Shares of Fossil Inc. jumped almost 8 percent to $45.83 Tuesday after the company reported a more than threefold increase in second-quarter income, helped in part by a double-digit percentage gain in sales and a decrease in income tax rate.
For the three months ended July 3, income rose to $54.5 million, or 80 cents a diluted share, from $16.6 million, or 25 cents, in the year-ago quarter. Analysts polled by Yahoo Finance had expected EPS of 34 cents. Sales jumped 30.6 percent to $412.6 million from $315.9 million.
The company said gross profits rose 41.7 percent to $236.9 million, or 57.4 percent of net sales, compared with $167.2 million, or 52.9 percent of net sales last year. In addition, income taxes in the quarter fell by 22.1 percent to $7.5 million due to an effective tax rate of 12.1 percent, compared to $9.6 million, an effective rate of 36.6 percent, in last year’s quarter.
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Mike Kovar, executive vice president and chief financial officer, said, “Our focus continues to be on growing the penetration of the Fossil brand worldwide while capitalizing on our powerful multibrand watch portfolio.” He also cited an improving economy and a resurgence in the fashion watch category as factors in helping the accessories firm deliver a 42 percent increase in its wholesale watch business for the quarter.
For the six months, income more than doubled to $90.4 million, or $1.33 a diluted share, from $33.9 million, or 51 cents, last year. Sales increased 26.1 percent to $805.8 million from $638.9 million.
The company said it expects third-quarter diluted EPS in the range of 68 cents to 72 cents, above the 63 cents penciled in by analysts, and fourth-quarter diluted EPS between $1.12 and $1.18. Fiscal year 2010 diluted EPS is expected at $3.13 to $3.23 compared with $2.07 in 2009 and analysts’ estimates of $2.61 for the current year.