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Fossil, Inc. Reports Record First Quarter 2013 Results

Asia Pacific wholesale net sales rose 15.3%, or $11.7 million, in comparison to the first quarter of fiscal 2012. The period-over-period growth in sales was driven primarily by strong watch sales. The addition of SKAGEN contributed $3 million in sales for the first quarter of fiscal 2013.

Direct to consumer net sales for the first quarter of fiscal 2013 increased by 22.7%, or $30.7 million, compared to the prior fiscal year first quarter. The sales increase was primarily driven by the expansion of the global retail store base along with a 4.3% increase in comparable store sales. The overall sales growth was driven by a strong performance in watches as well as the Company's repositioned jewelry business and a modest increase in the leathers category.

Operating profit increased 13.8%, or $11.5 million, compared to the prior year first quarter, including a positive impact of $0.2 million related to foreign currency translation. Operating margin decreased 20 basis points to 13.9%, compared to 14.1% for the same period a year earlier. Gross margin decreased by 20 basis points to 55.6%, resulting primarily from the negative impact of currencies and a larger mix of sales through distributors. This was partially offset by favorable channel and product mix and improved margins in global full price retail stores. The Company's operating expense rate was flat at 41.7% compared to the first quarter of fiscal 2012. Total operating expenses increased from the prior fiscal year first quarter due to the expansion of the Company's retail store and concession base, infrastructure investments to support growth in the Asia Pacific region and global initiatives, along with the impact of newly acquired businesses.

Other income-net increased favorably by $7.2 million compared to the prior fiscal year first quarter primarily due to a non-cash, mark-to-market valuation gain related to the Company's future acquisition of the remaining 50% of its Spanish joint venture and increased net gains on foreign currency contracts and account balances. The Company's effective income tax rate was 28.1% compared to 27.8% in the fiscal 2012 first quarter.

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