~ Net Sales of $160.4 million ~
~ Operating Income of $9.6 million; Adjusted
Operating Income of $10.3 million ~
~ EPS of $0.36 and Adjusted EPS of $0.38
~
~ Updates Fiscal Year 2024 Outlook ~
~ Board Declares Quarterly Dividend of $0.35
Per Share ~
Movado Group, Inc. (NYSE: MOV) today announced second quarter
and six-month results for the periods ended July 31, 2023.
Efraim Grinberg, Chairman and Chief Executive Officer, stated,
“We managed our business well, delivering second quarter net sales
and earnings within our range of expectations despite operating in
a challenging retail environment for our category, particularly in
the United States and Europe, our largest markets. While wholesale
shipments moderated from last year, reflecting our partners’ tight
management of inventory and a more cautious consumer, we continued
to make progress against our key initiatives to deliver
sought-after innovation, powerful marketing and compelling value
across our portfolio of brands. Our Company continues to manage
with discipline, delivering positive operating cash flow and
balance sheet strength with $218.9 million in cash, well-controlled
inventory and no debt at quarter end. While we believe that there
remains a level of consumer uncertainty, we are committed to
investing in our brand-building efforts and expect these
initiatives to generate strong return on investment and enhance our
growth potential over the medium and long term. We are excited
about our Movado brand refresh being launched this fall and
supporting our licensed brand partners with strong regional
marketing programs.”
Fiscal 2024 Second Quarter
Highlights (See attached table for
GAAP and Non-GAAP measures)
- Delivered net sales of $160.4 million versus $182.8 million in
the second quarter of fiscal 2023;
- Generated gross margin of 55.7% as compared to 58.5% in the
prior year period;
- Generated operating income of $9.6 million as compared to $30.7
million in the prior year period; Adjusted operating income of
$10.3 million as compared to $31.4 million;
- Achieved diluted earnings per share of $0.36 as compared to
$1.05 in the prior year period; Adjusted diluted earnings per share
of $0.38 as compared to $1.07; and
- Ended the quarter with cash of $218.9 million and no debt.
Mr. Grinberg continued, “We expect the difficult environment for
consumer discretionary products to persist into the back half of
the year, which is reflected in our updated outlook that
incorporates lower shipments across our wholesale partners in North
America and Europe. As we look ahead, we will continue to execute
our growth strategies, disciplined cost controls, and product
innovation, including value price points across our family of
brands, while investing behind our most important brands and
focusing on delivering long-term sustainable growth and increased
shareholder value.”
Non-GAAP Items (See attached table for GAAP and Non-GAAP
measures)
Second quarter fiscal 2024 results of operations included the
following items:
- a $0.6 million pre-tax charge, or $0.5 million after tax,
representing $0.02 per diluted share, associated with the
amortization of acquired intangible assets related to the
acquisitions of Olivia Burton and MVMT.
Second quarter fiscal 2023 results of operations included the
following items:
- a $0.7 million pre-tax charge, or $0.6 million after tax,
representing $0.02 per diluted share, associated with the
amortization of acquired intangible assets related to the
acquisitions of Olivia Burton and MVMT.
In this press release, reference to “adjusted” results exclude
the impact of the above charges from the second quarter of fiscal
years 2024 and 2023, as well as the items described in the Non-GAAP
Items section of the Company’s earnings release for the first
quarter of fiscal year 2024. Please refer to the attached table of
GAAP and Non-GAAP measures for a detailed reconciliation of the
Company’s reported results to its adjusted, non-GAAP results.
Second Quarter Fiscal 2024 Results (See
attached table for GAAP and Non-GAAP measures)
- Net sales decreased 12.3% (13.8% on a constant dollar basis) to
$160.4 million compared to $182.8 million in the second quarter of
fiscal 2023. The decrease in net sales reflected declines in
wholesale customers’ brick and mortar stores, online retail and
Movado Company Stores due to the challenging environment for
consumer discretionary products. U.S. net sales decreased 12.4% as
compared to the second quarter of last year. International net
sales decreased 12.1% (14.9% on a constant dollar basis) as
compared to the second quarter of last year.
- Gross profit was $89.3 million, or 55.7% of net sales, compared
to $106.9 million, or 58.5% of net sales, in the second quarter of
fiscal 2023. The decrease in gross margin percentage was primarily
the result of decreased leverage of higher fixed costs on lower
sales, the unfavorable changes in channel and product mix and the
unfavorable impact of foreign currency exchange rates.
- Operating expenses were $79.6 million compared to $76.3 million
in the second quarter of fiscal 2023. Adjusted operating expenses
were $79.0 million for the second quarter of fiscal 2024 and $75.6
million in the second quarter of fiscal 2023. This increase was
primarily due to higher payroll-related costs, partially offset by
lower marketing expenses and performance-based compensation. As a
percent of sales, adjusted operating expenses increased to 49.3% of
net sales from 41.3% in the prior year period primarily due to
lower sales.
- Operating income was $9.6 million compared to $30.7 million in
the second quarter of fiscal 2023. Adjusted operating income for
the second quarter of fiscal 2024 was $10.3 million compared to an
adjusted operating income of $31.4 million in the second quarter of
fiscal 2023.
- The Company recorded a tax provision of $2.9 million compared
to a tax provision of $6.4 million in the second quarter of fiscal
2023. The Company recorded an adjusted tax provision in the second
quarter of fiscal 2024 of $3.0 million compared to an adjusted tax
provision of $6.6 million in the second quarter of fiscal
2023.
- Net income was $8.0 million, or $0.36 per diluted share,
compared to net income of $24.0 million, or $1.05 per diluted
share, in the second quarter of fiscal 2023. Adjusted net income
for the fiscal 2024 period was $8.5 million, or $0.38 per diluted
share. This compares to adjusted net income in the second quarter
of fiscal 2023 of $24.6 million, or $1.07 per diluted share.
First Half Fiscal 2024 Results (See
attached table for GAAP and Non-GAAP measures)
- Net sales for the first six months of fiscal 2024 decreased
11.8% to $305.3 million (12.1% on a constant dollar basis) compared
to $346.2 million in the first six months of fiscal 2023. The
decrease in net sales reflected declines in wholesale customers’
brick and mortar stores, online retail and Movado Company Stores
due to the challenging retail environment. U.S. net sales decreased
13.9% as compared to the first six months of last year.
International net sales decreased 10.2% (10.6% on a constant dollar
basis) as compared to the first six months of last year.
- Gross profit was $171.3 million, or 56.1% of net sales,
compared to $203.6 million, or 58.8% of net sales in the first six
months of fiscal 2023. The decrease in gross margin percentage was
primarily the result of the unfavorable changes in channel and
product mix, the unfavorable impact of foreign currency exchange
rates and decreased leverage of higher fixed costs on lower sales,
partially offset by reduced shipping costs.
- Operating expenses were $150.7 million as compared to $147.7
million in the first six months of fiscal 2023. Adjusted operating
expenses were $149.4 million compared to $146.2 million in the
first six months of fiscal 2023. This increase was primarily due to
higher payroll-related costs, partially offset by lower marketing
expenses and performance-based compensation. As a percent of sales,
adjusted operating expenses increased to 48.9% of net sales from
42.2% in the prior year period primarily due to lower sales.
- Operating income was $20.5 million compared to operating income
of $56.0 million in the first six months of fiscal 2023. Adjusted
operating income was $21.9 million compared to $57.4 million in the
prior year period.
- The Company recorded a tax provision in the first six months of
fiscal 2024 of $5.4 million as compared to a provision of $12.4
million in the first six months of fiscal 2023. The Company
recorded an adjusted tax provision of $5.7 million compared to an
adjusted tax provision of $12.7 million for the first half of
fiscal 2023.
- Net income was $17.2 million, or $0.76 per diluted share,
compared to net income of $42.5 million, or $1.83 per diluted
share, in the first six months of last year. In the first half of
fiscal 2024, adjusted net income was $18.2 million, or $0.80 per
diluted share, compared to adjusted net income of $43.7 million, or
$1.89 per diluted share, in the prior year period.
Fiscal 2024 Outlook
The Company is revising its previously provided outlook to
reflect the continued expected impact of the challenging consumer
discretionary environment on the business.
For Fiscal Year 2024, the Company currently expects:
- Net sales in a range of approximately $690.0 million to $700.0
million, as compared to its previous expectation for net sales in
the range of $725.0 million to $750.0 million;
- Gross profit of approximately 55% of net sales, as compared to
its previous expectation for gross profit of approximately 56% of
net sales;
- Operating income in a range of $62.5 million to $65.0 million,
as compared to its previous expectation for operating income in a
range of $80.0 million to $85.0 million;
- An effective tax rate of approximately 23%, assuming no changes
to the current tax regulations, as compared to its previous
expectation of 22%; and
- Earnings of $2.15 to $2.25 per diluted share, as compared to
its previous expectation of $2.70 to $2.90 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 due to the
impact of economic uncertainty 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 August 24, 2023, the
Board of Directors approved the payment on September 21, 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 September 7,
2023.
During the first six months of fiscal 2024, the Company
repurchased approximately 16,000 shares under its share repurchase
program. As of July 31, 2023 , the Company had $20.6 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, August 24, 2023, at 9:00 a.m.
Eastern Time. The conference call may be accessed by dialing (877)
407-0784. 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 August 24, 2023 until 11:59 p.m. ET
on September 7, 2023 and can be accessed by dialing (844) 512-2921
and entering replay pin number 13740661.
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
Six Months Ended
July 31,
July 31,
2023
2022
2023
2022
Net sales
$
160,390
$
182,804
$
305,295
$
346,228
Cost of sales
71,104
75,877
134,006
142,616
Gross profit
89,286
106,927
171,289
203,612
Total operating expenses
79,638
76,270
150,742
147,661
Operating income
9,648
30,657
20,547
55,951
Non-operating income/(expense): Other income, net
1,537
199
2,562
282
Interest expense
(113
)
(101
)
(226
)
(213
)
Income before income taxes
11,072
30,755
22,883
56,020
Provision for income taxes
2,885
6,418
5,419
12,429
Net income
8,187
24,337
17,464
43,591
Less: Net income attributable to noncontrolling interests
138
334
287
1,075
Net income attributable to Movado Group, Inc.
$
8,049
$
24,003
$
17,177
$
42,516
Diluted Income Per Share Information Net income per
share attributable to Movado Group, Inc.
$
0.36
$
1.05
$
0.76
$
1.83
Weighted diluted average shares outstanding
22,616
22,966
22,642
23,176
MOVADO GROUP, INC. GAAP AND NON-GAAP MEASURES (In
thousands, except for percentage data) (Unaudited)
Three Months Ended
July 31,
% Change
2023
2022
Total net sales, as reported
$
160,390
$
182,804
-12.3
%
Total net sales, constant dollar basis
$
157,589
$
182,804
-13.8
%
Six Months Ended
July 31,
% Change
2023
2022
Total net sales, as reported
$
305,295
$
346,228
-11.8
%
Total net sales, constant dollar basis
$
304,440
$
346,228
-12.1
%
MOVADO GROUP, INC. GAAP AND NON-GAAP MEASURES (In
thousands, except per share data) (Unaudited)
Net Sales Gross Profit TotalOperatingExpenses
OperatingIncome Pre-taxIncome Provision forIncome
Taxes Net IncomeAttributable toMovado Group, Inc.
Diluted EPS Three Months Ended July 31, 2023 As
Reported (GAAP)
$
160,390
$
89,286
$
79,638
$
9,648
$
11,072
$
2,885
$
8,049
$
0.36
Olivia Burton and MVMT Costs (1)
-
-
(612
)
612
612
147
465
0.02
Adjusted Results (Non-GAAP)
$
160,390
$
89,286
$
79,026
$
10,260
$
11,684
$
3,032
$
8,514
$
0.38
Three Months Ended July 31, 2022 As
Reported (GAAP)
$
182,804
$
106,927
$
76,270
$
30,657
$
30,755
$
6,418
$
24,003
$
1.05
Olivia Burton and MVMT Costs (1)
-
-
(712
)
712
712
138
574
0.02
Adjusted Results (Non-GAAP)
$
182,804
$
106,927
$
75,558
$
31,369
$
31,467
$
6,556
$
24,577
$
1.07
Net Sales Gross Profit
TotalOperatingExpenses OperatingIncome
Pre-taxIncome Provision forIncome Taxes Net
IncomeAttributable toMovado Group, Inc. Diluted EPS
Six Months Ended July 31, 2023 As Reported (GAAP)
$
305,295
$
171,289
$
150,742
$
20,547
$
22,883
$
5,419
$
17,177
$
0.76
Olivia Burton and MVMT Costs (1)
-
-
(1,319
)
1,319
1,319
317
1,002
0.04
Adjusted Results (Non-GAAP)
$
305,295
$
171,289
$
149,423
$
21,866
$
24,202
$
5,736
$
18,179
$
0.80
Six Months Ended July 31, 2022 As Reported
(GAAP)
$
346,228
$
203,612
$
147,661
$
55,951
$
56,020
$
12,429
$
42,516
$
1.83
Olivia Burton and MVMT Costs (1)
-
-
(1,481
)
1,481
1,481
289
1,192
0.06
Adjusted Results (Non-GAAP)
$
346,228
$
203,612
$
146,180
$
57,432
$
57,501
$
12,718
$
43,708
$
1.89
(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)
July 31,
January 31,
July 31,
2023
2023
2022
ASSETS Cash and
cash equivalents
$
218,909
$
251,584
$
203,109
Trade receivables, net
95,821
94,282
100,697
Inventories
181,448
186,203
215,038
Other current assets
25,206
24,212
21,588
Income taxes receivable
12,988
10,908
9,691
Total current assets
534,372
567,189
550,123
Property, plant and equipment, net
19,740
18,699
17,956
Operating lease right-of-use assets
71,358
80,897
76,818
Deferred and non-current income taxes
45,004
44,490
44,480
Other intangibles, net
8,432
9,642
10,946
Other non-current assets
70,791
66,788
65,813
Total assets
$
749,697
$
787,705
$
766,136
LIABILITIES AND EQUITY
Accounts payable
$
28,435
$
32,085
$
51,981
Accrued liabilities
47,135
46,720
58,475
Accrued payroll and benefits
10,976
17,343
11,383
Current operating lease liabilities
17,069
17,681
16,904
Income taxes payable
18,078
28,591
20,875
Total current liabilities
121,693
142,420
159,618
Deferred and non-current income taxes payable
8,321
15,163
15,788
Non-current operating lease liabilities
63,565
70,910
67,241
Other non-current liabilities
52,220
48,668
47,633
Redeemable noncontrolling interest
-
-
2,305
Shareholders' equity
500,784
507,606
470,836
Noncontrolling interest
3,114
2,938
2,715
Total equity
503,898
510,544
473,551
Total liabilities, redeemable noncontrolling interest and
equity
$
749,697
$
787,705
$
766,136
MOVADO GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (In thousands) (Unaudited)
Six Months Ended
July 31,
2023
2022
Cash flows from operating activities: Net income
$
17,464
$
43,591
Depreciation and amortization
5,039
5,635
Other non-cash adjustments
5,427
3,346
Changes in working capital
(19,999
)
(74,366
)
Changes in non-current assets and liabilities
1,295
(3,598
)
Net cash provided by/(used in) operating activities
9,226
(25,392
)
Cash flows from investing activities: Capital
expenditures
(4,620
)
(2,987
)
Long-term investments
(1,407
)
(2,283
)
Trademarks and other intangibles
(54
)
(57
)
Net cash used in investing activities
(6,081
)
(5,327
)
Cash flows from financing activities: Dividends paid
(37,650
)
(15,797
)
Stock repurchase
(433
)
(21,539
)
Stock awards and options exercised and other changes
(92
)
(405
)
Other
-
(85
)
Net cash used in financing activities
(38,175
)
(37,826
)
Effect of exchange rate changes on cash, cash equivalents,
and restricted cash
3,131
(5,489
)
Net change in cash, cash equivalents, and restricted cash
(31,899
)
(74,034
)
Cash, cash equivalents, and restricted cash at beginning of period
252,179
277,716
Cash, cash equivalents, and restricted cash at end of
period
$
220,280
$
203,682
Reconciliation of cash, cash equivalents, and restricted
cash: Cash and cash equivalents
$
218,909
$
203,109
Restricted cash included in other non-current assets
1,371
573
Cash, cash equivalents, and restricted cash
$
220,280
$
203,682
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230824403753/en/
ICR, Inc. Rachel Schacter/Allison Malkin 203-682-8200
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