Exhibit 99.1
FOSSIL, INC. UPDATES FOURTH QUARTER AND FISCAL 2005 EARNINGS ESTIMATES;
INTRODUCES FISCAL 2006 GUIDANCE
COMPANY TO HOLD CALL TODAY AT 5:00 PM EASTERN
RICHARDSON, Texas, Feb. 2 /PRNewswire-FirstCall/ -- Fossil, Inc. (Nasdaq:
FOSL) today announced that it expects fourth quarter net sales, ended December
31, 2005, to approximate $324 million, representing a 2% (5% excluding currency
impact) increase over fourth quarter fiscal 2004 net sales of $318 million and
versus the Company's previous guidance of $343 million. The Company has not
completed all aspects of its financial close at this time but estimates that
fourth quarter diluted earnings per share will be in the range of $0.28 to
$0.31. These estimates are in comparison to fourth quarter fiscal 2004 diluted
earnings per share of $0.47 and the Company's previous expectations of $0.48.
The earnings shortfall was primarily a result of lower consolidated sales and
gross profit margins than previously anticipated.
As a result of its updated fourth quarter guidance, the Company now
estimates full year fiscal 2005 diluted earnings per share will be in the range
of $1.04 to $1.07 per diluted share, $0.87 to $0.90 per diluted share, excluding
approximately $12 million of tax benefits related to repatriation of foreign
earnings under the American Jobs Creation Act of 2004 ("The Act"), as compared
to fiscal 2004 diluted earnings per share of $1.22. The Company also noted that
its inventory at year end is expected to be approximately 30% to 40% above prior
year levels. The Company is scheduled to report full results for the fourth
quarter and fiscal 2005 year ending December 31, 2005 during the week of
February 20th.
Commenting on the announcement, Mike Kovar, Chief Financial Officer stated,
"We are disappointed in not reaching our fourth quarter and full year financial
goals. Our sales shortfall in our domestic watch business inclusive of a 17%
decline in fourth quarter sales of FOSSIL(R) watches and lower than expected
sales growth in Europe and Asia offset the continued double-digit sales growth
in our accessories business and company-owned retail stores. In comparison to
the prior year fourth quarter, gross profit margins fell by over four hundred
basis points based primarily on a sales mix shift from higher to lower margin
businesses and higher to lower margin geographical regions, in addition to
higher freight costs and slightly higher markdowns. On a positive note, expenses
are expected to increase generally in line with our sales increase for the
quarter. From an inventory perspective, although we believe gross profit margins
could be negatively impacted as we return to more healthy stock levels, the
sales dollars generated on the reduction of our excess stock would be
incremental to the sales guidance we are outlining for 2006 and are not expected
to negatively impact 2006 diluted earnings per share estimates."
"During 2006, we have a number of initiatives that will add to the already
strong accessories growth we experienced during 2005," Mr. Kovar continued. "New
businesses such as the worldwide rollout of adidas(R) watches, Marc by Marc
Jacobs(R) watches and the introduction of Michele(R) and Diesel(R) jewelry
should make solid contributions during 2006 and beyond. However, until we can
generate the catalyst to reinvigorate watch sales we will hold ourselves to more
modest sales growth expectations and focus on reducing our expenses accordingly.
Therefore, we have introduced fiscal 2006 guidance below our historical targets.
Notwithstanding this, we continue to be committed to a strategy that results in
consistent sales and earnings growth and increased value for our stockholders
and believe the initiatives we are implementing will allow us to achieve our
goals."
Fiscal 2006 Outlook
The Company is introducing sales and earnings guidance for the full fiscal
2006 year and the first quarter of fiscal 2006. For the 2006 fiscal year, the
Company currently expects net sales to rise by approximately 9%. Sales for the
first half of fiscal 2006 are expected to increase around 7% with second half
sales rising approximately 10%. This is principally due to (i) tougher currency
comparisons in the first half of the year; and (ii) the launch of new business
initiatives weighted more heavily to the second half of the year. Diluted
earnings per share for fiscal 2006 are expected to approximate $1.05, which
includes a $0.03 to $0.04 per diluted share negative impact from the
implementation of SFAS No. 123R, "Share-Based Payment", as well as a $0.06 per
diluted share benefit from a lower share count given that the Company completed
its 3.5 million share repurchase program in January 2006. This compares to the
Company's current expectation for fiscal 2005 earnings of $0.87 to $0.90 per
diluted share, excluding tax benefits. For the first quarter of fiscal 2006, the
Company currently expects diluted earnings per share to approximate $0.12, as
compared to the first quarter fiscal 2005 diluted earnings per share of $0.32,
$0.19 diluted earnings per share excluding an approximate $10 million tax
benefit related to The Act. This guidance reflects the current prevailing
currency exchange rates between the U.S. dollar and foreign currencies of other
countries in which the Company operates.
The Company will broadcast a statement today at 5:00 p.m. ET to discuss its
revised fiscal 2005 guidance and 2006 outlook which can be heard by visiting
Fossil's website at http://www.fossil.com , selecting Investor Relations on the
homepage and then webcasts under the Investor Relations heading.
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: general economic conditions, competition, acts of
terrorism or acts of war, government regulation, changes in foreign currency
valuations in relation to the United States Dollar and possible future
litigation, as well as the risks and uncertainties set forth in the Company's
Current Report on Form 8-K dated September 14, 2004 and the Company's Form 10- K
and Form 10-Q reports filed with the Securities and Exchange Commission.
Fossil, Inc. is a design, development, marketing and distribution company
that specializes in consumer products predicated on fashion and value. The
Company's principal offerings include an extensive line of fashion watches sold
under the Company's proprietary and licensed brands. The Company also offers
complementary lines of small leather goods, belts, handbags, sunglasses, jewelry
and apparel. The Company's products are sold in department stores and specialty
retail stores in over 90 countries around the world, in addition to the
Company's e-commerce website at http://www.fossil.com. Certain product, press
release and SEC filing information concerning the Company is available at the
website.
SOURCE Fossil, Inc.
-0- 02/02/2006
/CONTACT: Mike Kovar, Chief Financial Officer of Fossil, Inc.,
+1-972-699-2229; or investor relations, Allison Malkin of Integrated Corporate
Relations, +1-203-682-8200, for Fossil, Inc./
/Web site: http://www.fossil.com /
(FOSL)