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Movado Group, Inc. (NYSE:MOV): A Watchmaker Investing for Long-Term Growth
Published on September 24, 2024 | Ticker: MOV

Movado Group, Inc. (NYSE:MOV) is a leading global watchmaking company with a portfolio of renowned watch brands and accessories. The company has a rich history dating back to 1881 when it was founded in La Chaux-de-Fonds, Switzerland. Today, Movado Group's brands are displayed in over 20 museums around the world, showcasing its commitment to design excellence and innovation.

Business Overview

Movado Group operates in two main segments: Watch and Accessory Brands, and Company Stores. The Watch and Accessory Brands segment includes the designing, manufacturing, and distribution of watches, jewelry, and other accessories under both owned and licensed brands. The Company Stores segment encompasses the company's retail outlet business.

Financials

In the fiscal year ended January 31, 2024, Movado Group reported annual revenue of $672.6 million and net income of $46.7 million. The company generated $76.8 million in annual operating cash flow and $68.4 million in free cash flow. These strong financial results demonstrate Movado Group's ability to generate consistent profitability and cash flow, even in challenging market conditions.

For the first quarter of fiscal 2025, which ended on April 30, 2024, Movado Group reported net sales of $136.7 million, down 5.7% from the prior year period. Operating income for the quarter was $3.3 million, compared to $10.9 million in the same period last year. The decrease in sales and profitability was primarily due to lower demand in the company's wholesale channels, both in the United States and internationally, partially offset by growth in the company's e-commerce business.

Outlook

Despite the near-term headwinds, Movado Group remains focused on its long-term growth strategy. The company is investing significantly in marketing and brand-building initiatives to drive increased consumer demand for its portfolio of watch and accessory brands. This includes a major advertising campaign for the Movado brand, set to launch in the fall of 2024, as well as the introduction of new product collections like the successful Movado Bold Quest line.

In the Watch and Accessory Brands segment, the company's owned brands, such as Movado, Concord, and Olivia Burton, generally earn higher gross margins than the licensed brands, which include Coach, Tommy Hilfiger, and Calvin Klein. Movado Group is working to strengthen its owned brand portfolio, which accounted for 33.4% of total revenue in the first quarter of fiscal 2025.

Geographically, Movado Group generates the majority of its revenue from international markets, with the United States accounting for 40.7% of total revenue in the first quarter. The company is focused on returning the Movado brand to growth in the United States, while also aiming to restore growth in its licensed brand portfolio in Europe.

Looking ahead, Movado Group provided guidance for fiscal 2025, expecting net sales in the range of $700 million to $710 million, gross margin of approximately 55%, and earnings per diluted share between $1.20 and $1.30. This guidance reflects the company's increased investment in marketing and brand-building initiatives, which are expected to drive long-term top-line growth, despite near-term pressure on profitability.

Liquidity

Movado Group's strong balance sheet and cash position, with $225.4 million in cash and no debt as of April 30, 2024, provide the company with the financial flexibility to execute its strategic growth plan. The company also remains committed to returning capital to shareholders, having paid $7.8 million in dividends during the first quarter of fiscal 2025 and maintaining a $16.8 million share repurchase authorization.

Conclusion

While the current retail environment remains challenging, Movado Group's focus on innovation, brand-building, and strategic investments positions the company well for long-term success. The company's diverse portfolio of owned and licensed watch and accessory brands, coupled with its strong financial foundation, make Movado Group an intriguing player in the dynamic apparel, accessories, and luxury goods industry.

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