Movado Group, Inc. Announces Third Quarter Results

Movado Group, Inc. (NYSE: MOV) today announced third quarter and nine-month results for the periods ended October 31, 2023.

Fiscal 2024 Third Quarter Highlights (See table below for GAAP and Non-GAAP measures)

• Reported net sales of $187.7 million versus $211.4 million in the third quarter of fiscal 2023;
• Generated gross margin of 54.5% compared to 57.3% in the prior year period;
• Generated operating income of $20.7 million as compared to $38.3 million in the prior year period; Adjusted operating income of $21.1 million as compared to $38.9 million;
• Delivered diluted earnings per share of $0.77 as compared to $1.28 in the prior year period; Adjusted diluted earnings per share of $0.78 as compared to $1.31; and
• Ended the quarter with cash of $201.0 million and no debt.

Efraim Grinberg, Chairman and Chief Executive Officer, stated, “For the third quarter, our results were impacted by the challenging retail environment in our largest markets, the United States and Europe. Notwithstanding this, the quarter saw us continue to advance our strategic priorities and invest in our brands while preparing for the all-important holiday selling season. Importantly, the strength of our balance sheet, with $201.0 million of cash at quarter-end and no debt, allowed us to remain flexible as we continued to navigate the difficult backdrop.”

Mr. Grinberg continued, “As we look to the final quarter of the year, we believe it is appropriate to moderate our annual outlook to incorporate our expectation for a continuation of the current operating environment across the U.S. and Europe. That said, we believe we are well positioned to capitalize on the holiday season with compelling newness across our watch and jewelry brands. We are particularly enthusiastic about the refreshed branding and advertising campaign in support of the Movado brand. Overall, we see significant opportunity ahead for Movado Group as we update our strategies to address the evolving landscape in the fashion watch category. We remain committed to continuing to drive long-term profitable growth.”

Non-GAAP Items (See attached table for GAAP and Non-GAAP measures)

Third quarter fiscal 2024 results of operations included the following items:

• a $0.4 million pre-tax charge, or $0.3 million after tax, representing $0.01 per diluted share, associated with the amortization of acquired intangible assets related to the acquisitions of Olivia Burton and MVMT.

Third quarter fiscal 2023 results of operations included the following items:

• a $0.7 million pre-tax charge, or $0.5 million after tax, representing $0.03 per diluted share, associated with the amortization of acquired intangible assets related to the acquisitions of Olivia Burton and MVMT.

In this press release, references to “adjusted” results exclude the impact of the above charges and the charges described in the Non-GAAP Items section of the Company’s earnings releases for the first and second quarters of fiscal year 2024 in deriving the adjusted results for the nine months ended October 31, 2023 and October 31, 2022. Please refer to the attached GAAP and Non-GAAP measures table for a detailed reconciliation of the Company’s reported results to its adjusted, non-GAAP results.

Third Quarter Fiscal 2024 (See attached table for GAAP and Non-GAAP measures)

• Net sales decreased 11.2% to $187.7 million, or decreased 13.5% on a constant dollar basis, compared to $211.4 million in the third quarter of fiscal 2023. The decrease in net sales reflected declines in wholesale customers’ brick and mortar stores, online retail and Movado Company Stores. U.S. net sales decreased 12.3% as compared to the third quarter of last year. International net sales decreased 10.4% (14.4% on a constant dollar basis) as compared to the third quarter of last year.
• Gross profit was $102.3 million, or 54.5% of sales, compared to $121.0 million, or 57.3% of sales, in the third quarter of fiscal 2023. The decrease in gross margin percentage was primarily the result of unfavorable changes in channel and product mix and the decreased leverage of certain fixed costs on lower sales, partially offset by decreased shipping costs and the favorable impact of foreign currency exchange rates.
• Operating expenses were $81.6 million compared to $82.8 million in the third quarter of fiscal 2023. Adjusted operating expenses were $81.3 million for the third quarter of fiscal 2024 and $82.1 million in the third quarter of fiscal 2023. This decrease was primarily due to lower performance-based compensation, partially offset by higher payroll related expenses and marketing expenses. As a percent of sales, adjusted operating expenses increased to 43.3% of sales from 38.8% in the prior year period due to lower sales.
• Operating income was $20.7 million compared to $38.3 million in the third quarter of fiscal 2023. Adjusted operating income for the third quarter of fiscal 2024 was $21.1 million compared to adjusted operating income of $38.9 million in the third quarter of fiscal 2023.
• The Company recorded a tax provision of $4.5 million compared to a tax provision of $8.4 million in the third quarter of fiscal 2023. The Company recorded an adjusted tax provision in the third quarter of fiscal 2024 of $4.6 million compared to an adjusted tax provision of $8.6 million in the third quarter of fiscal 2023.
• Net income was $17.4 million, or $0.77 per diluted share, compared to net income of $29.3 million, or $1.28 per diluted share, in the third quarter of fiscal 2023. Adjusted net income for the fiscal 2024 period was $17.7 million, or $0.78 per diluted share. This compares to adjusted net income in the third quarter of fiscal 2023 of $29.8 million, or $1.31 per diluted share.

Nine Month Results Fiscal 2024 (See attached table for GAAP and Non-GAAP measures)

• Net sales decreased 11.6% to $493.0 million, or decreased 12.6% on a constant dollar basis, compared to $557.6 million in the first nine months of fiscal 2023. The decrease in net sales reflected declines in wholesale customers’ brick and mortar stores, online retail and Movado Company Stores. U.S. net sales decreased 13.4% as compared to the first nine months of last year. International net sales decreased 10.3% (12.1% on a constant dollar basis) as compared to the first nine months of last year.
• Gross profit was $273.6 million, or 55.5% of sales, compared to $324.6 million, or 58.2% of sales in the same period last year. The decrease in gross margin percentage was primarily the result of unfavorable changes in channel and product mix, the decreased leverage of higher fixed costs on lower sales and the unfavorable impact of foreign currency exchange rates, partially offset by reduced shipping costs.
• Operating expenses were $232.4 million as compared to $230.4 million in the same period last year. Adjusted operating expenses were $230.7 million compared to $228.3 million in the prior year period. This increase was primarily due to higher payroll-related costs, partially offset by lower performance-based compensation and marketing expenses. As a percent of sales, adjusted operating expenses increased to 46.8% of sales from 40.9% in the prior year period primarily due to lower sales.
• Operating income was $41.2 million compared to operating income of $94.2 million in the same period last year. Adjusted operating income was $42.9 million compared to $96.4 million in the prior year period.
• The Company recorded a tax provision in the first nine months of fiscal 2024 of $9.9 million as compared to a provision of $20.9 million in the first nine months of fiscal 2023. The Company recorded an adjusted tax provision of $10.3 million compared to an adjusted tax provision of $21.3 million for the first nine months of fiscal 2023.
• Net income was $34.6 million, or $1.53 per diluted share, compared to net income of $71.8 million, or $3.12 per diluted share, in the first nine months of last year. In the first nine months of fiscal 2024, adjusted net income was $35.9 million, or $1.58 per diluted share, compared to adjusted net income of $73.5 million, or $3.19 per diluted share, in the first nine months of fiscal 2023.

Fiscal 2024 Outlook

The Company is revising its previously provided outlook to reflect third quarter results and the expected continuing impact of a challenging environment.

For Fiscal Year 2024, the Company currently expects:

• Net sales in a range of approximately $665.0 million to $675.0 million, as compared to its previous expectation for net sales in the range of $690.0 million to $700.0 million;
• Gross profit of approximately 55% of net sales, unchanged from its previous expectation;
• Operating income in a range of $51.0 million to $55.0 million, as compared to its previous expectation for operating income in a range of $62.5 million to $65.0 million;
• An effective tax rate of approximately 23%, unchanged from its previous expectation; and
• Earnings of $1.85 to $2.00 per diluted share, as compared to its previous expectation of $2.15 to $2.25 per diluted share.

The Company noted that its fiscal 2024 outlook continues to exclude approximately $2.1 million of amortization of acquired intangible assets related to the Olivia Burton and MVMT brands. This outlook does not contemplate further deterioration in the economic environment and assumes no further significant fluctuations from prevailing foreign currency exchange rates.

Quarterly Dividend and Share Repurchase Program

The Company also announced today that on November 30, 2023, the Board of Directors approved the payment on December 26, 2023 of a cash dividend in the amount of $0.35 for each share of the Company’s outstanding common stock and class A common stock held by shareholders of record as of the close of business on December 12, 2023.

During the third quarter of fiscal 2024, the Company repurchased approximately 69,700 shares under its November 23, 2021 share repurchase program. As of October 31, 2023, the Company had $18.6 million remaining available under the share repurchase program.

Conference Call

The Company’s management will host a conference call and audio webcast to discuss its results today, November 30, 2023, at 9:00 a.m. Eastern Time. The conference call may be accessed by dialing [phone]. Additionally, a live webcast of the call can be accessed at www.movadogroup.com. The webcast will be archived on the Company’s website approximately one hour after the conclusion of the call. Additionally, a telephonic re-play of the call will be available from 12:00 p.m. ET on November 30, 2023 until 11:59 p.m. ET on December 14, 2023 and can be accessed by dialing [phone] and entering replay pin number 13742649.

Movado Group, Inc. designs, sources, and distributes MOVADO, MVMT, OLIVIA BURTON, EBEL, CONCORD, CALVIN KLEIN, COACH, HUGO BOSS, LACOSTE, and TOMMY HILFIGER watches, and, to a lesser extent, jewelry and other accessories, and operates Movado Company Stores in the United States and Canada.

In this release, the Company presents certain financial measures that are not calculated according to generally accepted accounting principles in the United States (“GAAP”). Specifically, the Company is presenting adjusted gross profit, adjusted gross margin, adjusted operating expenses and adjusted operating income, which are gross profit, gross margin, operating expenses and operating income, respectively, under GAAP, adjusted to eliminate the amortization of acquisition accounting adjustments related to the Olivia Burton and MVMT acquisitions. The Company is also presenting adjusted tax provision, which is the tax provision under GAAP, adjusted to eliminate the impact of charges for the Olivia Burton and MVMT acquisitions. The Company believes these adjusted measures are useful because they give investors information about the Company’s financial performance without the effect of certain items that the Company believes are not characteristic of its usual operations. The Company is also presenting adjusted net income, adjusted earnings per share and adjusted effective tax rate, which are net income, earnings per share and effective tax rate, respectively, under GAAP, adjusted to eliminate the after-tax impact of amortization of acquisition accounting adjustments related to the Olivia Burton and MVMT acquisitions. The Company believes that adjusted net income, adjusted earnings per share and adjusted effective tax rate are useful measures of performance because they give investors information about the Company’s financial performance without the effect of certain items that the Company believes are not characteristic of its usual operations. Additionally, the Company is presenting constant currency information to provide a framework to assess how its business performed excluding the effects of foreign currency exchange rate fluctuations in the current period. Comparisons of financial results on a constant dollar basis are calculated by translating each foreign currency at the same U.S. dollar exchange rate as in effect for the prior-year period for both periods being compared. The Company believes this information is useful to investors to facilitate comparisons of operating results. These non-GAAP financial measures are designed to complement the GAAP financial information presented in this release. The non-GAAP financial measures presented should not be considered in isolation from or as a substitute for the comparable GAAP financial measures, and the methods of their calculation may differ substantially from similarly titled measures used by other companies.

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company has tried, whenever possible, to identify these forward-looking statements using words such as “expects,” “anticipates,” “believes,” “targets,” “goals,” “projects,” “intends,” “plans,” “seeks,” “estimates,” “may,” “will,” “should” and variations of such words and similar expressions. Similarly, statements in this press release that describe the Company's business strategy, outlook, objectives, plans, intentions or goals are also forward-looking statements. Accordingly, such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause the Company's actual results, performance or achievements and levels of future dividends to differ materially from those expressed in, or implied by, these statements. These risks and uncertainties may include, but are not limited to general economic and business conditions which may impact disposable income of consumers in the United States and the other significant markets (including Europe) where the Company’s products are sold, uncertainty regarding such economic and business conditions, including inflation, increased commodity prices and tightness in the labor market, trends in consumer debt levels and bad debt write-offs, general uncertainty related to possible terrorist attacks, natural disasters and pandemics, including the effect of the COVID-19 pandemic and other diseases on travel and traffic in the Company’s retail stores and the stores of its wholesale customers, supply disruptions, delivery delays and increased shipping costs, adverse impact on the Company’s wholesale customers and customer traffic in the Company’s stores as a result of increased uncertainty and economic disruption caused by the COVID-19 pandemic, the impact of international hostilities, including the Russian invasion of Ukraine, on global markets, economies and consumer spending, on energy and shipping costs and on the Company’s supply chain and suppliers, defaults on or downgrades of sovereign debt and the impact of any of those events on consumer spending, changes in consumer preferences and popularity of particular designs, new product development and introduction, decrease in mall traffic and increase in e-commerce, the ability of the Company to successfully implement its business strategies, competitive products and pricing, including price increases to offset increased costs, the impact of “smart” watches and other wearable tech products on the traditional watch market, seasonality, availability of alternative sources of supply in the case of the loss of any significant supplier or any supplier’s inability to fulfill the Company’s orders, the loss of or curtailed sales to significant customers, the Company’s dependence on key employees and officers, the ability to successfully integrate the operations of acquired businesses without disruption to other business activities, the possible impairment of acquired intangible assets, risks associated with the Company’s minority investments in early-stage growth companies and venture capital funds that invest in such companies; the continuation of the Company’s major warehouse and distribution centers, the continuation of licensing arrangements with third parties, losses possible from pending or future litigation and administrative proceedings, the ability to secure and protect trademarks, patents and other intellectual property rights, the ability to lease new stores on suitable terms in desired markets and to complete construction on a timely basis, the ability of the Company to successfully manage its expenses on a continuing basis, information systems failure or breaches of network security, complex and quickly-evolving regulations regarding privacy and data protection, the continued availability to the Company of financing and credit on favorable terms, business disruptions, and general risks associated with doing business outside the United States including, without limitation, import duties, tariffs (including retaliatory tariffs), quotas, political and economic stability, changes to existing laws or regulations, and success of hedging strategies with respect to currency exchange rate fluctuations, and the other factors discussed in the Company’s Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. These statements reflect the Company's current beliefs and are based upon information currently available to it. Be advised that developments subsequent to this press release are likely to cause these statements to become outdated with the passage of time. The Company assumes no duty to update its forward looking statements and this release shall not be construed to indicate the assumption by the Company of any duty to update its outlook in the future.

(Tables to follow)

MOVADO GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
			Three Months Ended								Nine Months Ended
			October 31,								October 31,
				2023				2022				2023				2022
	Net sales		$	187,686			$	211,397			$	492,981			$	557,625
	Cost of sales			85,358				90,370				219,364				232,986
	Gross profit			102,328				121,027				273,617				324,639
	Total operating expenses			81,636				82,756				232,378				230,417
	Operating income			20,692				38,271				41,239				94,222
	Non-operating income/(expense):
	Other income, net			1,632				422				4,194				704
	Interest expense			(135	)			(143	)			(361	)			(356	)
	Income before income taxes			22,189				38,550				45,072				94,570
	Provision for income taxes			4,519				8,439				9,938				20,868
	Net income			17,670				30,111				35,134				73,702
	Less: Net income attributable to noncontrolling interests			281				825				568				1,900
	Net income attributable to Movado Group, Inc.		$	17,389			$	29,286			$	34,566			$	71,802
	Diluted Income Per Share Information
	Net income per share attributable to Movado Group, Inc.		$	0.77			$	1.28			$	1.53			$	3.12
	Weighted diluted average shares outstanding			22,677				22,794				22,641				23,044

MOVADO GROUP, INC.
GAAP AND NON-GAAP MEASURES
(In thousands, except for percentage data)
(Unaudited)
		Three Months Ended
		October 31,						% Change
		2023			2022
Total net sales, as reported		$	187,686		$	211,397		-11.2	%
Total net sales, constant dollar basis		$	182,797		$	211,397		-13.5	%
		Nine Months Ended
		October 31,						% Change
		2023			2022
Total net sales, as reported		$	492,981		$	557,625		-11.6	%
Total net sales, constant dollar basis		$	487,237		$	557,625		-12.6	%

	MOVADO GROUP, INC.
	GAAP AND NON-GAAP MEASURES
	(In thousands, except per share data)
	(Unaudited)
			Net Sales			Gross Profit			Total Operating Expenses				Operating Income			Pre-tax Income			Provision for Income Taxes			Net Income Attributable to Movado Group, Inc.			Diluted EPS
	Three Months Ended October 31, 2023
	As Reported (GAAP)		$	187,686		$	102,328		$	81,636			$	20,692		$	22,189		$	4,519		$	17,389		$	0.77
	Olivia Burton and MVMT Costs (1)			-			-			(376	)			376			376			90			286			0.01
	Adjusted Results (Non-GAAP)		$	187,686		$	102,328		$	81,260			$	21,068		$	22,565		$	4,609		$	17,675		$	0.78
	Three Months Ended October 31, 2022
	As Reported (GAAP)		$	211,397		$	121,027		$	82,756			$	38,271		$	38,550		$	8,439		$	29,286		$	1.28
	Olivia Burton and MVMT Costs (1)			-			-			(671	)			671			671			132			539			0.03
	Adjusted Results (Non-GAAP)		$	211,397		$	121,027		$	82,085			$	38,942		$	39,221		$	8,571		$	29,825		$	1.31
			Net Sales			Gross Profit			Total Operating Expenses				Operating Income			Pre-tax Income			Provision for Income Taxes			Net Income Attributable to Movado Group, Inc.			Diluted EPS
	Nine Months Ended October 31, 2023
	As Reported (GAAP)		$	492,981		$	273,617		$	232,378			$	41,239		$	45,072		$	9,938		$	34,566		$	1.53
	Olivia Burton and MVMT Costs (1)			-			-			(1,695	)			1,695			1,695			407			1,288			0.05
	Adjusted Results (Non-GAAP)		$	492,981		$	273,617		$	230,683			$	42,934		$	46,767		$	10,345		$	35,854		$	1.58
	Nine Months Ended October 31, 2022
	As Reported (GAAP)		$	557,625		$	324,639		$	230,417			$	94,222		$	94,570		$	20,868		$	71,802		$	3.12
	Olivia Burton and MVMT Costs (1)			-			-			(2,152	)			2,152			2,152			421			1,731			0.07
	Adjusted Results (Non-GAAP)		$	557,625		$	324,639		$	228,265			$	96,374		$	96,722		$	21,289		$	73,533		$	3.19
	(1) Related to the amortization of acquired intangible assets for Olivia Burton and MVMT and MVMT's deferred compensation, where applicable.

MOVADO GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
					October 31,			January 31,			October 31,
					2023			2023			2022
ASSETS
	Cash and cash equivalents				$	200,965		$	251,584		$	186,665
	Trade receivables, net					135,523			94,282			135,566
	Inventories					171,966			186,203			215,006
	Other current assets					18,856			24,212			18,664
	Income taxes receivable					11,135			10,908			7,978
	Total current assets					538,445			567,189			563,879
	Property, plant and equipment, net					19,458			18,699			18,207
	Operating lease right-of-use assets					84,212			80,897			74,918
	Deferred and non-current income taxes					44,814			44,490			44,288
	Other intangibles, net					7,688			9,642			9,818
	Other non-current assets					68,780			66,788			64,570
	Total assets				$	763,397		$	787,705		$	775,680
LIABILITIES AND EQUITY
	Accounts payable				$	22,998		$	32,085		$	40,884
	Accrued liabilities					57,165			46,720			66,894
	Accrued payroll and benefits					10,317			17,343			15,581
	Current operating lease liabilities					15,885			17,681			16,779
	Income taxes payable					20,024			28,591			25,457
	Total current liabilities					126,389			142,420			165,595
	Deferred and non-current income taxes payable					7,966			15,163			15,639
	Non-current operating lease liabilities					76,929			70,910			65,164
	Other non-current liabilities					49,195			48,668			45,735
	Redeemable noncontrolling interest					-			-			2,433
	Shareholders' equity					500,439			507,606			478,021
	Noncontrolling interest					2,479			2,938			3,093
	Total equity					502,918			510,544			481,114
	Total liabilities, redeemable noncontrolling interest and equity				$	763,397		$	787,705		$	775,680

MOVADO GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
					Nine Months Ended
					October 31,
					2023				2022
	Cash flows from operating activities:
	Net income				$	35,134			$	73,702
	Depreciation and amortization					7,278				8,218
	Other non-cash adjustments					8,258				7,413
	Changes in working capital					(43,865	)			(108,857	)
	Changes in non-current assets and liabilities					563				(4,125	)
	Net cash provided by/(used in) operating activities					7,368				(23,649	)
	Cash flows from investing activities:
	Capital expenditures					(6,627	)			(4,703	)
	Long-term investments					(2,040	)			(2,716	)
	Trademarks and other intangibles					(113	)			(175	)
	Net cash used in investing activities					(8,780	)			(7,594	)
	Cash flows from financing activities:
	Dividends paid					(45,399	)			(23,600	)
	Stock repurchases					(2,349	)			(28,150	)
	Distribution of noncontrolling interest earnings					(780	)			-
	Stock awards and options exercised and other changes					(73	)			(80	)
	Other					-				(85	)
	Net cash used in financing activities					(48,601	)			(51,915	)
	Effect of exchange rate changes on cash, cash equivalents, and restricted cash					(377	)			(7,349	)
	Net change in cash, cash equivalents, and restricted cash					(50,390	)			(90,507	)
	Cash, cash equivalents, and restricted cash at beginning of period					252,179				277,716
	Cash, cash equivalents, and restricted cash at end of period				$	201,789			$	187,209
	Reconciliation of cash, cash equivalents, and restricted cash:
	Cash and cash equivalents				$	200,965			$	186,665
	Restricted cash included in other non-current assets					824				544
	Cash, cash equivalents, and restricted cash				$	201,789			$	187,209

 

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The Movado Group Stock at the time of publication of the news with a raise of +1,54 % to 26,40EUR on Tradegate stock exchange (29. November 2023, 22:26 Uhr).