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Tickers in this Article: FOSL, COH, M, JWN
It was no surprise that Fossil's (Nasdaq: FOSL) third-quarter headline figures were anemic. The top line fell 6.9% and earnings slipped 3.3%. However, as many investors have come to realize, near-term performance for retailers and consumer good companies can't be used to accurately make long-term buy and hold decisions.

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Beat Estimates
While the results were far from impressive, Fossil's stock soared over 10% on the news as the numbers beat estimates. While I don't think the results warranted such a price surge, I do think Fossil carries a strong brand name and is financially sound enough to be considered by investors with a longer-term mindset.

Increasing Sales
While most retailers and consumer good companies have been on a markdown binge over the last year, Fossil has successfully avoided lower prices to clear out inventory. In addition, the company increased sales from its own retail business and is relying less on revenue from its lower revenue sources by selling via department stores like Macys (NYSE: M) and Nordstrom (NYSE: JWN). For the third quarter, the gross margin increased 60 basis points.

Strong Position
Management improved its liquidity position by decreasing its inventory and accounts receivable by 15.7% and 19.5% respectively. As a result, the company's cash position increased to $306.7 million, from $125.2 million last year. Along with its strong cash position, the company has negligible debt.

Fashion is one of the last things on consumers' minds right now. That said, as shoppers tiptoe back into the malls, they are more likely to purchase a timeless accessory while money is tight. Purchasing a new watch or handbag allows consumes to add a new piece to their wardrobe that can be used more frequently than clothing and is unlikely to go out of style.

The Bottom Line
I've been a loyal Fossil consumer for years. They produce a high quality product at a price point far below higher end brands like Coach (NYSE: COH). With analysts expecting the company to grow at a 16% annualized growth rate the next five years, I think paying 16 times earnings for Fossil is reasonable. Fossil is a solid company and will likely grow even stronger as the economy emerges from the recession. Investors, time is ticking. (To learn more, see Analyzing Retail Stocks.)

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