PARAMUS, N.J., March 27 /PRNewswire-FirstCall/ -- Movado Group, Inc.
(NYSE: MOV), today reported results for its fourth quarter and fiscal year
ended January 31, 2008.
Full Fiscal Year 2008 Performance
Net sales for fiscal 2008 increased 5.0% to $559.6 million and included
$31.2 million of excess discontinued product sales and a one-time accrual of
$15.0 million for product returns associated with the Company's previously
announced closing of approximately 1,400 wholesale doors selling the Movado
brand in the United States (see attached table for a reconciliation of GAAP to
non-GAAP measures). Year-ago net sales included $16.6 million of excess
discontinued product sales. Adjusting for these items recorded in both
periods, net sales rose 5.2% to $543.3 million. On a constant-exchange-rate
basis, which excludes the effect of translating foreign-currency-denominated
sales into U.S. dollars, and excluding the previously mentioned discontinued
product sales and accrual for product returns, net sales rose 2.7%.
Adjusting for the aforementioned items in both fiscal 2008 and fiscal 2007
and unusual items recorded in fiscal 2007, gross margin expanded 150 basis
points to 64.0% of sales compared to 62.5% of sales last year. Adjusted gross
profit in fiscal 2008 was $347.7 million versus $322.9 million last year.
Without adjustments, gross margin for fiscal 2008 and fiscal 2007 was 60.2%
and 60.6%, respectively, and gross profit for those periods was $336.7 million
and $322.9 million, respectively. Adjusted operating profit in fiscal 2008
was $61.8 million, or 11.4% of sales, compared to $56.1 million, or 10.9% of
sales, in fiscal 2007. Without adjustments, operating profit in fiscal 2008
was $50.8 million, or 9.1% of sales, compared to $52.3 million, or 9.8% of
sales, in fiscal 2007.
Net income for fiscal 2008 was $60.8 million, or $2.23 per fully diluted
share, and included the following special items:
- a $20.8 million net realized tax benefit, or $0.76 per fully diluted
share, related to the resolution of a tax examination by the Internal
Revenue Service and the further utilization of net operating loss
carryforwards (NOLs) associated with our non-U.S. businesses partially
offset by;
- a $0.24 per fully diluted share impact related to the aforementioned
accrual for product returns
Adjusting for the special items recorded in both years, net income for
fiscal 2008 increased 13.1% to $46.6 million, or $1.71 per fully diluted
share, compared to $41.2 million, or $1.54 per fully diluted share recorded in
fiscal 2007.
Efraim Grinberg, President and Chief Executive Officer, stated,
"Considering the challenging economic and retail environment in the U.S.,
particularly during the holiday season, we are pleased with our overall
performance. In fiscal 2008, we achieved adjusted EPS growth of 11%, adjusted
gross margin of 64%, and adjusted operating margin of 11.4%. These results
were achieved because of our diversified business model -- both geographically
and from a brand portfolio perspective. Today, approximately 50% of our
wholesale revenue is generated outside of the United States. With our
powerful brands and strong balance sheet, we are well positioned to weather
these challenging times."
Fourth Quarter Performance
Net sales for the fourth quarter of fiscal 2008 were $138.6 million, or
2.6% below last year, and included the previously mentioned one-time accrual
of $15.0 million and $8.9 million of excess discontinued product sales. Year-
ago net sales included $4.4 million of excess discontinued product sales.
Adjusting for these items recorded in both periods, net sales rose 4.9% to
$144.6 million. On a constant-exchange-rate basis, which excludes the effect
of translating foreign-currency-denominated sales into U.S. dollars, and
excluding the previously mentioned discontinued product sales and accrual for
product returns, net sales rose 0.8%.
Adjusting for the aforementioned items and unusual items recorded in both
periods, gross margin expanded 120 basis points to 64.3% of sales compared to
63.1% of sales last year. Adjusted gross profit in the fourth quarter of
fiscal 2008 was $93.0 million versus $87.0 million last year. Without
adjustments, gross margin for this year and last year was 59.0% and 61.1%,
respectively, and gross profit for those periods was $81.8 million and $86.9
million, respectively. Adjusted operating profit was $14.2 million compared
to $15.0 million in the year-ago period. Adjusted net income was $10.8
million, or $0.40 per fully diluted share, versus $11.4 million, or $0.42 per
fully diluted share last year. Without adjustments, this year's net income
was $19.6 million, or $0.72 per fully diluted share, versus $14.0 million, or
$0.52 per fully diluted share last year.
Rick Cote, Executive Vice President and Chief Operating Officer, stated,
"In fiscal 2008, we significantly expanded our adjusted gross margins through
new product introductions and a strong international performance. Importantly,
our business remains a significant cash flow generator, with over $150 million
in cash flow from operations provided over the past two years, and we possess
a very strong balance sheet with a cash position of $170 million at fiscal
2008 year-end and a net cash position in excess of $100 million."
Mr. Grinberg concluded, "We remain focused on doing the right things for
the long-term success of our business, positioning ourselves today to emerge
even stronger when the domestic economy begins to recover. New initiatives
are in place across each of our brands for this year and we look forward to
the innovative products we plan to introduce at the Basel Watch Fair in April.
We are also very excited about our Movado brand strategy, which builds on the
strength and aspirational appeal of the brand across all channels through
product, merchandising and marketing initiatives, along with a more
streamlined distribution -- ultimately increasing productivity in remaining
locations."
Share Repurchase Program
During the fourth quarter of fiscal 2008, the Company initiated a share
repurchase program to buyback up to one million shares of the Company's common
stock to reduce or eliminate earnings per share dilution caused by the shares
of common stock issued upon the exercise of stock options and in connection
with other equity based compensation plans. As of March 27, 2008, the Company
had repurchased 599,207 shares of its common stock at an average cost of
$19.30 per share.
Fiscal 2009 Guidance
Movado Group projects fiscal 2009 net sales will be in the range of $555
million to $565 million. The Company maintains its diluted earnings per share
guidance of approximately $1.65 to $1.72, based on a projected tax rate of
24%. This guidance reflects a more cautious outlook on the U.S. economic
environment, which the Company believes could be offset by favorable foreign
exchange rates. This guidance continues to include an approximate $0.20 per
fully diluted share negative impact related to expected wholesale door
closings, certain expenses related to the Company's ERP implementation, and
severance costs to be paid as part of the Company's previously announced
Movado brand strategy. In fiscal 2008, the Company reported adjusted diluted
earnings per share of $1.71, which excludes the aforementioned net tax benefit
and the accrual for product returns.
The Company's management will host a conference call today, March 27th 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, sources, 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 and
management believes they present information regarding the Company that 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 and gross margin excluding excess
discontinued product sales and a one-time accrual for product returns
associated with the new Movado brand strategy because the Company believes
that it is useful to investors to eliminate the effect of these unusual items
in order to improve the comparability of the Company's results for the periods
presented.
The Company is also presenting adjusted operating profit, which is
operating profit excluding the impact of the product return accrual, an
accounts receivable adjustment due to a change in estimate and an out-of-
period foreign exchange adjustment. The Company is also presenting adjusted
net income (and associated per share measures) which is net income excluding
the diluted impact of the product return accrual, an accounts receivable
adjustment due to a change in estimate, an out-of-period foreign exchange
adjustment, a tax settlement with the IRS, the further utilization of NOLs
from the Ebel acquisition and a gain on a sale of artwork. Management
believes that presenting adjusted diluted earnings per share is useful for
investors because it improves 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 implement the new Movado brand
strategy, the ability of the new Movado brand strategy to improve the
Company's net sales, profitability and other results of operations, 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.
(Tables to follow)
MOVADO GROUP, INC.
Consolidated Statements of Income
(in thousands, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
January 31, January 31,
2008 2007 2008 2007
Net sales $138,567 $142,261 $559,550 $532,865
Cost of sales 56,770 55,322 222,868 209,922
Gross profit 81,797 86,939 336,682 322,943
Selling, general and
administrative expenses 78,618 71,907 285,905 270,624
Operating profit 3,179 15,032 50,777 52,319
Other income, net - 973 - 1,347
Interest expense (801) (936) (3,472) (3,785)
Interest income 1,293 1,020 4,666 3,280
Income before income taxes and
minority interest 3,671 16,089 51,971 53,161
(Benefit) / provision for income
tax (16,162) 1,841 (9,471) 2,890
Minority interest 220 199 637 133
Net income $19,613 $14,049 $60,805 $50,138
Net income per diluted share $0.72 $0.52 $2.23 $1.87
Number of shares outstanding 27,201 27,012 27,293 26,794
MOVADO GROUP, INC.
Reconciliation tables
(in thousands, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
January 31, January 31,
2008 2007 2008 2007
Operating profit (GAAP) $3,179 $15,032 $50,777 $52,319
Returns reserve provision (1) 11,000 - 11,000 -
A/R reserve adjustment (2) - - - 6,000
Out-of-period FX adjustment (3) - - - (2,211)
Adjusted operating profit (non-
GAAP) $14,179 $15,032 $61,777 $56,108
Three Months Ended Twelve Months Ended
January 31, January 31,
2008 2007 2008 2007
Net income (GAAP) $19,613 $14,049 $60,805 $50,138
Returns reserve provision (1) 6,600 - 6,600 -
A/R reserve adjustment (2) - - - 3,706
Out-of-period FX adjustment (3) - - - (1,729)
Sale of assets (4) - (524) - (524)
Tax adjustments (5) (15,430) (2,158) (20,814) (10,385)
Adjusted net income (Non-GAAP) $10,783 $11,367 $46,591 $41,206
Number of shares outstanding 27,201 27,012 27,293 26,794
Adjusted net income per share
(non-GAAP) $0.40 $0.42 $1.71 $1.54
(1) Non-cash charge to sales returns reserve due to closing of certain
wholesale doors in the U.S. The reserve represented a $15.0 million
reduction in net sales with a related $11.0 million reduction in
operating profit.
(2) Non-cash charge to accounts receivable reserve due to a change in
estimate.
(3) One-time benefit recorded for an out-of-period adjustment related to
foreign currency.
(4) Gain on sale of a non-operating asset.
(5) To present financials at a consistent 25% effective tax rate for both
periods. Actual taxes in both periods reflect the utilization of net
operating loss tax carryforwards and lower effective tax rates.
Fiscal 2008 actual taxes also include a favorable settlement of an IRS
audit.
MOVADO GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
January 31, January 31,
2008 2007
ASSETS
Cash and cash equivalents $169,551 $133,011
Trade receivables, net 94,328 111,417
Inventories 205,129 193,342
Other current assets 50,317 35,109
Total current assets 519,325 472,879
Property, plant and equipment, net 68,513 56,823
Deferred income taxes 20,024 12,091
Other non-current assets 38,354 35,825
Total assets $646,216 $577,618
LIABILITIES AND EQUITY
Current portion of long-term debt $10,000 $5,000
Accounts payable 38,397 32,901
Accrued liabilities 42,770 45,610
Deferred and current taxes payable 8,526 5,946
Total current liabilities 99,693 89,457
Long-term debt 50,895 75,196
Deferred and non-current income taxes 6,363 11,054
Other liabilities 24,205 23,087
Minority interest 1,865 443
Shareholders' equity 463,195 378,381
Total liabilities and equity $646,216 $577,618
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, Movado Group, Inc.
+1-201-267-8000
Leigh Parrish
or Stephanie Rich, both of Financial Dynamics
+1-212-850-5600, for Movado
Group, Inc.
Web site: http://www.movadogroup.com
(MOV)