Movado Group, Inc. Shows Signs of Stabilization

By Joe

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Movado Group (NYSE: MOV) reported fiscal 2017 third-quarter earnings on Nov. 22. The luxury watchmaker saw the recent rate of decline in its sales and profit moderate, and the company held firm on its revenue and earnings guidance for the year.

Movado Group results: The raw numbers

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Data source: Movado Group Q3 2017 earnings press release.

What happened with Movado Group this quarter?

Net sales declined 3.1% year over year to$179.8 million, and 1.4% on a constant dollar basis.

"Despite a challenging retail environment and continued weakness in the watch category, we delivered sales and profits at the high end of our internal expectations," said Chairman and CEO Efraim Grinberg during a conference call with investors.

Gross profit edged down 1.5% to $98.6 million. However, gross margin improved to 54.8% compared to 53.9% in the third quarter of 2016, as Movado refrained from offering steep discounts to defend its profits. In a press release, Grinberg said the gross margin improvement also demonstrated "the ongoing power" of Movado's portfolio of brands and the company's ability to innovate.

Still, lower sales also dented operating income, which fell 7% to$31.1 million as operating expenses rose 1.3% to $67.5 million.

All told, net income declined 6% to$20.2 million, while earnings per share -- which were helped somewhat by share buybacks -- decreased 5% to$0.87.

Looking forward

Despite the multitude of challenges currently affecting the retail industry -- such as declining department store traffic and the decision by many retailers to operate at leaner inventory levels ahead of the holiday shopping season -- Movado maintained its full-year outlook, including:

  • Net sales of$550 millionto$560 million
  • Operating income of $50 million to $55 million
  • Net income of$33 million to $36.5 million, or $1.40to$1.55 per share

"While the watch category has continued to remain difficult at retail, we see signs of stabilization for the holiday season," added Grinberg. "We believe we are well positioned for the holiday with our powerful portfolio brands and are excited about our impactful marketing plans in place behind our flagship Movado brand."

Movado also announced a partnership with Rebecca Minkoff, a popular millennial fashion brand, including plans to launch both men's and women's timepieces in spring 2017. "Rebecca Minkoff is one of the fastest growing fashion designers geared toward the millennial consumer," said Grinberg. "Looking ahead, we continue to remain focused on driving product innovation that resonates with our consumers and executing and delivering on our plan."

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Joe Tenebruso has no position in any stocks mentioned. The Motley Fool recommends Movado Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.