Movado Group Inc (NYSE:MOV). reported its third-quarter earnings for fiscal year 2025, revealing a significant miss on earnings per share (EPS) expectations. The company's stock showed resilience, trading slightly higher in pre-market activity despite the disappointing results. Movado's actual EPS of $0.37 fell short of the forecasted $0.80, while revenue also missed expectations, coming in at $182.7 million against a forecast of $209.1 million. The stock price increased by 0.66%, reflecting a complex investor sentiment influenced by both challenges and strategic initiatives outlined in the earnings call.
Key Takeaways
- Movado's EPS of $0.37 fell short of the $0.80 forecast.
- Revenue decreased by 2.6% year-over-year to $182.7 million.
- Stock price rose by 0.66% in pre-market trading.
- U.S. market sales declined by 7.1%, while international markets grew slightly.
- A $50 million share repurchase program was announced.
Company Performance
Movado Group experienced a challenging quarter with a 2.6% decline in sales compared to the previous year. The company attributed this to a tough retail environment and increased operating expenses. Despite these challenges, Movado's international markets showed resilience, growing by 0.4%, with notable strength in India, where sales increased by 20%.
Financial Highlights
- Revenue: $182.7 million, down 2.6% year-over-year
- Earnings per share: $0.37, down from $0.77 the previous year
- Gross profit margin: 53.8%, a slight decrease from 54.5%
- Cash position: $181.5 million
Earnings vs. Forecast
Movado's EPS of $0.37 represented a 53.75% miss compared to the forecast of $0.80. This significant miss is a notable deviation from the company's historical performance, where it has typically aligned more closely with market expectations. The revenue shortfall of $26.4 million also highlights the challenges faced in the current retail climate.
Market Reaction
Despite the earnings miss, Movado's stock price increased by 0.66% in pre-market trading, closing at $20.86 the previous day. This movement may reflect investor confidence in the company's strategic initiatives, such as the share repurchase program and cost-saving measures, which aim to improve future profitability.
Company Outlook
Movado projects full-year net sales of approximately $665 million, with a gross profit margin of 54%. The company plans to focus on improving profitability in fiscal 2026, supported by new product launches and a $50 million share repurchase program.
Executive Commentary
CEO Efraim Grinberg expressed optimism, stating, "We are energized on returning the company to a higher level of profitability while improving revenue trends." CFO Sally DeMarsales emphasized the focus on fiscal 2026, noting, "As we plan for fiscal 2026, we are focused on delivering a meaningful improvement in profitability."
Q&A
During the earnings call, analysts inquired about the new share buyback program and its impact on dilution. Executives discussed low retail inventory levels and the potential for inventory rebuilding as economic conditions improve.
Risks and Challenges
- Challenging retail environment in the U.S. and Europe
- Increased operating expenses impacting profitability
- Potential supply chain disruptions affecting inventory levels
- Market saturation in key regions
- Macroeconomic pressures influencing consumer spending
This comprehensive analysis provides insight into Movado's current financial health and strategic direction, highlighting both the challenges faced and the initiatives underway to drive future growth.
Full transcript - Movado Group Inc (MOV) Q3 2025:
Conference Operator: Good day, everybody, and welcome to the Movado Group Incorporated Third Quarter Fiscal Year 2025 Earnings Conference Call. As a reminder, today's call is being recorded and may not be reproduced in full or in part without permission from the company. At this time, I would like to turn the conference over to Alison Malkin of ICR. Please go ahead.
Alison Malkin, Investor Relations, ICR: Good morning, everyone. With me on the call is Efraim Grinberg, Chairman and Chief Executive Officer and Sally DeMarsales, Executive Vice President and Chief Operating Officer and Chief Financial Officer. Before we get started, I would like to remind you of the company's safe harbor language, which I'm sure you're all familiar with. The statements contained in this conference call, which are not historical facts, may be deemed to constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual future results may differ materially from those suggested in such statements due to a number of risks and uncertainties, all of which are described in the company's filings with the SEC, which includes today's press release.
If any non GAAP financial measure is used on this call, a presentation of the most directly comparable GAAP financial measure to this non GAAP financial measure will be provided as supplemental financial information in our press release. Now, I would like to turn the call over to Efraim Grinberg, Chairman and Chief Executive Officer of Movado Group.
Efraim Grinberg, Chairman and Chief Executive Officer, Movado Group: Thank you, Alison. Welcome to Movado Group's 3rd quarter conference call. With me today is Sally DeMarsales, our COO and CFO. I will first review our overall results and our progress against our strategic initiatives and then Sallie will review our financial results in greater detail. Over the last year, we have made significant progress on a number of strategic initiatives, including the introduction of iconic new product families across our brand portfolio and revitalizing our marketing efforts and storytelling across our brands and regions.
As we began the year, we made the decision to invest in driving revenue growth and brand awareness with increased marketing spend. While net sales are down 2.9% for the year to date period, we continue to believe that the investments we've made have strengthened our brands and provide a solid foundation for growth in the coming years. Nonetheless, given the challenging environment for both our category and retailers in the U. S. And Europe and consistent with the message conveyed on our Q2 conference call, we have started to take the steps needed to drive improving financial performance.
Our focus now is on a successful holiday season and building a strong business model for next year that will reduce costs, continue our brand building initiatives, while rationalizing marketing investments, delivering on key growth opportunities such as jewelry and growth markets like India and Southeast Asia and returning North America and our Movado brand to higher levels of profitability. With $182,000,000 of cash and no debt, we continue to have a strong balance sheet and believe that our dividend is a priority to continue to return value to our shareholders. Today, we also announced that our Board of Directors approved a new $50,000,000 share repurchase plan. During the Q3, retailers continued to tightly manage inventories in both the U. S.
And Europe. The U. S. Retail environment was also further affected by the later Thanksgiving holiday and compounded by the uncertainty surrounding the election. As Election Day approached, U.
S. Digital marketing costs escalated. Post the election, we have seen those costs begin to moderate. In Movado, we began to launch our campaign featuring our new set of iconic brand ambassadors in early September and we received a lot of positive feedback from consumers. On our movado.com website, we saw our quarterly sales increased by 16.9% with both September October sales growing by over 25%.
We saw very strong performance in our Movado Bold and Heritage Watch collections, driven by new introductions. Our shipments to retail and digital partners in the U. S. And Europe were pressured by tighter inventory management. In addition, a delay in the launch of our Amazon (NASDAQ:AMZN) Premier platform also pressured sales.
This launch has now occurred and we expect a strong holiday season on their platform. As it relates to holiday, while early in the season, our newness is resonating well and our new campaign and our new marketing campaign is broadening consumer interest, which we expect to improve our trend at our retail partners. We continue to be excited about the power of this campaign and its ability to build brand image and demand. On the international front, the Movado brand continues to perform well in India, where we saw a 20% increase and believe it can become a big market for us. In our licensed brands, our sales grew by 3.8%, driven by growth in Coach (NYSE:TPR), Lacoste, Calvin Klein and Hugo Boss (ETR:BOSSn) during the Q3.
Coach has performed extremely well over the 1st 9 months of the year, driven by strong new product introductions that are resonating well with consumers, including our new Sammy collection, a unique oval collection inspired by the Coach brand's iconic turn lock and is generating demand from Gen Z consumers. For men, our automatic charter collection is a top performer and is featured with basketball superstar Jason Tatum in our holiday campaign. In Tommy Hilfiger, our sales are being led by the iconic TH85 chronograph and the new Henry family at an introductory price point for automatic watches. We continue to perform well in Tommy jewelry, especially for men with bracelets that complement our watches as well as the LUV collection offering 2 tone hearts for her. We believe that we will have an increased opportunity in Tommy Hilfiger as we increase the design quotient of our watches as we move forward.
In Hugo Boss, we have returned to growth for the quarter and the 9 months with strong sales of our iconic Time Traveler collection and the introduction of our new Boss Matic family, which has received a strong reception from consumers. Boss Matic features an automatic quartz hybrid movement. In Lacoste, we had strong sales growth, powered by our jewelry collection, which features our best selling Metropole bracelet. Metropole has been a hit since we first introduced it and it continues to grow at a double digit rate. We are also excited to have introduced our new Lacoste LC 33 collection recently.
LC33 is an Annie Digi sports watch that we're very excited about and we're already seeing a strong response from consumers in our key markets. The LC33 collection is priced at $95 Finally, in the CK brand, we grew our overall business driven by strong sales in jewelry, which we believe is a significant opportunity. We are also amplifying our women's offering of CK Watches around our new Pulse family and our already successful Twisted Bezel family. From a regional perspective, our U. S.
Business was down 7.1%, while our international markets grew by 0.4% with a decline in Europe, offset by growth in Latin America, the Middle East, India and Australia. Our Movado Company stores continue to perform at a similar pace as they did during the 1st 6 months of the year. The next few weeks are the most important selling period for our stores, which got off to a good start during Black Friday weekend. Each day is now more important than last year with the shortened period between Thanksgiving and Christmas. As we plan for next year, we believe we will have increased opportunities with fine tuning our assortments across our brand portfolios.
As a team, we recognize this year has not delivered our desired results. Together, we are energized on returning the company to a higher level of profitability while improving revenue trends. As you can see from our press release, we took some actions to begin to reduce our operating costs during the Q3, which will have a small benefit during the Q4 and a much greater benefit over the course of next year. As we build our plans for next year, we will be very disciplined in managing our variable expenses. We believe that we have additional opportunities to drive operational efficiencies and reduce costs while growing our brands.
We have a proven track record in taking bold and decisive action to drive our performance. We have a great portfolio of brands in the jewelry and watch category and believe that we are well positioned to accomplish our goals for next year. We look forward to sharing our plans with you when we announce our year end results. I would now like to turn the call over to Sallie.
Sally DeMarsales, Executive Vice President, Chief Operating Officer and Chief Financial Officer, Movado Group: Thank you, Efraim, and good morning, everyone. For today's call, I will review our financial results for the Q3 year to date period of fiscal 2025, and then I will provide an update on our outlook for the year. My comments today will focus on adjusted results. Please refer to the description of the special items included in our results for the Q3 year to date period of fiscal 2025 in our press release issued earlier today, which also includes a reconciliation table of GAAP and non GAAP measures. Overall, our performance for the Q3 of fiscal 2025 continued to be negatively impacted by a challenging environment, both in our category and by retailers in the United States and Europe.
Despite being down year over year, as Efraim mentioned, we made good progress on our strategic initiatives and maintained an extremely strong balance sheet. Turning to a review of the quarter. Sales were $182,700,000 as compared to $187,700,000 last year, a decrease of 2.6%. In constant dollars, a decrease in net sales was 3.5%. Net sales decreased across owned brands and company stores, partially offset by an increase in licensed brands.
By geography, U. S. Net sales decreased 7.1% as compared to the Q3 of last year. International net sales increased 0.4%. On a constant currency basis, international net sales decreased 1.1% with continued softening in our largest international market, Europe.
Gross profit as a percent of sales was 53.8% compared to 54.5% in the Q3 of last year. The year over year decrease in gross margin rate was primarily driven by unfavorable channel and product mix and the deleverage of higher fixed costs over lower sales. Operating expenses were $89,100,000 as compared to $81,600,000 for the same period of last year. The increase was driven by an increased investment in marketing and in payroll related costs. As a result of the reduction in sales and gross margin and the increase in operating expenses, operating income decreased to $9,300,000 as compared to $20,700,000 in the Q3 of fiscal 2024.
We recorded approximately $1,400,000 of other non operating income in the Q3 of fiscal 2025, which is primarily comprised of interest earned on our global cash position as compared to $1,500,000 during the same period of last year. We recorded income tax expense of $2,000,000 in the Q3 of fiscal 2025 as compared to $4,500,000 in the Q3 of fiscal 2024. Net income in the Q3 was $8,300,000 or $0.37 per diluted share as compared to $17,400,000 or $0.77 per diluted share in the year ago period. Now turning to our year to date results. Sales for the 9 month period ended October 31, 2024 were $478,700,000 as compared to $493,000,000 last year.
Total (EPA:TTEF) net sales decreased 2.9% as compared to the 9 month period of fiscal 2024. In constant dollars, the decrease in net sales was 3.2%. International net sales decreased 1.7 percent or 2.3 percent on a constant currency basis. U. S.
Net sales declined by 4.5%. Gross profit was $260,300,000 or 54 0.4 percent of sales as compared to $273,600,000 or 55.5 percent of sales last year. The decrease in gross margin rate for the 1st 9 months was primarily due to unfavorable channel and product mix and the deleverage of higher fixed costs on lower sales. For the 9 months ended October 31, 2024, operating income was $15,600,000 as compared to $41,200,000 in fiscal 2024. We recorded approximately $5,200,000 of other non operating income in the 9 month period of fiscal 2025, which is primarily comprised of interest earned on our global cash position as compared to $3,800,000 during the same period of last year.
Net income was $14,900,000 or $0.66 per diluted share as compared to $34,600,000 or $1.53 per diluted share in the year ago period. Now turning to our balance sheet. Cash at the end of the 3rd quarter was $181,500,000 as compared to $201,000,000 at the same period of last year. Accounts receivable was $139,200,000 up 2.7% from the same period of last year due to timing and mix of business. Inventory at the end of the quarter was down $3,000,000 from the same period of last year and aligned with our sales performance.
In the 1st 9 months of fiscal 2025, capital expenditures were $6,400,000 and we repurchased approximately 120,000 shares under our share repurchase program. This morning, we also announced that the Board of Directors approved a new 3 year $50,000,000 share buyback program. The previous share buyback program had expired on November 23, 2024. I would now like to discuss our outlook. As Efraim mentioned, we continue to operate in a challenging environment, especially for our category and in our key markets of the United States and Europe.
Our net sales are currently expected to be approximately $665,000,000 which reflects the low end of our previous guidance range. We expect gross profit of approximately 54 percent of sales for the year. As previously discussed, we are taking action to reduce our operating expenses and are managing our discretionary spending. We therefore expect operating income of approximately $23,000,000 also at the low end of our previous guidance. We continue to anticipate a 25% effective tax rate with expected earnings of $0.90 per diluted share.
As we plan for fiscal 2026, we are focused on delivering a meaningful improvement in profitability as compared to our expected outlook for fiscal 2025. This expectation includes $6,500,000 in annualized savings from the cost savings initiatives taken this most recent quarter. I would now like to open the call up for questions.
Conference Operator: Thank you. We will now be conducting a question and answer Our first question comes from the line of Michael Legg with The Benchmark Company. Please proceed with your question.
Michael Legg, Analyst, The Benchmark Company: Thanks. Good morning. On the new stock buyback authorization, is there any change to your usage of it as far as being active in stock buyback versus just offsetting dilution?
Efraim Grinberg, Chairman and Chief Executive Officer, Movado Group: Right now, it's focused on offsetting dilution. And then as we hopefully will generate more cash, we're open to change that as well.
Conference Operator: Okay. And
Michael Legg, Analyst, The Benchmark Company: then you mentioned that inventory levels at retail are light. Can you talk about historic when you see trends reverse that are easing indicators in both
Efraim Grinberg, Chairman and Chief Executive Officer, Movado Group: You've gotten quiet, Mike. It's gone very quiet.
Michael Legg, Analyst, The Benchmark Company: Can you hear me now?
Efraim Grinberg, Chairman and Chief Executive Officer, Movado Group: Yes. I can hear you.
Michael Legg, Analyst, The Benchmark Company: Okay. So retail inventory levels, you mentioned were light. Can you talk about any leading indicators that you've seen in the past as when purchasing trends change and how lead time you have with and any other leading indicators you look for positive consumer behavior? Thanks.
Efraim Grinberg, Chairman and Chief Executive Officer, Movado Group: Sure. So I think the inventory levels now are pretty getting to a historically low level in both the U. S. And Europe, which are the 2 markets for us that are the most developed and the markets that are most sensitive and focused on that. Historically, as the economic environment improves and retail improves, I think that we've seen a bounce back and an openness to rebuild inventories as retailers realize that they're losing sales.
I think one of the differences in the dynamic today is that people have built e commerce businesses that carry less inventory than in store businesses. But in really no cases is the dotcombusinessmorethan20% to 25% of a retailer's overall business.
Michael Legg, Analyst, The Benchmark Company: Okay. Thank you.
Conference Operator: Thank you. And we have reached the end of the question and answer session. I'll now turn the floor back to Efrain Greenberg for closing remarks.
Efraim Grinberg, Chairman and Chief Executive Officer, Movado Group: Okay. Thank you. Thank you very much for being with us on the call today. I am optimistic about the category overall, beginning to see improvements in the future. But we are really focused as a company of continuing to focus on what we can control and very focused on driving down our expenses next year as a company and returning to an acceptable level of profitability.
With that, I'd like to wish everybody a great holiday season and wish you all the best. So thank you very much.
Conference Operator: This concludes today's conference and you may disconnect your lines at this time.
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