~ Net Sales of $187.7 million ~
~ Operating Income of $20.7 million;
Adjusted Operating Income of $21.1 million ~
~ EPS of $0.77 and Adjusted EPS of $0.78
~
~ Company Updates Fiscal 2024 Outlook
~
~ Board Declares Quarterly Dividend
~
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
(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 November 30, 2023
until 11:59 p.m. ET on December 14, 2023 and can be accessed by
dialing (844) 512-2921 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 OperatingExpenses OperatingIncome
Pre-taxIncome Provision forIncome Taxes Net
IncomeAttributable toMovado 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
OperatingExpenses OperatingIncome Pre-taxIncome
Provision forIncome Taxes Net IncomeAttributable toMovado
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
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231130029303/en/
ICR, Inc. Rachel Schacter/Allison Malkin 203-682-8200
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