Fossil Group Inc FOSL
Q3 2012 Earnings Call Transcript

Transcript Call Date 11/06/2012

Operator: Good morning, ladies and gentlemen, thank you for standing by. Welcome to the Fossil Inc. Third Quarter Fiscal 2012 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. This conference is being recorded today Tuesday, November 6, 2012.

I will now like to turn the conference over to Allison Malkin of ICR. Please go ahead.

Allison Malkin - Integrated Corporate Relations: Thank you. Good morning, everyone. Before we begin, you should be aware that during this conference call, certain discussions will contain forward-looking information. Actual results could differ materially from those that will be projected during these discussions. Fossil's policy on forward-looking statements and additional information concerning a number of factors that could cause actual results to differ materially from such statements is readily available in our Form 10-K and 10-Q reports filed with the SEC. In addition, Fossil undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

If any non-GAAP financial measure is used on this call, a presentation of the most directly comparable GAAP financial measure and reconciliation of this non-GAAP financial measure to GAAP will be provided as supplemental financial information to this release under the Earnings Release section, under the Investor Relations heading on Fossil's website.

Please note that you may listen to a live webcast or a replay of this call by visiting Fossil's website and then clicking on About Us at the bottom of the homepage and then on Webcast under the Connections heading.

Now, I would like to turn the call over to Fossil's Chairman and CEO, Kosta Kartsotis.

Kosta N. Kartsotis - Chairman and CEO: Thanks, Allison. Good morning, everyone, and joining me today to discuss our third quarter results are, Mike Kovar, our CFO; and Jennifer Pritchard, our President of Retail. First, we want to thank – to express our thoughts and support for all those impacted by Hurricane Sandy. We wish a speedy recovery to all those affected.

Our third quarter net sales of $684 million represented a 10% increase from last year in constant currency. These sales results were a bit lower than we had projected as our overall sales in Europe ended the quarter down year-over-year. However, we were able to surpass our earnings guidance due to strong double digit growth in both our direct-to-consumer business and our Asia-Pac wholesale business and supported the strong expense management and an improved gross margin versus our expectations.

Our adjusted earnings per share of $1.28 represents a 17% increase over the prior year quarter. Globally, watch sales increased 15% in constant currency, including Skagen which represented 5% of the increase. This marks our third year of double-digit increases in Q3 watch sales, following a 20% increase in 2011 and a 49% increase in 2010.

Solid gains across our Fossil and multi-brand watch portfolio resulted in increased market share and showed the strength of our brands and the resilience of our operating model.

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