Financials

Movado Group Sees Flat Q2 Sales

FinancialsAug 29, 2017

Movado Group Sees Flat Q2 Sales

The company said fashion watches and licensed brands were down in the United States.

20170829-Olivia-Burton.jpg
Pictured here is the “Forget Me Knot” open bangle from Olivia Burton. Despite flat sales in the second quarter, Movado revised its outlook for the full-year upward following the acquisition of the Olivia Burton jewelry brand. Right now, the brand is present in the U.S. through retailers like Anthropologie, Lord & Taylor and Nordstrom, according to its website.

Paramus, N.J.--Movado Group said net sales were almost flat in the second quarter and down in the first-half of the year in its latest earnings report released Tuesday.

In the second quarter, sales were $128.8 million compared to $128.1 the year prior, an increase of less than 1 percent.

Gross profit was $66.1 million, or 51 percent of sales, compared to $70.3 million, or 55 percent of sales, in the second quarter last year, while operating expenses decreased 4 percent to $57.8 million and operating income was down from $10.1 million in the year-earlier period to $8.3 million.

CEO Efraim Grinberg said the U.S. retail environment was challenging for the company during the period, but noted it was offset by particularly strong growth in net sales in Latin America, Europe and Asia.

During a conference call Tuesday morning, Grinberg said that the U.S. presented a challenge for fashion watches especially. Licensed brands also were down in the region, posting a 26 percent decrease in the U.S.

Movado company stores, however, grew 5 percent overall, and the wholesale business was up 8 percent.

Grinberg added that the launch of its Movado Connect smartwatch was “very well received” by retail partners and will be available in stores beginning Sept. 1.

During the first quarter, Movado focused on streamlining operations to reduce costs and operate more efficiently and faster, Grinberg said, continuing a move it started near the end of the last fiscal year. It also continued to focus on growing its digital footprint, particularly through social media platforms.

Overall, in the first six months of fiscal 2018, net sales were down 6 percent to $228 million.

Operating income in the first half was $4.7 million, compared with $15.5 million in the first-half last year, and gross profit was 51 percent of sales at $115.3 million, compared with $131.6 million, or 54 percent of sales, in the prior year.

The company said that it is updating its outlook for the full fiscal year 2018 to reflect the acquisition of the Olivia Burton brand.

Movado said that since the brand is performing “in line with (its) expectations” and they are seeing “initial success with the integration as the brand continues to resonate with its core millennial customer,” it now anticipates that net sales will be in the range of $530 to $545 million and operating income will be approximately $53 to $58 million in the

full-year. Previously, the company had predicted net sales in the range of $515 to $530 million and operating income at $50 to $55 million.

In addition to growing Olivia Burton globally, the company also will focus on expanding other new business initiatives, including Rebecca Minkoff and Movado Connect watches, and increasing its direct-to-consumer business.

Later this year, they also will extend the Movado Heritage line with several new models and new retail partners, Grinberg said.
Brecken Branstratoris the senior editor, gemstones at National Jeweler, covering sourcing, pricing and other developments in the colored stone sector.

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