ 2.51 $ 1.87 $ 5.59 $ 4.61
Weighted average common
shares outstanding:
Basic 59.8 62.6 61.0 63.3
Diluted 60.2 63.2 61.4 64.0
December 29, December 31,
Consolidated Balance Sheet Data (in millions): 2012 2011
$ 737.3 $ 844.1
Working capital
Cash, cash equivalents and securities available 177.4 287.7
for sale
363.5 302.5
Accounts receivable, net of allowances
506.3 489.0
Inventories
1,842.0 1,642.9
Total assets
2.8 9.0
Short-term debt
75.1 6.2
Long-term debt
119.6 128.6
Deferred taxes and other long-term liabilities
1,240.5 1,116.8
Stockholders' equity
Business Segment Sales Amounts Percentage of Total
($ in millions) For the 13 Weeks Ended For the 13 Weeks Ended
December 29, December 31, December 29, December 31,
2012 2011 2012 2011
Wholesale:
North America $ 354.7 $ 307.1 37.4% 37.0%
Europe 232.9 223.5 24.6% 26.9%
Asia Pacific 102.8 86.4 10.9% 10.4%
Total wholesale 690.4 617.0 72.9% 74.3%
Direct to consumer 257.3 213.8 27.1% 25.7%
Total net sales 100.0% 100.0%
$ 947.7 $ 830.8
Business Segment Sales Amounts Percentage of Total
($ in millions) For the 52 Weeks Ended For the 52 Weeks Ended
December 29, December 31, December 29, December 31,
2012 2011 2012 2011
Wholesale:
North America $ 1,083.5 $ 967.5 37.9% 37.7%
Europe 697.0 695.4 24.4% 27.1%
Asia Pacific 361.5 297.0 12.7% 11.5%
Total wholesale 2,142.0 1,959.9 75.0% 76.3%
Direct to consumer 715.5 607.4 25.0% 23.7%
Total net sales 100.0% 100.0%
$ 2,857.5 $ 2,567.3
Product Category Information
Product Sales Amounts Amounts
(in millions) For the 13 Weeks Ended For the 52 Weeks Ended
December 29, December 31, December 29, December 31,
2012 2011 2012 2011
Watches $ 729.3 $ 607.1 $ 2,141.5 $ 1,843.9
Leathers 132.2 136.9 440.1 427.8
Jewelry 64.7 62.5 181.6 190.1
Other 21.5 24.3 94.3 105.5
Total net sales $ 947.7 $ 830.8 $ 2,857.5 $ 2,567.3
Store Count Information
Fourth Quarter Fiscal 2012 Fourth Quarter Fiscal 2011
North Other Total North Other
America International America International Total
Full price accessory 106 145 251 103 142 245
Outlets 99 58 157 75 29 104
Clothing 31 2 33 32 4 36
Full price 5 13 18 2 11 13
multi-brand
SKAGEN branded 6 8 14 -- -- --
Total stores 247 226 473 212 186 398
Constant Currency Financial Information
The following table presents the Company's business segment sales on a
constant currency basis. To calculate net sales on a constant currency basis,
net sales for the current fiscal year period for entities reporting in
currencies other than the U.S. dollar are translated into U.S. dollars at the
actual effective rates during the comparable period of the prior fiscal year.
Net Sales Net Sales
(in millions) For the 13 Weeks Ended For the 52 Weeks Ended
December 29, 2012 December 29, 2012
Impact of Impact of
As Foreign As Foreign
Reported Currency Constant Reported Currency Constant
Exchange Currency Exchange Currency
Rates Rates
Wholesale:
North America $ 354.7 $ 1.6 $ 353.1 $ 1,083.5 $ (2.2) $ 1,085.7
Europe 232.9 (7.6) 240.5 697.0 (43.2) 740.2
Asia Pacific 102.8 0.3 102.5 361.5 (3.2) 364.7
Total wholesale 690.4 (5.7) 696.1 2,142.0 (48.6) 2,190.6
Direct to 257.3 (0.1) 257.4 715.5 (8.1) 723.6
consumer
Total net sales $ 947.7 $ (5.8) $ 953.5 $ 2,857.5 $ (56.7) $ 2,914.2
Non-GAAP Financial Information
The information below has been presented on a GAAP basis and on an as adjusted
basis excluding the impact of costs related to the acquisition of Skagen and
an income tax audit settlement. These adjusted presentations are non-GAAP
financial measures. Management believes these measures provide investors with
useful supplemental information regarding the Company's underlying business
trends and the performance of the Company's ongoing operations and are useful
for period-over-period comparisons and projected earnings of such operations.
In addition, management uses these non-GAAP financial measures internally in
its budgeting and review process.
While management believes that these non-GAAP financial measures are useful in
evaluating the Company's business, this information should be considered as
supplemental in nature and should be viewed in addition to, and not in lieu of
or superior to, the Company's operating performance measures calculated in
accordance with GAAP. In addition, these non-GAAP financial measures may not
be the same as similarly titled measures presented by other companies.
For the 13 Weeks Ended For the 52 Weeks Ended
December 29, 2012 December 29, 2012
Amounts As a Amounts As a
(in Percentage (in Percentage
millions) of Net millions) of Net Sales
Sales
Pretax income, as reported $205.7 21.7% $492.2 17.2%
under GAAP
Skagen acquisition items:
Acquisition-related
transaction and transition 1.4 0.2% 8.7 0.3%
costs
Mark-to-market of liability
related to contingent (6.4) (0.7%) (9.9) (0.3%)
purchase price
Pretax income, as adjusted $200.7 21.2% $491.0 17.2%
For the 13 For the 52
Weeks Ended Weeks Ended
December 29, December 29,
2012 2012
Diluted earnings per share, as reported under GAAP $2.51 $5.59
Skagen acquisition items (net of tax):
Acquisition-related transaction and transition costs 0.02 0.10
Mark-to-market of liability related to contingent (0.08) (0.12)
purchase price
Income tax benefit from prior year audit settlements (0.18) (0.18)
Diluted earnings per share, as adjusted $2.27 $5.39
CONTACT: Dennis Secor
Chief Financial Officer
Fossil, Inc.
(972) 699-6820
Investor Relations:
Allison Malkin
ICR, Inc.
(203) 682-8225
company logo
Sponsored Links
Advertisement
Advertisements
Sponsored Links
Advertisement
Rate this Page