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Movado Group Sinks After a Challenging Quarter

Movado Group (NYSE: MOV) released fiscal second-quarter 2020 results on Wednesday morning, detailing encouraging market-share gains but also the travails of an "increasingly challenging environment" for its watchmaking niche. Movado followed by tempering the full-year guidance it initially provided in late March.

With shares down 15% in Wednesday's trading, let's look at what the company accomplished over the last few months.

Movado Group results: The raw numbers

Metric Q2 2020* Q2 2019 Change
Net sales $157.8 million $144.1 million 9.5%
GAAP net income $17.5 million $9.1 million 92.3%
GAAP earnings per share $0.75 $0.39 92.3%

Data source: Movado Group. *For the quarter ended July 31, 2019. GAAP = generally accepted accounting principles.

Yellow stock market arrow chart showing declines with a gray background.

Image source: Getty Images.

What happened with Movado Group this quarter?

  • Net sales climbed 11% on a constant-currency basis.
  • Adjusted for one-time items (mostly related to acquisitions and stock-based compensation), Movado's non-GAAP net income was $8.3 million, or $0.36 per share, declining from $10.6 million, or $0.45, in the year-ago period.
  • Most analysts were modeling higher adjusted earnings of $0.49 per share on net sales closer to $167 million. 
  • Movado repurchased 53,000 shares during the quarter, leaving $36.4 million under its repurchase authorization as of July 31, 2019.

What management had to say

CEO Efraim Grinberg said:

Overall, we delivered sales growth of 9.5% and adjusted operating income of $10.3 million in the second quarter, despite an increasingly challenging environment for our category, planned incremental investments, and currency headwinds. We are pleased with the market share gains of our licensed brand portfolio both internationally and domestically, and saw strong digital sales growth on our movado.com site during the quarter. In a difficult marketplace, we are well positioned given the investments we've made over the last few years, including building out our international markets, acquiring Olivia Burton and MVMT, developing important product innovation, and establishing our digital center of excellence. As we look ahead, we will continue to make planned strategic investments across the business to support our brands as we focus on delivering long-term sustainable growth.

Looking forward

Given its relative underperformance to start the fiscal year, punctuated by "ongoing challenges in our category, the impact of tariffs, and the increasingly volatile global environment," according to Grinberg, Movado reduced its full-year outlook.

For the full fiscal-year 2020, it now sees net sales ranging from $725 million to $740 million, down from $750 million to $765 million previously, and representing year-over-year growth of approximately 7.8% at the midpoint. On the bottom line, that should translate to net income per share of $2.25 to $2.35, down from $2.70 to $2.80 in the prior forecast.

Movado is right to trumpet its industry leadership, market-share gains, and investments aimed at driving long-term growth. But given the relative headwinds it's facing in navigating those core markets, investors understandably responded in kind today.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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