Out of the Gate: Fossil sinks on 2Q outlook

The stock declined $2.28, or 6.1 percent, to $34.93 early in the session.

Fossil forecast second-quarter earnings of 25 cents per share, which includes 4 cents in expansion expenses, and sales of $341.1 million to $347.5 million.

Analysts, who typically exclude one-time items from their forecast, expect 30 cents per share in earnings and sales of $352.4 million.

Separately, Fossil forecast fiscal 2008 profit above expectations, after posting a 21 percent rise in first-quarter earnings.

Morgan Keegan & Co. analyst Brad Stephens, who rates the stock "Outperform," praised Fossil's ability to withstand weakness in U.S. consumer spending but expects investors will focus on Fossil's second-quarter outlook.

"While admittedly surprised by the second-quarter guidance, we're not extremely shocked given store build-out costs to support 28 percent square-footage growth in a historically unprofitable quarter," Stephens wrote in a client note.