Fossil shares fall on 'Underweight' rating

NEW YORK - Shares of Fossil Inc. fell on Wednesday after an analyst restarted coverage by downgrading the watchmaker to "Underweight" amid a deteriorating economic environment and a strengthening dollar.

Shares fell $1.35, or 7.1 percent, to $17.65 during midday trading. The stock has traded between $15.25 and $46.25 during the past 52 weeks.

JPMorgan discontinued coverage of Fossil earlier with a "Neutral" rating, but analyst Anna A. Andreeva relaunched coverage on Wednesday with an "Underweight" rating and $16 price target.

"While longer-term, we think Fossil should be able to grow market share given its diversified portfolio of watches, jewelry, and handbags and expansion of the accessory retail format, in the near term, the consumer is pulling back, especially when it comes to discretionary spending," Andreeva wrote in a note to investors.

She said the company's high-single digit sales forecast for the second half of the year and 2009 might be at risk.

"We are also concerned about Fossil's exposure to the struggling U.S. department store channel, which represents 30 percent of sales," Andreeva wrote.

She lowered 2008 and 2009 estimates to $2 and $1.75, respectively, while analysts polled by Thomson Financial, on average, predict earnings of $2.10 in 2008 and $2.19 in 2009.

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