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Fossil sees Asia and Europe driving growth, shares soar

REUTERS – Fossil Inc , known for its watches and other fashion accessories, said it expects its strong wholesale business in the Asia Pacific region to drive earnings this year, and even expects its business in Europe to perform well, sending its shares up more than 30 percent in early trading.

Fossil, whose watches sell from $7 to upwards of $2,000, said second-quarter revenue rose in both regions, helping it to report stronger-than-expected earnings and allowing it forecast earnings above Wall Street expectations.

The strong results and upbeat outlook come at a time when many retailers are experiencing a slowdown in crisis-hit Europe and formerly hot emerging markets such as China.

“Long term we see strong opportunities for market share gains throughout Europe as we look to expand our existing owned-distribution footprint and to take advantage of the strong appeal of the Skagen brand in the region,” Chief Executive Kosta Kartsotis said on a conference call with analysts.

Fossil bought privately held Danish watch maker Skagen Designs Ltd in January to expand in Europe.

The company said it was positive on its wholesale business in Asia, which grew 29 percent in the quarter, saying it saw strong demand for its luxury brands in the region.

“We believe the robust appetite for accessories (in Asia) coupled with the developing ‘white space’ is a significant opportunity for both the Fossil brand and for our multi-brand watch portfolio,” a company executive said on the call, referring to largely unexplored markets.

Fossil’s shares, which had lost more than 40 percent of their value since the company last reported results in May, were up 33 percent at $92.57 in early trading on the Nasdaq.

The company, which sells its namesake brand as well as Armani Exchange, Marc by Marc Jacobs and Michael Kors Holdings Ltd products, said it expects full-year adjusted earnings $5.29 to $5.34 per share.

Analysts on average had been expecting earnings of $5.28 per share on that basis, according to Thomson Reuters I/B/E/S.

Second-quarter earnings rose to $57.3 million, or 92 cents per share from $51.4 million, or 80 cents per share, a year earlier. On an adjusted basis the company earned 93 cents per share. Analysts on average had expected 78 cents per share.

The company, whose retail customers range from Wal-Mart Stores Inc to high-end Neiman Marcus Group Inc , said revenue rose 14.3 percent to $636.1 million, beating the average analyst forecast of $634.9 million.

Revenue in its wholesale segment, which accounts for more than half of the company’s revenue, rose about 14 percent to $481.9 million. Wholesale revenue in North America rose 17 percent to $249.8 million on improved sales of watches and its Skagen-branded products.

Revenue from the company’s direct-to-consumer segment, which includes more than 400 company-owned stores, catalogs and e-commerce activities, rose 15 percent to $154.2 million.

(Reporting by Arpita Mukherjee in Bangalore; Editing by Maju Samuel and Ted Kerr)

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