tanked 27% in late trading Thursday after the watchmaker put fourth-quarter earnings well below its prior forecast and offered a weak outlook.
The company, hurt by soft sales and margins, said it estimates fourth-quarter earnings of 28 cents to 31 cents a share, down from its guidance of 48 cents a share. According to Thomson First Call, analysts had targeted earnings of 49 cents a share.
The Richardson, Texas-based company put fourth-quarter sales at $324 million, below its earlier prediction of $343 million and analysts' forecast of $344 million. In the year-earlier fourth quarter, Fossil earned 47 cents a share on sales of $318 million.
The soft fourth-quarter results will result in full-year earnings of $1.04 to $1.07 a share, or 87 cents to 90 cents a share when excluding a charge related to repatriation. Analysts forecast earnings of $1.24 a share.
"We are disappointed in not reaching our fourth-quarter and full-year financial goals," said Chief Financial Officer Mike Kovar in a statement. "Our sales shortfall in our domestic watch business inclusive of a 17% decline in fourth-quarter sales of Fossil 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."
Kovar also said margins were hurt by a sales mix shift toward lower-margin businesses and geographical regions, in addition to higher freight costs and slightly increased markdowns.
For 2006, Fossil expects earnings of $1.05 a share, including 3 cents to 4 cents in stock-based compensation costs and a 6-cent benefit related to a lower share count due to its stock buyback. Wall Street had projected earnings of $1.42 a share. The company expects 2006 sales to rise about 9%.
Fossil projects first-quarter earnings of 12 cents a share, well below Wall Street's estimate of 25 cents a share.
"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," Kovar said. "Therefore, we have introduced fiscal 2006 guidance below our historical targets."
Shares of Fossil were down $6.45 to $16.74 in after-hours trading.