A Well-Preserved Fossil

Fossil (Nasdaq: FOSL) pulled off a pretty decent third quarter, but as is common these days, it wasn't able to give a very rosy outlook for the fourth quarter.

Third-quarter net income increased 19.8% to $36.5 million, or $0.54 per share, for the company, which sells handbags, watches, and other accessories. Net sales increased 14.3% to $409.8 million. Fossil was able to boast that its margin expansion helped it report a 31.5% increase in operating income.

Yeah, you guessed it: There's some malaise, too, and that's Fossil's fourth-quarter outlook. Like many other companies, Fossil said that since the third quarter, "business conditions have grown more challenging." In addition to the weak economy, the strengthening of the U.S. dollar is hurting results.

Expect fourth-quarter earnings of $0.70 per share, compared to previous guidance for earnings of $0.94 to $0.97 per share.

Maybe investors won't feel too comforted, but compared to some of the tidings out there, they might count themselves fortunate. You've probably noticed the laundry list of companies that have done everything from slash guidance or even withdraw guidance altogether because of extremely weak consumer spending.

And of course, there have been some third-quarter earnings reports that showed pretty memorable decreases in quarterly profit, too, so Fossil's results don't seem too bad. For the long term, I'd say Fossil looks like a good stock idea for several reasons, not least of which is the fact that it has $125.2 million in cash, and negligible debt.

While many luxury-brand companies may have near-term troubles, one thing Fossil has going for it is that it provides its goods at a variety of price points -- including very reasonable ones. If consumers decide they just can't afford stuff from Coach (NYSE: COH), Blue Nile (Nasdaq: NILE), or Tiffany (NYSE: TIF), they might decide to go with some less pricey accessories from Fossil. Personally, I've always liked Fossil's watches and handbags and didn't feel like I was breaking the bank, so I see it as a reasonable trade-down for consumers who are increasingly finding themselves on tight budgets.   

Fossil isn't immune to the economic headwinds hitting many consumer-oriented companies, to be sure. However, I think this stock, which is trading at just eight times earnings and has been beaten up just like many other similar stocks, is certainly worth investors' consideration.

We dug up some related Foolishness on Fossil:

• In August, Fossil was looking feisty.
• I was digging Fossil in February.