Allison C Malkin - Senior Managing Director, ICR Kosta N. Karsotis - CEO Michael W.

Barnes - President and COO Mike L. Kovar - Sr.

VP and CFO

John Rouleau - Wachovia Securities Neely Tamminga - Piper Jaffray Elizabeth Montgomery - Cowen and Company Barbara Wyckoff - Buckingham Research Group Robert Samuels - J.P. Morgan Clifford Greenberg - Baron Capital

Thank you. Before we begin, you should be aware that during this conference call certain discussions will contain forward-looking information.

Actual results could differ materially from those that will be projected during these discussions. Fossil’s policy on forward-looking statements and additional information concerning a number of factors that could cause actual results to differ materially from such statements is readily available in our Form 10-K and 10-Q report, filed with the SEC.

In addition Fossil undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. If any non-GAAP financial measure is used on this call a presentation of the most directly comparable GAAP financial measure and a reconciliation of the non-GAAP financial measure to GAAP will be provided as supplemental financial information to this release under the earnings release section of the investor relations heading on Fossil’s website.

Please note that this call is being webcast live on Fossil’s website. It will be available for replay on the website under the investor relation heading after the conclusion of the call.

And now I’ll like to turn the call over to Fossil CEO Kosta Karsotis.

Thanks Allison. Good morning and thank you for joining us today.

Also with us today on are Mike Barnes, President and COO and Mike Kovar our CFO. This morning we will give you an overview of our Q3 results of some additional insight into our operations and initiatives.

At the conclusion of our prepared remarks, we will welcome your questions. Fossil performed very well in the third quarter as we continue to execute on our key growth strategies and margin expansion initiatives.

While we have experienced moderate growth in the United States, we are continuing to reap the benefits of our global business platform as we experienced strong growth in Europe and other parts of the world. This allowed us to exceed our financial expectations.

In addition to our solid financial performance this quarter we also continue to advance each of our key strategies including maximizing the potential of our brands internationally. Expanding our direct to consumer businesses and increasing Fossil brand worldwide.

In total, third quarter net sales rose 19.6% to $359 million driven by our international, direct consumer and accessories businesses. On an adjusted basis, including cost associated with our equity granting practice review, diluted EPS for third quarter increased by 48% to $ 0.46 a share.

During the third quarter we continued to broaden our product offerings through our launch of Fossil jewelry, cold weather accessories and our upscale premium priced Fossil 54 handbag collection. And in addition to this highlights I would like to point out a couple of areas of our business that continue to deliver solid performances.

International sales rose 25% excluding currency impact and for the quarter more than 50% of the total company’s sales were done through overseas wholesale activities. European sales advanced 18% in local currencies with sales increases in all markets and in all of our major businesses.

We are also pleased to announce that our leather goods business and wholesale grew 41% in Europe, so we are making inroads there as well. Additionally we are experiencing significant gains in Eastern Europe and the Middle East, our shipments to distributors in this area increased by 65%.

Our other international segment which consists of the Asia Pac region Canada, Mexico and our export sales from the United States continued to grow with sales advancing 40%. We are continuing to grow our market share in many of this under penetrated markets in the segment.

We remained focused on maximizing our international expansion opportunity especially given that the market is vast and that our international business is our most profitable business. Profitable brands in that sale in all categories rose 15% during the third quarter as we capitalize on expansion opportunities and launches, Fossil retail accessories and jewellery as well as the previously mentioned new product initiatives.

Global Fossil watch sales increased 14% excluding currency impact on off-priced sales. With our Europe segment increasing at an 21% rate and our other international segment expanding at a 42% rate.

We believe successful innovation on our watch offerings as well as the ongoing reposition of the Fossil brand to be the primary driver of these results. Additionally we are continuing to broaden the brand’s awareness through our retail store expansion, increased catalogue mailings and an expanding web presence as evidenced by the launch of our e commerce business in Germany during September.

Our direct to consumer segment reported healthy gains on top of strong results a year ago with net sales increase in 18.5% and more importantly we experienced a robust 13.4% comp globally in our accessories store concept which as you are aware with the focus of our retail expansion plan. We are also very pleased with our financial performance as we continued to make progress towards our stated goals.

Our gross profit margin expanded 270 basis points to 52.1%. This was due to three things, the currency impact, our company wide margin initiatives and to the mix towards more international businesses.

The operating margin rose 250 basis points to 13.5% of net sales, 14.4% excluding option related expenses and for the first nine months of the year our operating margin excluding option related expenses that increased to 12%, a 51% increase from the prior year. We believe the progress we are making to-date on our gross profit and operating margin expansions has us well positioned to meet our long-term financial objectives.

We also improved upon an already healthy balance-sheet. Cash rose by $117 million to $193 million, inventory once again is below last year’s level despite our double digit sales growth.

We also ended the quarter with only $15 million in debt. Given the strength of our balance sheet and the completion of all prior stock buyback programs, we are pleased to announce today that our Board has authorized the buyback of up to two million shares which we expect to be in this month.

Now I will turn the call over to Mike Barnes for more details.

Thanks Kosta. Good morning everyone.

I am going to start with the review of our domestic business. The domestic wholesale watch shipments increased by 5.7% excluding discontinued product sales from the current prior year quarter.

This performance is primarily the result of sales growth in licensed watches and our owned Michele and Relics brand which was partially offset by sales declines in Fossil in mass market watches. Sales of licensed watches rose by 29.4% driven by sales increases in DKNY, Michael Kors, Burberry and Marc by Mark Jacobs.

Sales growth was aided by continuing door growth for our DKNY and Burberry brands primarily through our US department store locations. Both Michael Kors and Marc by Mark Jacobs are still relatively new being in only their third and second year of existence respectively.

But both are performing extremely well at retail and gaining market share. Additionally we are optimistic about gaining further leverage in certain of our licensed watch businesses as the brands continue to increase overall.

Michelle Motto shipments were up 24% for the quarter and the brand remains the best selling luxury fashion watch in Nordstrom’s. Michele was also highlighted at Neiman’s during their 100th anniversary celebration.

Additionally we are going to be launching Michele sunglasses in the spring of 2008 with a signature line priced from $295 to $395 and a diamond collection priced from $395 to $1195. Finally we remain on target for our Michele jewellery launch in Q2 of 2008 as well.

Fossil watches reported a 6% decline in domestic wholesale shipments excluding off priced sales, reflective of an uneasy retail environment which has resulted in the tightening of inventory levels at our retail customers. Fossil watches represent our largest US business with sales increases dependent on cost for growth versus door growth in the wholesale segment.

However it’s important to note at the sell out level Fossil watches continue to generate solid sales growth rate in our department store accounts, specialty retail stores and our own stores which we believe reflects the improved innovation in the product range and modern vintage design in the current assortment. Our mass market business posted a sales decline in the third quarter as well, primarily due to a shift in shipments into the second quarter.

If you recall during the second quarter we reported a 69% increase in wholesale mass market shipments. Year-to-date our mass market shipments are consistent with our expectations and we expect this business to grow on a full year basis.

We have recently launched Callaway brand into Target chain. We believe this initiative in addition to our current positioning in the channel will provide us with long term growth opportunities.

Regarding accessories our domestic accessory business enjoyed a strong rebound from last quarter with shipments increasing by 12.3%. Our strongest performing category was handbags and we saw strength in both Fossil and Relic.

Increases in handbag shipments were partially offset by declines in our small leather and belt categories. Also women handbags wholesale shipments increased by 18% during the third quarter.

As you recall we had a difficult spring in handbags primarily due to missing the mark on our fabric line. As we move into the fall/winter season, leather becomes a much higher component of our handbags assortment and we are seeing better selling results in many of the new groups we launched during the quarter which are replacing much of our legacy core leather products.

We are also experiencing average unit price increases of 20% plus in comparison to last year as we continue to add value to the products and consumers are responding favorably to these higher price point items. Men’s bags, although, it’s not a significant business at this point continue to show impressive results with wholesale shipments of 86% during the quarter.

Finally we are pleased with the results we are experiencing with the initial launch of the Fossil 54 handbag line into approximately 50 department store doors. We are confident that this product can grow to a much larger presence long-term and the Fossil 54 product line continues to show strong performance in our own retail stores.

Our core Relic bag line continues to perform well at Penney’s and Kohl’s and we are seeing great response to the new executive totes that’s recently been added to the collection. Additionally in our continued initiative to broaden our accessories business internationally, we are planning to launch Relic handbags into Germany during the second quarter of 2008.

Now I will give a little color on the international markets which drove over 50% of our overall Q3 sales and even more on a wholesale basis. Our total international business had a terrific performance for the quarter with net sales increasing 32.3% or 24.9% excluding currency.

In Europe the sales rose 28.1% or 18.4% ex-currency with contributions across all markets. We experienced strong growth from our Fossil and our licensed watch brands as well as our Fossil and Emporio Armani jewellery businesses.

With all of our major markets in Europe achieving double digit sales increase. In our other international segment, wholesale shipments rose by 42.1% or 39.9% ex-currency.

We experienced strong double-digit growth across all of our major owned and licensed watch and jewellery brands in this segment and all of our operating subsidiaries experienced double digit sales growth. As we have mentioned on previous calls our shop and shop contest in the Asia Pacific region continued to build awareness for our brands and are allowing us to gain market share within the department store environment.

Our China distribution business, which we launched in the fourth quarter last year, generated about $1.3 million in sales during the third quarter. While this represents an insignificant piece of our consolidated revenues, we are beginning to build awareness for our brands in this region and we believe it will result in significant revenue growth over the longer term.

We also just opened our subsidiary in India. Similar to China we believe India represents a significant opportunity for our global watch and jewelry business especially considering the significant retail developments we see occurring in this country today.

Our Mexico subsidiary, which we acquired in February of 2006, continues to outperform our expectations. We experienced a 61% increase in wholesale shipments during the quarter.

In addition to increasing the presence of our global watch portfolio in the market, we developed a solid accessories business in Mexico with non watch product accounting for about 23% of the sales year to date. And as we’ve mentioned before, Mexico also provides us with the solid opportunity for broadening our North American retail presence in the future.

On the global jewelry front, wholesale shipments of branded jewelry rose by 39% during the quarter primarily as the result of continued sales volume and door growth in Fossil and to a lesser extent, Emporio Armani jewelry. Additionally the launch of the Fossil accessories jewelry line into approximately 550 U.S department store doors during the third quarter contributed approximately $2.4 million to the overall jewelry increase.

Early retail selling results have the line performing it’s sell through rates in excess of the overall department store jewelry category. We believe branded jewelry is a significant growth opportunity and we are continuing to explore options to broaden the presence of this category through both brand extensions and expansion of our current geographical footprint.

Now, turning to our direct consumer businesses. On a global basis we experienced solid contribution from our retail stores during the third quarter.

Sales from our direct consumer segment rose by 18.7% or 17.1% excluding currency, as a result of a 14.5% increase from retail store door growth and a 5.9% comp store increase in a 178 stores and a 14% increase related to our ecommerce business. Store sales from our 63 full price possible Fossil accessories store actually increased by 13.4% on a comp basis globally.

Our overall global store comps were negatively impacted by lower comps in our outlook stores to primarily to the reduction of our discontinued style. It resulted and vastly improved our store gross margins.

Globally, we ended the third quarter with 225 stores, including 97 full price accessories stores, 48 of which were outside the U.S, 79 out of locations including 5 outside the U.S and 33 apparel stores and 16 multi brand stores. This compares to 191 stores at the end of the prior year quarter, which included 69 full price accessories stores of which 29 were outside the U.S and 76 out of locations with 3 outside the U.S.

32 apparel stores and 14 multi-brand stores. During the third quarter, we opened 24 new doors, including 19 full price accessories stores with no store closings.

For the fourth quarter, we expect to open an additional 19 stores, 18 of which were full price accessories stores with equal distribution between locations inside and outside the U.S. By 2008, we are planning to open between 80 to 85 stores concentrating on the full price accessories concept with firm commitments in place right now for about 36 locations.

The trailing 12 month performance on our full price accessories stores is as follows. The average sales per square foot is about $558, our four wall pretax contribution margins are 25.9%.

Return on invested capital 44% with the pay back in approximately 27 months. Our typical accessories store build out is about 500,000 and our average inventory level in a new store is around $62,000.

At this time, I’m going to turn the call over Mike Kovar to discuss our third quarter financial results. Mike?

Thanks Mike. All right, I would like to once again summarize the results of our third quarter in comparison to the prior year quarter.

Net sales increased 19.6% to $358.6 million compared to $299.7 million. Gross profit grew 26.2% to $187 million or 52.1% of net sales compared to $148.1 million or 49.4% of net sales.

Operating income increased 47%, to $48.5 million inclusive of a $3 million of expenses related to our historical equity granting practices review, which I’ll refer to here on out on the graph review and that’s compared to $33 million in operating income last year. Net income rose 41.4% with $30.5 million, inclusive of $1.9 million of grant review related expenses compared to net income of $21.5 million.

Diluted earnings per share increased 38. 7% to $0.43 inclusive of $0.3 per diluted share of grant review related expenses and this compares to $0.31 per diluted share last year and finally diluted weighted average common shares has increased 2.3% to $70.3 million compared to $68.7 million shares last year.

The mix break down for the third quarter was as follows: 17.4% from domestic wholesales watch sales; 15.3% from domestic wholesale accessories sales; 17.3% from worldwide direct to consumer businesses, 33.6% from European wholesale sales and 16.4% from wholesale sales in other international locations. The 19.6% sales growth in the quarter consisted of the following increases and decreases by category in geographic regions.

Domestic watch sales decreased approximately 1% to $62.6 million compared to $63.2 million in the prior year quarter. Other domestic sales, which include our leather, sunglasses and jewelry businesses, increased 12.3% to $54.8 million compared to $48.8 million in the prior year quarter.

Sales generated from European based wholesale operations increased 28% to $120.6 million compared to $94.2 million in the prior year quarter. Other international sales increased 42.2% to $58.6 million compared to $41.2 million in the prior year quarter And finally sales from our worldwide direct to consumer businesses grew 18.5% to $62 million compared to $52.3 million in the prior year quarter, and as Mike mentioned this was the result of 14.5% growth in the average number of doors opened during the quarter.

Comp store sales increases of 5.9% globally and a 13.9% increase from our e-commerce based businesses. Third quarter gross profit margins increased by $38.9 million to $187 million compared to $148.1 million in the prior year quarter and this reflected a 270 basis points increase in gross profit margin to 52.1% in the third quarter compared to 49.4% in the prior year quarter.

Gross profit margin was favorably affected by an approximate 140 basis point improvement as a result of a weaker U.S. dollar.

Additionally, a sales-mix shift towards higher margin international sales and improved gross margins as a result of our focus on product margin improvements, inventory initiatives, including reduced levels of lower or no margin off price sales and higher store outlet margins contributed favorably to the increase in gross profit margins. Operating expenses as a percentage of net sales increased 20 basis points in the third quarter, to 38.6% compared to 38.4% in the prior year quarter.

Total operating expenses increased $23.3 million in comparison to the prior year quarter to $138.5 million, which included $3 million of grant review expenses. Excluding the expenses associated with the grant review, third quarter operating expenses increased $20.3 million or 17.6% in comparison to the prior year quarter and as a percentage of sales, decreased to 37.8% from the 38.4%, percentage in the prior quarter.

The total operating expense increase is primarily driven by $8.2 million or 33.6% increase in our direct to consumer segment. This is primarily due to retail sales growth including pre-opening costs and related infrastructure additions including a new merchandising system, an increased field sales personnel and construction resources to support global retail program.

Operating expense increases also included $3.5 million in expenses related to the translational impact of foreign based expenses as a result of the weaker U.S. dollar.

Additionally operating expense increases included costs related to new category launches during the quarter and increases in expenses as a result of higher levels of sales. One item to point out, excluding the direct to consumer and grant review related expenses, our operating expenses increased 13.3% in relation to a 19.9% increase in our global wholesale net sales.

Operating profit increased 47% in the third quarter to 13.5% in net sales compared to 11% of net sales in the prior year quarter. As the result of increased growth profit margins partially offset by a slight increase in operating expenses as a percentage of sales.

During the quarter operating expense was favorably impacted by approximately $7.2 million as a result of translation of foreign sales and expenses in the U.S dollars. Interest expense of $174,000 during the quarter decreased from $1 million during the prior year quarter and this decrease was principally due to the payment of previously outstanding borrowing on our U.S base for revolving line of credit at the end of fiscal year 2006.

It was if you recall was used primarily for common stock repurchases made in late 2005 and early 2006. Other income and expense increased favorably by $1.4 million during the third quarter.

This increase is primarily related to increased interest income resulting from higher levels of invested cash balances and increased foreign currency transaction gains. Income tax expense for the third quarter and prior year quarter was $19.2 million and $10.4 million, respectively resulting in an effective income tax rate of 38.7% and 32.6% respectively.

A lower effective rate for the prior year quarter was a result of a reduction in our 2005 federal income tax liability and a result of reconciling our 2005 tax provision to our return filed in September of 2006. For the fourth quarter of fiscal year 2007, we estimate our effective tax rate with approximate 37% to 38%.

Now turning to the balance sheet. At the end of the third quarter cash, cash equivalents and short term investments totaled $193.4 million compared to $76.5 million at the end of prior year quarter and we have approximately $3.4 million of long-term debt which was added in Q3 as a result of the purchase of our previously leased European headquarters office in Basel, Switzerland.

Accounts receivables increased by 20.6% to $203.4 million, that’s compared to the $168.7 million at the end of the third quarter of last year. Base sales outstanding for the third quarter increased slightly to 52 days from 51 days last year.

And this increase in the DSO was primarily due to higher levels of international sales, that generally result in slightly large collection cycle than those experienced in the U.S. Inventory at quarter end was $266.2 million representing a decline of 1.4% from the prior year quarter inventory balance of $269.9 million.

Despite an additional 34 retail doors being opened since the end of the prior year quarter and the much weaker US dollar. To-date, capital expenditures totaled approximately $24 million and we are expecting full year 2007 CapEx to be between $35 million and $40 million with the increase in the fourth quarter primarily related to additional retail store growth and additional building improvements to our Richardson corporate offices as well as normal maintenance CapEx type items.

Depreciation and amortization expense for the first nine months of the year was approximately $24 million and we are estimating full year 2007 depreciation and amortization expense of $33 million. As it relates to the guidance for the remainder of the year we estimate fourth quarter and full year 2007 diluted earnings per share on a GAAP bases will approximate $0.67 and $1.67 respectively.

Excluding grant review expenses of $0.12 per diluted share, diluted earnings per share is expected to be around $1.79 for the full year 2007. We estimate net sales growth in the 13% to 15% range for the fourth quarter of fiscal 2007 and our net sales and earnings guidance reflects the current prevailing rate of the US dollar compared to other foreign currencies primarily the Euro and the Pound.

Mike?

In summary we are very pleased with our results for the quarter and the strength of business across geographies, brand and categories as we begin the fourth quarter and holiday season. We believe our diverse business model is one that will support our long-term goals.

We expect increased sales by approximately 13% annually reaching $2.5 billion in total sales in 2012. Retail expansion, international growth and the expansion of the Fossil brand globally are expected to drive these increases.

We also expect the increase to result in higher levels of profitability. We are committed to the strategies, they are expected to lead to strong earnings growth and increased value for all Fossil’s stakeholders.

We also would like to give a special thanks to all Fossil employees around the world for such a terrific performance. The company has come a long way and is in a position to do even better.

And now I will turn the call over for Q&A. Question and Answer

Hey good morning guys. Great quarter.

Good morning.

So it seems like on the international side that there is really strong breadth across your sales growth. I mean is it… could you talk a little bit more about that is it really just pretty evenly split between the licensed watches, the Fossil watches, I guess Fossil handbags and then the jewelry both on the Armani and the Fossil side?

John as you know our international business is quite a diverse business as it relates to the markets that we operate in as well as even becoming more diverse in the products that we offer. As Mike mentioned I think in his portion of the call, we saw double-digit increases in all major subsidiary markets during the third quarter and that would include both Europe and the Asia Pacific region.

On a product and category basis, we are seeing strength across the board in both Fossil watches and licensed watches as well as both of our Armani and Fossil jewelry categories. I think Kosta mentioned that Fossil in Europe was up 21% for the quarter and again Europe is a little more penetrated than the Asia Pacific region where we saw 42% increase in Fossil and the licensed brands were having similar type of increases across the international market place as well.

So I think we are well positioned, we have got a lot of strength behind all of our businesses in those regions and we are expecting that obviously to continue for the balance of the year.

Also John I would mention that the world is a big place and there is a lot of undeveloped opportunities still out there. What we see is in some of our lesser penetrated markets or some of the smaller markets like even places like eastern Europe, we are seeing great sales gains.

China is just starting to get off from its fourth quarter opening last year and we just opened our offices in India. So there is a lot of opportunity to further develop the international market and that will continue to be one of our main focuses going-forward.

Terrific and then kind of switching gears a little bit to the US wholesale environment particularly on the watch side. Kosta or Mike I mean.

At some point should we expect to see some increases in Fossil watches here? You made two comments one that business was down a little bit but two that the sales were actually pretty good, the sales rates were actually pretty good.

So is this more a function of the department stores bringing inventory levels down or how should we think about that?

Well the fact is John our business has changed quite a bit and the facts were in the last quarter our Fossil domestic wholesale watch business only 20% of those is from the United States.

Right.

So it’s a small number. Its also because of the wholesale nature of it.

It doesn’t always track our sales, we have always said that..

Right.

We are slightly down last quarter doesn’t mean our sales were down at retail. But that’s the indicator right now is probably our retail stores.

I think we are. Our comp store in the U.S.

were up 9.6% and our accessories were. That’s really a better measure of the brand because then wholesale shipments flow different every quarter.

So I would look at that. And then the one thing I would say is obviously retail traffic looks to be somewhat of a headwind in the United States.

But our repositioning and what we are doing with the brand is putting us in a position where we are going to have increases in the United States, brand’s going to get stronger, we are going to build more stores, we are sending more catalogues out, the internet’s going to grow. This repositioning we are only part way into it but it is going to put us in a position where we are going to grow the brand and I think pretty dramatically over the next several years in the United States.

Okay and then last question is the Fossil jewelry at wholesale and then the cold weather accessories I believe you ship that in wholesale as well. Any early read on some of the sales related to those two newer categories in wholesale?

Well the jewelry I think we are at about 550 stores in the second quarter. Its doing very well.

Its going to expand next year so its on a good track in the United States. Cold weather accessories is just hit and we have seen some strong results even though the weather is a little warmer in the United States.

So that’s probably going to be a good business for us also even though it’s small.

Okay great. Keep it up.

Thanks.

Great. Good morning and my congratulations to a stellar global business.

Okay a couple of things here.. just want to ask about Kosta from your perspective from a merchant’s perspective particularly jewelry I think is clearly going to be just a category choice here indicating that you have seen some pretty good reads on the initial stuff that you have in stores right now.

Just wondering do you think that this is from your perspective something that has legs to it? I mean this jewelry cycle that we are going into it and I just have a related question to handbags after.

Well, I think, as you know did quite a bit of business globally and jewelry is a big opportunity for us for fats growth and it has been in the past one of our most efficient businesses, most profitable, not very much obsolescence on inventory. We are expanding that experience in the United States but we think it’s going to be good here.

It’s so small at this point, we are just starting that it’s hard to say what the results are going to be long-term except to say that the positioning of the brand in the department stores of the United States is in a very strong position. There are some brands in the department stores that are leading that environment and watches brand is getting stronger in that environment.

So we are very optimistic about the future and expansion and not just jewelry but all other accessory categories, leather goods and obviously watches as well in United States of departmental stores.

And then in terms of handbag… in terms of handbag, do you think that you are gaining shares from brands around you. Do you think it's a price point on trade down from other brands into your brands?

I mean clearly the products does look better and I think its reigniting with the consumer, but just wondering all indications right now inside the handbag category right now doesn't seem to expanding. So do you think you are taking shares from others around you?

You never say over the 19% growth of as we probably gaining market share and gain I think it gets back to positioning. We are not the most expensive guy in the department and not the less expensive but we as the brand get stronger and as our position and the repositioning of the brand get stronger.

We feel we have a large opportunity and in our leather bags 54 of them were in there, kind of the leadership price point did extremely well in the small number of doors and it is going to expand. We also have an opportunity, I think kind of a moderate leather handbag on a long term there, it will give us a larger opportunity.

And I think if you look at this repositioning we are doing, the catalogue. It has the impact I think of potentially putting us in a position where we can grow handbag even faster in the United States than around the world.

We are also... we are doing a test in the fourth quarter of hand bag only catalogue and it’s been mailed to some of our customers, try to accelerate that and if you went to one our stores right now you will see that handbag catalogue in store, maximum handbags but I think long term we are in a position because the handbag business is so strong because our brand positioning, I think for a long term in a position where we can gain more space and more market share.

And just one more housing keeping item for Mike, in terms of the store openings for next year to 80 to 85 sided effects on a gross basis or net basis and then just kind of generally speaking what do you think on this happening with respect to sourcing cost coming out of China. Are prices going up?

Are we kind of holding flat or just a full type falter, best in any sort of pricing increases?

On the store side we think we are going to open between 80 and 85. There maybe a few closures than we probably… most would be five but 80 and 85 is the net number.

Your question on sourcing in China, is that we are seeing, we have seen some pressure on the cost of raw materials but the reality is that the cost of raw material such as stainless steel etcetera is not a big part of the cost of our products. There is some tightening of the labor market in China as well, that’s something we are keeping our eye on very closely and we are doing a lot of research just to how to guarantee the future of our sourcing in the future.

Thank you guys and good luck.

Thanks Neely.

Hi, guys. Congratulations on the quarter.

Thanks Liz.

I guess, I had a couple of questions about the European business. Can you just review for us how big Germany is as a percentage of the whole, maybe give us an update about how are the brands growing in some of these newer markets like the U.K.?

Well we don’t try and get that granular in that analysis, I have explained that Germany is our largest market in Europe primarily due to the fact that we own that business, in fact we went public back in 1993 so we have had an opportunity for many years of penetrating. The other specific thing about Germany is it is probably more penetrated in the FOSSIl brand in the market than we are in the U.S.

so it’s a very strong market for us. Obviously all the other markets that we distribute through in Europe are significant opportunity for us for larger levels of growth just due to the fact that we are nowhere near the penetration levels that we are in Germany.

I mean, overall in Europe, we are seeing strength across the board, there’s not just one or two markets, we are seeing it, in every market that we have a subsidiary company as well as the distributor market so the strength is definitely across the board and not in one or two places.

Okay, that’s helpful and then I had a follow up on, I guess it was Kosta saying that the leather goods business in Europe was up 41% at wholesale. I know that it’s not a significant business for you but I wondered, in terms of like the price of those products versus what the handbags are in the U.S.

is there… are they priced comparably to the U.S. or are they just a little bit higher and where do they fit in relative to the competition in the European market like a Furla and Longchamp and all those brands.

Well the price is probably on average to say 30% or so higher than in the U.S. which is typical of all our products and we are seeing very strong growth there, meaning lot of that is being accelerated by the stores we are building there, I think we have 26 stores there, potentially that could double next year so as we have been talking about we are working on a company wide initiative where the company would put more resources in Europe and try to grow it even faster.

It’s a less competitive market, they love American brands, it is a more profitable business plus zero impact, continue to push it everywhere we can, we think it is a big opportunity for the company and we are seeing great results out of the stores of Mikefed [ph] and every market that we go into so it’s a very interesting thing for us and we are expanding as fast as we can.

All right, thanks guys and congratulations.

Hi, everyone, great job. I have two questions.

Outside of China and India what countries in the region are logical next steps for sort of big growth either by acquisition of subsidiary or joint venture you mentioned Eastern Europe, Middle East, what about South America and if you could kind of comment on duty trend. And then I have question, a second question.

Well as far as the growth internationally we have really expanded our subsidiaries over the last five years, throughout Asia. South America is the market that we're paying a lot of attention to, particularly we just bought the, our Mexico subsidiary in last year.

And then, we have focused on our distributors, South America particularly in Brazil, which is a very large market force there. So that’s probably going to remain to be a third party distribution business for us but it is something that we are getting more involved with and we are getting focused on it and we are working a lot more in conjunction with our distribution partners in South America than we ever have in the past.

The same thing for Asia. I would say there is a big opportunity for us to continue to grow our businesses in Asia.

We just opened China last year in the fourth quarter and India this year. Just recently actually.

So that’s going to be a huge focus for us. We continue to work with our distribution partners, we have great distribution businesses that we don’t own in places like Korea, we did opened our own office in Korea within the past year to focus on some of those businesses but we still have a third party distributor as well, places like Taiwan, etc.

are also opportunities. Europe has a big opportunity force I think possibly in some of the ex-eastern bloc type countries, we are seeing big increases in the economies in places like Poland, Czech Republic, Hungary.

Those could be opportunities for us in the future, we are going to stay opportunistic if we see an opportunity to either, open our own offices or work with somebody on a joint venture basis, we’re going to look at that very closely. Meanwhile we are going to continue to develop our third party distributors who are doing an excellent job for us.

Many of these people have been with us for a number of years and they continue to grow the businesses at a rapid pace.

Thank you, last question. Could you please update us on status of Adidas?

What’s going on with that?

Adidas is pretty much the same as we discussed last time and that is, we launched it last year and it was the biggest launch we ever did, which was global. We kind of read the results of it this year were seen where the consumers voting on what type of products, the digital, the analogs, the different looks and we are adjusting to that and so this year is really kind of a flat year for us and Adidas.

We are doing those reads, we're making adjustments for the future and we think the next year is the best opportunity for us to begin growth of the brand again.

Okay. Thanks, keep it up.

Thank you.

Yes. Good morning guys.

Just one question. Was curious about how we should think about SG&A growth as we move into next year.

I guess as retail continues to become a larger piece of the business?

Hey Rob this is Mike. I’ll take that one.

If you recall in the analysts day presentation, a few weeks ago. We talked about in the five-year plan the expectation for SG&A leverage was minimal.

I think we talked about 30 to 40 basis points into the future. Primarily due to the fact that retail is expected to grow at a much faster pace than our wholesale operations and as we've said then, the retail component of SG&A is more significant as a percentage of sales then in that of our wholesale businesses and obviously the margin component of our retail business is as much more significant as well.

So we expect to see next year and next year will be really the first year that, I think it becomes somewhat pronounced. Is probably SG&A leverage slightly improving as our wholesale businesses continue to leverage investments we've made over the last few years.

But the investment in our retail organization to build out the construction in our group to be able to manage 85 door openings. To broaden our field management and to bring on some additional system needs will probably pull the SG&A leverage down slightly.

Great. Thanks very much.

Thank you, sir.

Yes. Hi guys.

Congratulations.

Thank you.

Give us a little more color on where you opened accessory stories in the third quarter and were you hoping to in the fourth quarter and how they’re doing so far? Just whatever color you can give, it seems like the roll out is going very well.

Well we're opening a number of stores around the worlds quite honestly. In Europe and U.S.

We just opened a store in Hawaii, and there’s one opening in Las Vegas this week. So it’s a pretty busy time for us and what we've said before is that obviously the European stores as we mentioned before have actually outperformed stores in the other parts of world but we're seeing very strong experience every where we open stores.

In Austria its very strong we started last year and every store we opened there has been very strong. We are now getting very good experience out of the stores we opened in Hong Kong last year They started off very slowly, now they are very strong.

So Asia looks like a big opportunity. We're opening a store in Beijing right next to the Olympic stadium next year, which we think is going to be a good store for us.

But just about everywhere in the world, it’s really interesting when we put this accessory assortment in the store format and our new repositioning. Customers come in and buy from us and the stores do very well.

So we're very bullish on the retail long-term.

And Kosta, are you opening up different footprints in indifferent locations or, and what’s the mix between accessories and watches or other in the stores moment?

Well, stores in United States are, I think we’re targeting 1500 square feet. Outside the United States stores are smaller, especially in Europe, typically slightly less than half the business is watches and if you look at the store in the new footprint, it looks like an accessory store.

One of things we’re trying to do is grow the accessories business. The leather goods business is part of it because it’s much larger business totally than watches is and there’s a big potential for us to grow.

For example, if handbag currently is 15% of our retail business it has the potential to be 30% or so. So it should add comps long-term as we get more and more traction in leather goods.

Okay. Good luck.

Thank you.

Thank you. Sir.

Hey guys, couple of more, as far as gross margin is concerned, you obviously benefited from the mix shift in the Europe but I am wondering you got this big margin initiative in place, I know that was due to kick-in in the second half phenomenally, I guess I think in the fourth quarter wondering what kind of margins we are getting out of some of your newer watch styles. I think that was an area you were targeting from a cost prospective or perhaps a productivity prospective.

Wondering if you could just talk around that a little bit.

Yes, generally speaking John the watch margins on the new products that we’re landing or have landed over the last three to six months are significantly higher than a lot of the old course styles that we had in the assortment. As we mentioned on the call in Q2 we expected some improvement in margins from the margin initiatives we have going on, we thought that would be limited in Q3 simply because of the timing of when we got started on that initiative this year.

But we do expect a more robust impact in the fourth quarter, as we should see fourth quarter of our efforts in that area flow through the income statement.

Terrific and then just a follow up. The new stores obviously performing extremely well given that in any more thoughts on perhaps remodeling a few stores next year or some sort of remodeling program.

Yes. We do actually have a program in place to remodel, existing stores as those leases come up.

We remodeled some last year, we did some this year and I think the strategy is over the next three years; the rest of them will be redone and redesigned.

Terrific. Thanks guys.

Thank you. Sir.

Thanks Andrews. Should you want to replay this conference call, it is been recorded and will be available today from 10:00 AM Central time until 12:00 midnight you can call 303-590-30 and again the call will be available from 10 today till midnight tomorrow 12:00 midnight.

You can call 303 590 3000 again the call will be available from 10:00 today through midnight tomorrow, by dialing 303 590 3000 and the reservation number to enter is 1109 7115 followed by the “ # “ sign. The conference call has also been recorded by Street Events and can be accessed through Street Events website at www.streetevents.com or directly through our website at, www.fossil.com, by clicking on Investor Relations on the home page and then on web cast.

Finally should you have any questions that did not get addressed today, please give Kosta, Mike Barnes, or myself a call. Thanks again for joining us.

Our next scheduled conference call will be in February for the release of our 2007 fourth quarter and full year operating results.