~ Updates Full Year Outlook ~
~ Board Declares Quarterly Dividend
~
Movado Group, Inc. (NYSE:MOV) today announced second quarter and
six month results for the period ended July 31, 2016.
Efraim Grinberg, Chairman and Chief Executive Officer, stated,
“We managed our business well in the second quarter delivering top
and bottom line results consistent with our outlook, despite a
challenging retail and economic environment. During the quarter,
our Movado and licensed brands continued to outperform the watch
category at retail. Given the challenging marketplace, we still see
a number of headwinds and feel it is prudent to lower our full year
outlook.”
Mr. Grinberg continued, “As we look to the back half of the
year, we are excited about our innovative product pipeline across
the portfolio for the holiday season. We also have very strong
marketing programs in place for the holiday season including an
increased television schedule to support Movado in the United
States as well as comprehensive digital marketing programs. Our
teams continue to execute well on delivering on our strategic
initiatives while maintaining a disciplined focus on our expenses.
Our balance sheet remains extremely strong allowing us increased
flexibility as we continue to focus on delivering sustainable
profitable growth.”
During the first quarter of fiscal 2017, the Company recorded a
$1.1 million charge, net of tax of $0.7 million, or $0.05 per
diluted share, for the immediate vesting of stock awards and
certain other compensation related to the announcement of the
retirement of Rick Coté, the Company’s Vice Chairman and Chief
Operating Officer, in fiscal 2017 (“COO’s retirement”). During the
first quarter of fiscal 2016, the Company recorded a $2.5 million
charge, net of tax of $0.1 million, or $0.10 per diluted share,
related to operating efficiency initiatives and other items in
fiscal 2016.
Second Quarter Fiscal 2017 (See
attached table for GAAP and Non-GAAP measures)
- Net sales were $128.1 million compared
to $145.6 million in the second quarter of fiscal 2016, a decrease
of 12.0%. Net sales on a constant dollar basis decreased 11.2%
compared to net sales in the second quarter of fiscal 2016.
- Gross profit was $70.3 million, or
54.9% of sales, compared to $79.0 million, or 54.3% of sales, in
the second quarter last year. The increase in gross margin
percentage was primarily the result of the favorable impact of
channel and product mix, and certain sourcing improvements, as well
as changes in foreign currency exchange rates, partially offset by
the reduced leverage of certain fixed costs as a result of lower
net sales.
- Operating expenses decreased $0.6
million, or 1.0%, to $60.2 million. This decrease was primarily the
result of a decrease in marketing expenses, performance-based
compensation and selling-related expenses, partially offset by the
unfavorable impact of foreign currency exchange rates and an
increase in allowances on accounts receivable.
- Operating income was $10.1 million
compared to operating income of $18.2 million in the second quarter
of fiscal 2016.
- The Company recorded a tax provision of
$3.4 million which equates to an effective tax rate of 35.1%
compared to a tax provision of $6.1 million or an effective tax
rate of 33.8% in the second quarter of fiscal 2016.
- Net income was $6.3 million, or $0.27
per diluted share, compared to $12.1 million, or $0.50 per diluted
share, in the second quarter of fiscal 2016.
First Half Fiscal 2017 (See attached
table for GAAP and Non-GAAP measures)
- Net sales were $242.1 million compared
to $266.0 million in the first six months of fiscal 2016, a
decrease of 9.0%. Net sales on a constant dollar basis decreased
8.4% compared to net sales in the first six months of fiscal
2016.
- Gross profit was $131.6 million, or
54.3% of sales, compared to $141.5 million, or 53.2% of sales in
the same period last year. Adjusted gross profit for the first six
months of fiscal 2016, which excludes $0.7 million in charges
related to operating efficiency initiatives and other items in the
first quarter of fiscal 2016, was $142.2 million, or 53.4% of
sales. The increase from the adjusted gross margin percentage in
the first half of last year was primarily the result of the
favorable impact of changes in foreign currency exchange rates as
well as channel and product mix, and certain sourcing improvements,
partially offset by the reduced leverage of certain fixed costs as
a result of lower net sales.
- Operating expenses were $116.1 million
as compared to $116.4 million in the first half of last year. For
the first six months of fiscal 2017, adjusted operating expenses
were $114.3 million, which excludes $1.8 million of expenses
related to the COO’s retirement in fiscal 2017, as compared to
adjusted operating expenses of $114.4 million in the first half of
last year, which excludes $2.0 million of expenses related to
operating efficiency initiatives and other items recorded in the
first quarter of fiscal 2016. The $0.1 million decrease in adjusted
operating expenses was primarily the result of a decrease in
marketing expenses, performance-based compensation and
selling-related expenses, mostly offset by the unfavorable effect
of fluctuations in foreign currency rates and an increase in
allowances on accounts receivable.
- Operating income was $15.5 million
compared to operating income of $25.1 million in the first six
months of fiscal 2016. Adjusted operating income for the first half
of fiscal 2017, which excludes $1.8 million of expenses related to
the COO’s retirement in fiscal 2017, was $17.3 million. Adjusted
operating income for the first half of fiscal 2016, which excludes
$2.7 million of expenses related to operating efficiency
initiatives and other items recorded in the first quarter, was
$27.8 million.
- The Company recorded a tax provision in
the first six months of fiscal 2017 of $5.2 million as compared to
a tax provision of $9.2 million in the first six months of last
year. Based upon adjusted pre-tax income, the adjusted tax
provision for income tax was $5.9 million compared to an adjusted
tax provision for income tax of $9.4 million in the first half of
fiscal 2016.
- Net income was $9.6 million, or $0.41
per diluted share, compared to $15.7 million, or $0.65 per diluted
share, in the first six months of fiscal 2016. For the first half
of fiscal 2017, adjusted net income was $10.7 million, or $0.46 per
diluted share, which excludes $1.1 million in expenses, net of tax,
related to the COO’s retirement in fiscal 2017. Adjusted net income
for the first six months of fiscal 2016 was $18.2 million, or $0.75
per diluted share, which excludes $2.5 million in expenses, net of
tax, related to operating efficiency initiatives and other items in
the first quarter of fiscal 2016.
Updated Fiscal 2017 Outlook (See
attached table for GAAP and Non-GAAP measures)
The Company is updating its outlook for fiscal 2017. In fiscal
2017, the Company anticipates that net sales will be in a range of
$550.0 million to $560.0 million and operating income will be
approximately $50.0 million to $55.0 million. The Company
anticipates net income in fiscal 2017 to be approximately $33.0
million to $36.5 million, or $1.40 to $1.55 per diluted share,
reflecting a 32% anticipated effective tax rate. The Company's
outlook excludes the charge and related tax benefit associated with
the COO’s retirement and assumes no further significant
fluctuations from prevailing foreign currency exchange rates, as
well as no other unusual items for fiscal 2017.
Quarterly Dividend and Share Repurchase
Program
The Company also announced that on August 25, 2016, the Board of
Directors approved the payment on September 20, 2016 of a cash
dividend in the amount of $0.13 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 September 6,
2016.
During the second quarter of fiscal 2017, the Company
repurchased approximately 85,500 shares under its share repurchase
program. As of July 31, 2016, the Company had $47.1 million
remaining under the $50.0 million share repurchase
authorization.
Conference Call
The Company’s management will host a conference call and audio
webcast to discuss its results today, August 25th, at 9:00 a.m.
Eastern Time. The conference call may be accessed by dialing (888)
437-9357. 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 at 12:00 p.m. ET on August 25, 2016 until 11:59 p.m. ET
on September 1, 2016 and can be accessed by dialing 1-877-870-5176
and entering replay pin number 2538715.
Movado Group, Inc. designs, sources, and distributes MOVADO®,
EBEL®, CONCORD®, ESQ® Movado, COACH®, TOMMY HILFIGER®, HUGO BOSS®,
JUICY COUTURE®, LACOSTE® and SCUDERIA FERRARI® watches worldwide,
and operates Movado company stores in the United States.
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 and
adjusted operating expenses, which are gross profit, gross margin
and operating expenses, respectively, under GAAP, adjusted to
eliminate charges for the COO’s retirement and operating efficiency
initiatives and other unusual items. The Company is also presenting
adjusted operating income and adjusted tax provision, which is
operating income and tax provision under GAAP, adjusted to
eliminate charges for the COO’s retirement and operating efficiency
initiatives and other unusual items. 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 the charges for the COO’s
retirement and operating efficiency initiatives and other unusual
items. 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 US 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, trends in consumer debt levels
and bad debt write-offs, general uncertainty related to possible
terrorist attacks, natural disasters, the stability of the European
Union (including the impact of the June 23, 2016 referendum
advising that the United Kingdom exit from the European Union) and
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, the ability of the Company to
successfully implement its business strategies, competitive
products and pricing, 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 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, 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, the
continued availability to the Company of financing and credit on
favorable terms, business disruptions, disease, general risks
associated with doing business outside the United States including,
without limitation, import duties, 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.
MOVADO GROUP, INC. GAAP AND NON-GAAP
MEASURES (In thousands, except per share data)
(Unaudited)
Net Sales Gross Profit Operating Income
Pre-tax Income
Provisions for
Income Taxes
Net Income
Attributed to
Movado
Group, Inc.
EPS
Three Months Ended July 31, 2016 As Reported (GAAP) $
128,086 $ 70,263 $ 10,091 $ 9,796 $ 3,441 $ 6,306 $ 0.27
Three Months Ended July 31, 2015 As Reported (GAAP) $
145,569 $ 79,038 $ 18,234 $ 18,013 $ 6,080 $ 12,053 $ 0.50
Six Months Ended July 31, 2016 As Reported
(GAAP) $ 242,149 $ 131,580 $ 15,469 $ 14,856 $ 5,164 $ 9,614 $
0.41 Retirement Charge (1) - - 1,806
1,806 687 1,119 0.05
Adjusted Results
(Non-GAAP) $ 242,149 $ 131,580 $ 17,275 $ 16,662 $ 5,851 $
10,733 $ 0.46
Six Months Ended July 31, 2015 As
Reported (GAAP) $ 266,030 $ 141,487 $ 25,109 $ 24,789 $ 9,216 $
15,674 $ 0.65 Operating Efficiency Initiatives and Other Items (2)
- 693 2,670 2,670 134
2,536 0.10
Adjusted Results (Non-GAAP) $ 266,030 $
142,180 $ 27,779 $ 27,459 $ 9,350 $ 18,210 $ 0.75
(1) Related to a charge for the retirement of the
Vice Chairman and Chief Operating Officer. (2) Related to a charge
for severance, occupancy expenses and the write-off of certain
fixed assets.
MOVADO GROUP, INC.
CONSOLIDATED BALANCE SHEETS (In thousands)
(Unaudited)
July 31, January 31, July 31,
2016
2016
2015
ASSETS
Cash and cash equivalents $ 205,795 $ 228,188 $ 188,012
Trade receivables, net 72,737 71,030 80,818 Inventories 186,090
162,465 188,515 Other current assets 34,807 27,352
31,935 Total current assets 499,429 489,035
489,280 Property, plant and equipment, net 35,726
38,553 42,723 Deferred and non-current income taxes 20,656 20,323
19,652 Other non-current assets 42,925 37,259
38,356 Total assets $ 598,736 $ 585,170 $ 590,011
LIABILITIES AND
EQUITY
Loans payable to bank, current $ 3,000 $ 5,000 $ - Accounts
payable 26,013 27,308 31,687 Accrued liabilities 37,676 39,617
38,182 Income taxes payable 2,120 6,257 955
Total current liabilities 68,809 78,182 70,824
Loans payable to bank 35,000 35,000 40,000 Deferred and
non-current income taxes payable 3,089 2,640 3,750 Other
non-current liabilities 32,206 28,201 30,353 Noncontrolling
interests 649 595 2,089 Shareholders' equity 458,983
440,552 442,995 Total liabilities and equity $ 598,736 $
585,170 $ 590,011
MOVADO GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In
thousands) (Unaudited)
Six Months Ended July 31,
2016
2015
Cash flows from operating activities: Net income $ 9,692 $
15,573 Depreciation and amortization 5,688 6,131 Other non-cash
adjustments 7,120 3,364 Operating efficiency initiatives and other
items - 2,670 Changes in working capital (35,413 ) (25,748 )
Changes in non-current assets and liabilities (1,260 )
584
Net cash (used in) / provided by operating
activities (14,173 ) 2,574
Cash flows from investing activities: Capital
expenditures (1,796 ) (3,668 ) Restricted cash deposits (1,156 ) -
Short-term investment (154 ) - Trademarks and other intangibles
(263 ) (138 )
Net cash (used in) investing
activities (3,369 ) (3,806
) Cash flows from financing activities:
Proceeds from bank borrowings 3,000 50,000 Repayments of bank
borrowings (5,000 ) (10,000 ) Dividends paid (5,970 ) (5,239 )
Stock repurchase (2,858 ) (39,129 ) Other financing (1,408 )
(447 )
Net cash (used in) financing activities
(12,236 ) (4,815 ) Effect
of exchange rate changes on cash and cash equivalents 7,385 (5,793
) Net change in cash and cash equivalents (22,393 ) (11,840 ) Cash
and cash equivalents at beginning of period 228,188
199,852
Cash and cash equivalents at end of
period $ 205,795 $ 188,012
MOVADO GROUP, INC. GAAP AND NON-GAAP
MEASURES OUTLOOK FOR FISCAL YEAR ENDED JANUARY 31, 2017
(In millions, except per share data) (Unaudited)
Net Sales Operating Income Pre-tax
Income
Provisions for
Income Taxes
Net Income
Attributed to
Movado
Group, Inc.
EPS Fiscal Year Ended January 31, 2017 Outlook
(GAAP) $550.0 - $560.0 $48.2 - $53.2 $46.8 - $52.0 $14.9 -
$16.6 $31.9 - $35.4 $1.35 - $1.50 Retirement Charge (1) - 1.8 1.8
0.7 1.1 0.05
Outlook (Non-GAAP) $550.0 - $560.0 $50.0 -
$55.0 $48.6 - $53.8 $15.6 - $17.3 $33.0 - $36.5 $1.40 - $1.55
(1) Related to a charge for the
retirement of the Vice Chairman and Chief Operating Officer.
MOVADO GROUP, INC. CONSOLIDATED STATEMENTS OF
OPERATIONS (In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended July 31,
July 31,
2016
2015
2016
2015
Net sales $ 128,086 $ 145,569 $ 242,149 $ 266,030
Cost of sales 57,823 66,531
110,569 124,543 Gross profit 70,263
79,038 131,580 141,487 Operating expenses 60,172
60,804 116,111 116,378
Operating income 10,091 18,234 15,469 25,109
Interest expense (331 ) (256 ) (706 ) (408 ) Interest income
36 35 93 88
Income before income taxes 9,796 18,013 14,856 24,789
Provision for income taxes 3,441 6,080
5,164 9,216 Net income 6,355
11,933 9,692 15,573 Less: Net income / (loss) attributed to
noncontrolling interests 49 (120 ) 78
(101 ) Net income attributed to Movado Group,
Inc. $ 6,306 $ 12,053 $ 9,614 $ 15,674
Per Share Information: Net income attributed to
Movado Group, Inc. $ 0.27 $ 0.50 $ 0.41 $ 0.65 Weighted diluted
average shares outstanding 23,192 23,904 23,237 24,230
MOVADO GROUP, INC. GAAP AND NON-GAAP MEASURES
(In thousands, except for percentage data)
(Unaudited)
As Reported % Change Three Months
Ended % Change Constant July 31,
As Reported Dollar
2016
2015
Total Net sales $128,086 $145,569 -12.0% -11.2%
As Reported % Change Six Months Ended
% Change Constant July 31,
As Reported Dollar
2016
2015
Total Net sales $242,149 $266,030 -9.0% -8.4%
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ICR, Inc.Rachel Schacter/Allison Malkin, 203-682-8200
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