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FinancialsMar 27, 2020
Movado’s Q4 US Watch Sales Down 25%
The watch company has closed all its retail stores in the U.S., the U.K., and Canada amid the coronavirus pandemic.
A Movado Connect 2.0 timepiece. The Movado brand performed well in U.S. department stores and online over the holiday season, according to Movado’s recent financial results.
Paramus, N.J.—Movado Group’s U.S. watch and accessories sales suffered a 25 percent drop in the fourth quarter, followed by the closure of many of its retail stores in light of the coronavirus pandemic.
The New Jersey-based company has closed all of its retail stores in the U.S., Canada and the U.K., said CEO Efraim Grinberg on an earnings call Thursday morning.
Its offices are also closed, with the exception of China and Hong Kong, with its employees working remotely.
Its warehouses in New Jersey, Hong Kong, Kentucky, and those in Europe are open, but working with limited employees. Ecommerce orders are being delivered for Movado and Olivia Burton via its New Jersey warehouse.
Looking to its results, fourth-quarter net sales fell 4 percent to $191 million, compared with $199.4 million a year ago.
On the earnings call, CFO Sallie DeMarsilis said the dip in sales was driven by a decline in the company’s owned brands, like Movado.
The loss was partially offset by strength in its licensed brand business, up 11 percent year-over-year, and its retail outlet stores, up 16 percent.
Overall quarterly sales in its watch and accessories brand segment dipped 7 percent year-over-year to $158.5 million compared with $171.3 million last year.
Reflecting on brand performance over the holidays, Grinberg noted the Tommy Hilfiger brand performed well in Europe, India, and Mexico, while Hugo Boss and Lacoste did well in Europe.
The Movado brand was a top performer within U.S. department stores as well as its overall e-commerce business.
Website performance issues plagued e-commerce sales of its MVMT brand, and while the issues have been partially fixed, Movado said it is upgrading its cloud platform this June.
The Olivia Burton and Coach brands both performed well in e-commerce in China.
Movado’s U.S. watch and accessories brand sales suffered a double-digit drop, dipping 25 percent to $59.3 million compared with $78.8 million in the previous fourth quarter.
The decrease was driven by its owned brands, in particular the impact of MVMT’s aforementioned website issues.
On the other hand, its international watch and accessories brand sales climbed 7 percent to $99.2 million compared with $92.5 million last year. Movado said it saw the strongest sales growth in Europe and the Middle East.
Its quarterly retail business was up 16 percent compared with last year, operating 47 outlet locations, including two in Canada, up from 44 last year.
Quarterly gross profit totaled $100.6 million, or 53 percent of net sales, compared with $110.6 million, or 56 percent of net sales, in the fourth quarter last year.
The decrease was attributed to the “unfavorable impact of channel and product mix, unfavorable change in foreign currency exchange rate, additional special U.S. tariffs and the impact of fixed costs on lower sales,” said DeMarsilis.
Full-year net sales totaled $701 million, a 3 percent rise compared with $679.6 million last year.
For the full year, gross profit was $374.9 million, or 54 percent of sales, compared with $369.4 million, or 54 percent of sales, last year.
Looking to the year ahead, Movado said it expects the coronavirus pandemic to negatively impact its business, results of operations, and financial positions, but noted it could not reasonably assess the financial impact at this time.
Therefore, it will not provide fiscal 2021 guidance.
“We have been in this business for many years and endured many downturns, and believe our powerful brands, focus on innovation, and operating discipline position us well to successfully navigate through these unprecedented times,” said Grinberg on the call.
To increase its financial flexibility, Movado has borrowed an additional $30 million on its revolving credit facility this month and has $190 million in cash on its balance sheet as of March 25.
The company’s board has suspended its share repurchase program until further notice.
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