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Movado Group, Inc. Reports Third Quarter Results

~ Q3 Operating Profit Grows 20.9% from Year-Ago Adjusted Operating Profit ~

PARAMUS, N.J., Dec. 6 /PRNewswire-FirstCall/ -- Movado Group, Inc. (NYSE: MOV), today announced third quarter and nine-month results for the period ended October 31, 2007.

Third Quarter Fiscal 2008
  • Net sales increased $13.9 million, or 8.3%, to $180.2 million from
    $166.3 million last year. Net sales for the current quarter and year-
    ago period included $11.3 million and $12.1 million of excess
    discontinued product, respectively.
  • Comparable store sales increased 8.8% at the Company's Movado boutiques
    versus a 0.5% gain achieved last year.
  • Gross profit was $109.9 million, or 61.0% of sales, compared to $97.9
    million, or 58.9% of sales last year. Excluding excess discontinued
    product sales from the current quarter and year-ago period, adjusted
    gross profit was $109.2 million, or 64.7% of sales and $97.9 million,
    or 63.5% of sales, respectively.
  • Operating profit was $28.5 million versus $19.8 million last year.
    Year-ago operating profit included two unusual items, which resulted in
    a combined $3.8 million non-cash charge, or $0.07 per fully diluted
    share. Excluding these items, year-ago adjusted operating profit was
    $23.6 million. (See attached table for reconciliation of GAAP to non-
    GAAP measures.)
  • Income tax expense of $1.9 million reflects a 6.7% tax rate in the
    third quarter compared to an income tax benefit of $2.0 million
    recorded last year. Both periods reflect the continued utilization of
    a Swiss net operating loss carryforward (NOL) acquired with the Ebel
    brand in fiscal 2005, which contributed $0.19 to third quarter diluted
    earnings per share this year and $0.25 per fully diluted share in the
    year-ago period. The Company now anticipates a fiscal 2008 tax rate of
    approximately 15.9%.
  • On a reported basis, net income and earnings per share were $26.5
    million and $0.97, respectively, versus net income of $21.9 million and
    earnings per diluted share of $0.82 in the year-ago period.
  • Adjusting for unusual items recorded in fiscal 2008 and fiscal 2007,
    third quarter net income increased 23.7% to $21.3 million from $17.2
    million last year, and earnings per diluted share increased 21.9% to
    $0.78 in the third quarter from $0.64 in the year-ago period. (See
    attached table for reconciliation of GAAP to non-GAAP measures.)
Nine-Month Results
  • Net sales increased 7.8% to $421.0 million from $390.6 million last
    year. Net sales for the current nine-month period and year-ago period
    included $22.3 million and $12.1 million of excess discontinued
    product, respectively.
  • Comparable store sales increased 1.1% at the Company's Movado boutiques
    versus a 5.0% gain achieved last year.
  • Gross profit was $254.9 million, or 60.5% of sales, compared to $236.0
    million, or 60.4% of sales last year. Excluding excess discontinued
    product sales from the current nine-month period and year-ago period,
    adjusted gross profit was $254.6 million, or 63.9% of sales and $236.0
    million, or 62.4% of sales, respectively.
  • Operating profit was $47.6 million versus $37.3 million last year.
    Year-ago operating profit included the previously mentioned unusual
    items recorded in the third quarter. Excluding these items, year-ago
    adjusted operating profit was $41.1 million. (See attached table for
    reconciliation of GAAP to non-GAAP measures.)
  • Income tax expense of $6.7 million reflects a 13.9% tax rate in the
    year-to-date period compared to income tax expense of $1.0 million, or
    a 2.8% tax rate recorded last year, and reflects the further
    utilization of the Swiss NOL acquired with the Ebel brand in fiscal
    2005.
  • On a reported basis, net income and earnings per diluted share were
    $41.2 million and $1.51, respectively, versus net income of $36.1
    million and earnings per diluted share of $1.35 in the year-ago period.
  • Adjusting for unusual items recorded in fiscal 2008 and fiscal 2007,
    net income for the nine-month period increased 18.9% to $35.8 million
    from $30.1 million last year, and earnings per diluted share increased
    15.9% to $1.31 in the nine-month period from $1.13 in the year-ago
    period. (See attached table for reconciliation of GAAP to non-GAAP
    measures.)

Efraim Grinberg, President and Chief Executive Officer, commented, "Third quarter results were strong as we positioned each of our brands in the marketplace with bold new products, aspirational advertising campaigns, including Movado's milestone celebration of 60 years of modern design, and fully integrated marketing programs. We have made great strides in building our international business, which grew 33% from last year and represented over 40% of wholesale revenue during the third quarter."

Rick Cote, Executive Vice President and Chief Operating Officer, stated, "Year-to-date results demonstrate our commitment to strong operating disciplines which translated into expanded adjusted gross margins and operating profit growth. During the quarter, we continued to convert discontinued product into cash, thereby improving our inventory mix and driving cash flow. Going forward, we remain focused on growing our operating margin through a combination of gross margin improvement and the leveraging of our existing infrastructure."

The Company recognizes there is a growing sense of uncertainty surrounding the outlook of the U.S. economy. Results for the full year will depend on the strength of the holiday season and retailer replenishment in January.

Based on the Company's results for the first nine months of fiscal 2008 and assuming that the U.S. economic environment does not deteriorate, Movado Group now projects fiscal 2008 adjusted diluted earnings per share to range between $1.74 and $1.78 based on an estimated 25% tax rate. The 25% tax rate represents the Company's assumed normalized tax rate and allows for year-over- year financial comparisons. This compares to fiscal 2007 adjusted diluted earnings per share of $1.54. Fiscal 2008 and 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. Fiscal 2007 adjusted diluted earnings per share also exclude previously disclosed one-time items related to accounts receivable, foreign currency and sale of a non- operating asset. On a GAAP basis, Movado Group projects fiscal 2008 diluted earnings per share to range between $1.95 and $2.00, with a 15.9% tax rate, versus GAAP diluted earnings per share of $1.87 with a 5.4% tax rate recorded in fiscal 2007. Fiscal 2008 net sales are projected to be approximately $560 million.

The Company's management will host a conference call today, December 6th at 10:00 a.m. Eastern Time. 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.

The Company is presenting adjusted operating profit, which is operating profit excluding a nonrecurring, non-cash accounts receivable adjustment expense and a one-time out-of-period benefit related to a foreign currency adjustment. The Company is also presenting adjusted net income, which is net income excluding the above-described accounts receivable adjustment and foreign currency adjustment and adjusting to exclude the effects of the utilization of NOLs from the Ebel acquisition and to assume a normalized 25% tax rate for all periods presented.

Management believes that presenting adjusted operating profit and adjusted net income is useful for investors because they improve comparability of results for the periods presented by eliminating items that affect those line items that are not expected to recur, although such items may, in fact, recur in the future.

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, 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: actual or perceived weakness in the U.S. and global economy and fluctuations in consumer spending and disposable income, 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, 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   Nine Months Ended
                                          October 31,          October 31,

                                         2007      2006      2007      2006

    Net sales                          $180,153  $166,272  $420,983  $390,604

    Cost of sales                        70,266    68,370   166,098   154,600

    Gross profit                        109,887    97,902   254,885   236,004

    Selling, general and
     administrative expenses             81,398    78,123   207,287   198,717

    Operating profit                     28,489    19,779    47,598    37,287

    Other income, net                       -         374       -         374
    Interest expense                       (920)     (987)   (2,671)   (2,849)
    Interest income                       1,064       753     3,373     2,260

    Income before income taxes and
     minority interest                   28,633    19,919    48,300    37,072

    Income tax                            1,927    (1,964)    6,691     1,049
    Minority interest                       178        (2)      417       (66)

    Net income                          $26,528   $21,885   $41,192   $36,089

    Net income per diluted share          $0.97     $0.82     $1.51     $1.35
    Number of shares outstanding         27,236    26,799    27,299    26,659



                               MOVADO GROUP, INC.
                              Reconciliation tables
                      (in thousands, except per share data)
                                   (Unaudited)

                                    Three Months Ended    Nine Months Ended
                                        October 31,          October 31,

                                     2007        2006     2007        2006

    Operating Profit (GAAP)         $28,489     $19,779  $47,598     $37,287
    A/R Reserve Adjustment (1)            -       6,000        -       6,000
    Out-of-Period FX Adjustment (2)       -      (2,211)       -      (2,211)
    Adjusted Operating Profit
     (Non-GAAP)                     $28,489     $23,568  $47,598     $41,076


                                    Three Months Ended    Nine Months Ended
                                        October 31,          October 31,

                                       2007        2006     2007        2006

    Net Income (GAAP)               $26,528     $21,885  $41,192     $36,089
    A/R Reserve Adjustment (1)            -       3,706        -       3,706
    Out-of-Period FX Adjustment (2)       -      (1,729)       -      (1,729)
    Tax Adjustments (3)              (5,231)     (6,647)  (5,384)     (7,938)
    Adjusted Net Income (Non-GAAP)  $21,297     $17,215  $35,808     $30,128

    Number of shares outstanding     27,236      26,799   27,299      26,659
    Adjusted Net Income per share
     (Non-GAAP)                       $0.78       $0.64    $1.31       $1.13

    (1) Non-cash charge to accounts receivable reserve due to a change in
        estimate.
    (2) One-time benefit recorded for an out-of-period adjustment related to
        foreign currency.
    (3) To present financials at a consistent 25% effective tax rate for both
        periods.  Actual taxes primarily reflect utilization of the
        acquired Ebel net operating loss tax carryforward.



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

                                          October 31, January 31,  October 31,
                                             2007        2007         2006
    ASSETS

       Cash                                 $111,060    $133,011     $79,908
       Trade receivables, net                150,996     111,417     159,010
       Inventories                           210,510     193,342     207,709
       Other current assets                   37,056      35,109      33,740
           Total current assets              509,622     472,879     480,367

       Property, plant and equipment, net     63,729      56,823      53,339
       Deferred income taxes                  31,000      12,091      12,239
       Other non-current assets               38,605      35,825      34,819
           Total assets                     $642,956    $577,618    $580,764

    LIABILITIES AND SHAREHOLDERS' EQUITY

       Current portion of long-term debt     $10,000      $5,000      $5,000
       Accounts payable                       26,892      32,901      35,948
       Accrued liabilities                    54,311      45,610      52,465
       Deferred and current taxes payable     11,355       5,946       7,634
           Total current liabilities         102,558      89,457     101,047

       Long-term debt                         50,907      75,196      82,435
       Deferred and non-current
        income taxes                          32,980      11,054      11,050
       Other liabilities                      25,481      23,087      21,714
       Minority interest                       1,645         443         244
       Shareholders' equity                  429,385     378,381     364,274
           Total liabilities and equity     $642,956    $577,618    $580,764

    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: Investor Relations, Suzanne Rosenberg, Vice President Corporate Communications, of Movado Group, Inc., +1-201-267-8000;
or Leigh Parrish or Stephanie Rich of Financial Dynamics, +1-212-850-5600,
for Movado Group, Inc.
Web site: http://www.movadogroupinc.com
(MOV)