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Movado Group, Inc. Announces Second Quarter and Six-Month Results

- Second Quarter Operating Profit Increases 16% Over Last Year -

PARAMUS, N.J., Sept. 6 /PRNewswire-FirstCall/ -- Movado Group, Inc. (NYSE: MOV), today announced second quarter results for the period ended July 31, 2007.

Second Quarter Fiscal 2008
  • Net sales increased 10.2% to $139.5 million compared to $126.6 million last year. Net sales for the quarter included $8.3 million of excess discontinued product.
  • Comparable store sales decreased 2.3% at the Company's Movado boutiques versus a 9.3% increase in the year-ago period.
  • Gross profit was $83.3 million, or 59.8% of sales, compared to $78.5 million, or 62.0% of sales last year. Excluding excess discontinued product sales, adjusted gross profit was $83.4 million, or 63.6% of sales, an improvement of 160 basis points over the year-ago period.
  • Operating profit increased 16.1% to $16.3 million, or 11.7% of sales, versus $14.1 million, or 11.1% of sales in the year-ago period.
  • Net interest income was $0.2 million versus net interest expense of $0.3 million last year.
  • Income tax expense of $4.1 million reflects a 24.9% tax rate in the second quarter compared to income tax expense of $2.4 million, or a 17.5% tax rate, recorded last year. Last year's favorable tax rate benefited second quarter diluted earnings per share by $0.04 and reflected the continued utilization of a Swiss net operating loss carryforward (NOL) acquired with the Ebel brand in fiscal 2005.
  • Net income increased to $12.3 million, or $0.45 per diluted share, compared to net income of $11.3 million, or $0.43 per diluted share, in the prior year period.
First Half Fiscal 2008
  • Net sales increased 7.4% to $240.8 million from $224.3 million last year. Net sales for the year-to-date period included $11.0 million of excess discontinued product.
  • Comparable store sales decreased 1.9% at the Company's Movado boutiques versus a 7.0% increase in the year-ago period.
  • Gross profit was $145.0 million, or 60.2% of sales, compared to $138.1 million, or 61.6% of sales last year. Excluding excess discontinued product sales, adjusted gross profit was $145.4 million, or 63.3% of sales, an improvement of 170 basis points over the year-ago period.
  • Operating profit increased 9.1% to $19.1 million versus $17.5 million in the year-ago period.
  • Net interest income was $0.6 million versus net interest expense of $0.4 million last year.
  • Income tax expense of $4.8 million reflects a 24.2% tax rate for the year-to-date period compared to income tax expense of $3.0 million, or a 17.6% tax rate, recorded last year. Last year's favorable tax rate benefited diluted earnings per share by $0.05 and reflected the continued utilization of a Swiss net operating loss carryforward (NOL) acquired with the Ebel brand in fiscal 2005.
  • Net income was $14.7 million, or $0.54 per diluted share, compared to net income of $14.2 million, or $0.54 per diluted share, in the prior year period.

Efraim Grinberg, President and Chief Executive Officer, commented, "Our strong results for the first half of the year reflect the continued customer appeal of our diverse portfolio of brands. We are especially pleased with the strength of our international business reflecting the growing prominence of Ebel and the expansion of our licensed brands' global presence. At the end of the second quarter, we launched our compelling new LACOSTE watch collection to retailers around the world."

"As we enter the second half of this year, we have unique strategies and programs in place to support each of our brands. Celebrating 60 years of modern design leadership, we are very excited to pay tribute to the iconic Movado museum dial this fall season. Dynamic product and marketing initiatives will showcase this milestone achievement as we demonstrate the power of the Movado brand."

Rick Cote, Executive Vice President and Chief Operating Officer, stated, "We are encouraged by the continued momentum we experienced in the second quarter with solid expansion achieved in both our adjusted gross margin and operating margin results. These metrics underscore the strong growth and profitability of our business model and strategy, as we deliver improved returns to our shareholders. Additionally, during the first half of this year, we maximized opportunities to convert discontinued product into cash, thereby improving our inventory mix."

The Company recognizes there is increased volatility in the financial markets and a growing sense of uncertainty as to the outlook for the U.S. economy. Assuming current business trends remain intact, Movado Group continues to project fiscal 2008 diluted earnings per share of approximately $1.72 based on an estimated 25% tax rate. This compares to fiscal 2007 adjusted diluted earnings per share of $1.54. Fiscal 2007 adjusted diluted earnings per share exclude the impact of the tax benefit resulting from the further utilization of the NOL acquired with Ebel in fiscal 2005 and previously disclosed one-time items related to accounts receivable, foreign currency and sale of a non-operating asset. On a GAAP basis, fiscal 2007 diluted earnings per share were $1.87 with a 5.4% tax rate. Fiscal 2008 net sales are projected to be approximately $560 million.

The Company's management will host a conference call today, September 6, 2007 at 10:00 a.m. Eastern Time to discuss its second quarter financial results. A live broadcast of the call will be available on the Company's website: www.movadogroup.com. This call will be archived online within one hour of the completion of the conference call.

Movado Group, Inc. designs, manufactures, and distributes Movado, Ebel, Concord, ESQ, Coach, Tommy Hilfiger, HUGO BOSS, Juicy Couture and LACOSTE watches worldwide, and operates Movado boutiques and company stores in the United States.

In this release, the Company presents certain adjusted financial measures that are not calculated according to generally accepted accounting principles in the United States ("GAAP"). These non-GAAP financial measures are designed to complement the GAAP financial information presented in this release because management believes they present information regarding the Company that management believes is useful to investors. The non-GAAP financial measures presented should not be considered in isolation from or as a substitute for the comparable GAAP financial measure.

The Company is presenting net sales excluding excess discontinued product sales (and gross profit excluding such sales) because the Company believes that it is useful to investors to eliminate the effect of these unusual sales in order to improve the comparability of the Company's results for the periods presented. Adjusted gross margin is based on net sales excluding excess discontinued product sales, which did not contribute to gross profit in any of the periods presented.

For a reconciliation of fiscal 2007 adjusted diluted earnings per share to 2007 earnings per share on a GAAP basis, please see the Company's press release, dated March 29, 2007.

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 similar expressions. Similarly, statements in this press release that describe the Company's business strategy, outlook, trends, 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: the Company's ability to successfully introduce and sell new products, the Company's ability to successfully integrate the operations of newly acquired and/or licensed brands without disruption to its other business activities, changes in consumer demand for the Company's products, reduced discretionary spending by consumers due to the recent tightening of credit, risks relating to the fashion and retail industry, import restrictions, competition, seasonality, commodity price and exchange rate fluctuations, changes in local or global economic conditions, 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.



                              MOVADO GROUP, INC.
                    Consolidated Statements of Operations
                    (in thousands, except per share data)
                                 (Unaudited)

                                       Three Months Ended   Six Months Ended
                                            July 31,            July 31,

                                         2007      2006      2007      2006

    Net sales                          $139,467  $126,588  $240,830  $224,332

    Cost of sales                        56,121    48,076    95,832    86,230

    Gross profit                         83,346    78,512   144,998   138,102

    Selling, general and
     administrative expenses             67,009    64,438   125,889   120,594

    Operating profit                     16,337    14,074    19,109    17,508

    Interest expense                       (872)     (919)   (1,751)   (1,862)
    Interest income                       1,062       616     2,309     1,507

    Income before income taxes and
     minority interest                   16,527    13,771    19,667    17,153

    Income tax                            4,117     2,407     4,764     3,013
    Minority interest                       146        15       239       (64)

    Net income                          $12,264   $11,349   $14,664   $14,204

    Net income per diluted share          $0.45     $0.43     $0.54     $0.54
    Shares used in per share
     computation                         27,272    26,584    27,259    26,506



                              MOVADO GROUP, INC.
                         CONSOLIDATED BALANCE SHEETS
                                (in thousands)
                                 (Unaudited)

                                           July 31,   January 31,   July 31,
                                             2007        2007         2006
    ASSETS

       Cash                                $112,456    $133,011     $78,126
       Trade receivables, net               100,611     111,417     128,416
       Inventories                          215,557     193,342     215,461
       Other current assets                  37,443      35,109      34,712
           Total current assets             466,067     472,879     456,715

       Property, plant and equipment, net    61,040      56,823      51,931
       Deferred income taxes                 27,863      12,091       7,364
       Other non-current assets              37,417      35,825      33,100
           Total assets                    $592,387    $577,618    $549,110

    LIABILITIES AND SHAREHOLDERS' EQUITY

       Current portion of long-term debt     $5,000      $5,000      $5,000
       Accounts payable                      30,708      32,901      34,797
       Accrued liabilities                   38,037      45,610      37,459
       Deferred and current taxes payable     5,717       5,946       2,550
           Total current liabilities         79,462      89,457      79,806

       Long-term debt                        62,475      75,196      91,978
       Deferred and non-current
        income taxes                         32,181      11,054      13,278
       Other liabilities                     24,384      23,087      20,112
       Minority interest                      1,467         443         245
       Shareholders' equity                 392,418     378,381     343,691
           Total liabilities and equity    $592,387    $577,618    $549,110


    Impact of adoption of FIN 48:
    As a result of the adoption of FIN 48, the Company recorded a reduction
    to the February 1, 2007 retained earnings in the amount of $7.7 million
    representing the cumulative effect of the adoption.
SOURCE Movado Group, Inc.
CONTACT: Suzanne Rosenberg, Vice President, Corporate Communications of
Movado Group, Inc., +1-201-267-8000; or Leigh Parrish or Melissa Merrill, both
of Financial Dynamics, +1-212-850-5600
Web site: http://www.movadogroup.com
(MOV)