~ First Quarter Revenue of $99.3 Million
~
~ Reiterates Fiscal 2018 Outlook ~
~ Board Declares Quarterly Dividend
~
Movado Group, Inc. (NYSE:MOV) today announced first quarter
results for the period ended April 30, 2017.
Efraim Grinberg, Chairman and Chief Executive Officer, stated,
“For the first quarter, we reported sales and operating earnings
consistent with our expectations reflecting a very challenging
store traffic environment in the United States which has retailers
focused on reducing their inventory. We recognized this trend early
in our planning cycle and mitigated this impact through decisive
actions to significantly reduce our planned operating expenses for
the year. As we look to the balance of the year, we continue to
anticipate a challenging U.S. retail marketplace and expect modest
growth in our international markets. We are excited about our
upcoming launches including our expansion of the Movado Heritage
collection, the introduction of Movado Connect, our smart watch
powered by Google’s Android Wear, and the launch of our Rebecca
Minkoff watch collection. Our strategy is to focus on designing
unique and compelling products across our brands while investing in
our digital marketing and eCommerce initiatives to enable us to
navigate the evolving retail landscape.”
In the first quarter of fiscal 2018, the Company recorded a $6.3
million pre-tax charge, with a related tax benefit of $1.9 million,
or $0.19 per diluted share, related to its previously announced
cost savings initiatives. The first quarter of fiscal 2018
benefited only partially from the cost savings initiatives which
began to take effect during the latter part of the period. The
first quarter therefore included approximately $2.0 million, or
$0.06 per diluted share, of expenses that would not have been
incurred had the initiatives begun on February 1, 2017. In the
first quarter of fiscal 2017, the Company recorded a $1.8 million
pre-tax charge, with a related tax benefit of $0.7 million, or
$0.05 per diluted share, for the immediate vesting of stock awards
and certain other compensation related to the announcement of the
retirement of Rick Coté, the Company’s former Vice Chairman and
Chief Operating Officer, in fiscal 2017 (“COO’s retirement”).
First Quarter Fiscal 2018 Results (see
attached table for GAAP and non-GAAP measures)
- Net sales were $99.3 million compared
to $114.1 million in the first quarter of last year, a decrease of
13.0%. Net sales on a constant dollar basis decreased 11.0%
compared to net sales for the first quarter of fiscal 2017.
- Gross profit was $49.1 million, or
49.5% of sales, compared to $61.3 million, or 53.8% of sales, in
the first quarter last year. Adjusted gross profit for the first
quarter of fiscal 2018, which excludes $1.4 million in charges
related to a portion of the cost savings initiatives, was $50.5
million, or 50.9% of sales. The decrease in adjusted gross margin
percentage was primarily the result of channel and product mix as
well as the unfavorable impact of changes in foreign currency
exchange rates and reduced leverage of certain fixed costs as a
result of lower net sales.
- Operating expenses were $52.8 million,
compared to $55.9 million in the first quarter of last year. For
the first quarter of fiscal 2018, adjusted operating expenses were
$47.9 million, which excludes $4.9 million of expenses related to a
portion of the cost savings initiatives. For the first quarter of
fiscal 2017, adjusted operating expenses were $54.1 million, which
excludes $1.8 million of expenses related to the COO’s retirement
in fiscal 2017. The decrease in adjusted operating expenses was
primarily the result of decreased marketing expenses and the
favorable effect of fluctuations in foreign currency rates, as well
as decreased selling and other operating costs.
- Operating loss was $3.6 million,
compared to operating income of $5.4 million in the same period
last year. Adjusted operating income for the first quarter of
fiscal 2018, which excludes $6.3 million of expenses related to
cost savings initiatives, was $2.7 million. Adjusted operating
income for the first quarter of fiscal 2017, which excludes $1.8
million of expenses related to the COO’s retirement in fiscal 2017,
was $7.2 million.
- The Company recorded a tax provision of
$0.3 million, compared to a tax provision of $1.7 million in the
first quarter last year. The first quarter fiscal 2018 tax
provision included a $1.0 million, or $0.04 per share, discrete tax
item from the adoption of the new pronouncement for accounting for
share-based payments. Based upon adjusted pre-tax income, the
adjusted tax provision for income tax was $2.2 million, compared to
an adjusted tax provision for income tax of $2.4 million in the
first quarter of fiscal 2017.
- Net loss was $4.2 million, or a loss of
$0.18 per diluted share, compared to net income of $3.3 million, or
$0.14 per diluted share, in the same quarter last year. For the
first quarter of fiscal 2018, adjusted net income was $0.3 million,
or $0.01 per diluted share, which excludes $4.4 million of
expenses, net of $1.9 million of tax, related to the cost savings
initiatives in fiscal 2018, compared to adjusted net income of $4.4
million, or $0.19 per diluted share, which excludes $1.1 million of
expenses, net of $0.7 million of tax, related to the COO’s
retirement in fiscal 2017.
Fiscal 2018 Outlook
The Company is reiterating its outlook for fiscal 2018. In
fiscal 2018, the Company anticipates that net sales will be in a
range of $515.0 million to $530.0 million and operating income will
be approximately $50.0 million to $55.0 million. The Company
anticipates net income in fiscal 2018 to be approximately $33.0
million to $36.3 million, or $1.40 to $1.55 per diluted share,
reflecting a 32% anticipated effective tax rate. The Company's
outlook also assumes no further significant fluctuations from
prevailing foreign currency exchange rates.
This outlook excludes the $7.0 million to $10.0 million pre-tax
charge related to cost savings initiatives in fiscal 2018, of which
$6.3 million was recorded in the first quarter. The Company
continues to expect to realize approximately $12.0 million of
savings in fiscal 2018 and estimates approximately $15.0 million in
on-going annual pre-tax savings from these initiatives, with the
majority being in general and administrative expenses.
Quarterly Dividend and Share Repurchase
Program
The Company announced on May 25, 2017, that the Board of
Directors approved the payment on June 20, 2017 of a cash dividend
in the amount of $0.13 for each share of the Company’s outstanding
common stock and class A common stock held by shareholders of
record as of the close of business on June 6, 2017.
During the first quarter of fiscal 2018, the Company repurchased
44,000 shares under its share repurchase program. As of April 30,
2017, $4.9 million was utilized of the current $50.0 million share
repurchase authorization.
Conference Call
The Company’s management will host a conference call and audio
webcast to discuss its results today, May 25th at 9:00 a.m. Eastern
Time. The conference call may be accessed by dialing (888)
437-9445. Additionally, a live webcast of the call can be accessed
at www.movadogroup.com. The webcast will be archived on the
Company’s website approximately one hour after the conclusion of
the call. Additionally, a telephonic replay of the call will be
available at 12:00 p.m. ET on May 25, 2017 until 11:59 p.m. ET on
June 1, 2017 and can be accessed by dialing (844) 512-2921 and
entering replay pin number 7745601.
Movado Group, Inc. designs, sources, and distributes Movado,
EBEL, Concord, Coach, HUGO BOSS, Lacoste, Juicy Couture, Tommy
Hilfiger and Scuderia Ferrari brand watches worldwide and Rebecca
Minkoff brand watches beginning in summer of 2017.
In this release, the Company presents certain financial measures
that are not calculated according to generally accepted accounting
principles in the United States (“GAAP”). Specifically, the Company
is presenting adjusted gross profit, adjusted gross margin,
adjusted operating expenses and adjusted operating income, which
are gross profit, gross margin, operating expenses and operating
income, respectively, under GAAP, adjusted to eliminate charges for
the cost savings initiatives and the COO’s retirement. The Company
is also presenting adjusted tax provision, which is the tax
provision under GAAP, adjusted to eliminate charges for the cost
savings initiatives and the COO’s retirement. The Company believes
these adjusted measures are useful because they give investors
information about the Company’s financial performance without the
effect of certain items that the Company believes are not
characteristic of its usual operations. The Company is also
presenting adjusted net income, adjusted earnings per share and
adjusted effective tax rate, which are net income, earnings per
share and effective tax rate, respectively, under GAAP, adjusted to
eliminate the after-tax impact of the charges for the cost savings
initiatives and COO’s retirement. The Company believes that
adjusted net income, adjusted earnings per share and adjusted
effective tax rate are useful measures of performance because they
give investors information about the Company’s financial
performance without the effect of certain items that the Company
believes are not characteristic of its usual operations.
Additionally, the Company is presenting constant currency
information to provide a framework to assess how its business
performed excluding the effects of foreign currency exchange rate
fluctuations in the current period. Comparisons of financial
results on a constant dollar basis are calculated by translating
each foreign currency at the same US dollar exchange rate as in
effect for the prior-year period for both periods being compared.
The Company believes this information is useful to investors to
facilitate comparisons of operating results. These non-GAAP
financial measures are designed to complement the GAAP financial
information presented in this release. The non-GAAP financial
measures presented should not be considered in isolation from or as
a substitute for the comparable GAAP financial measures, and the
methods of their calculation may differ substantially from
similarly titled measures used by other companies.
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 variations of such words 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 general economic and business conditions
which may impact disposable income of consumers in the United
States and the other significant markets (including Europe) where
the Company’s products are sold, uncertainty regarding such
economic and business conditions, trends in consumer debt levels
and bad debt write-offs, general uncertainty related to possible
terrorist attacks, natural disasters, the stability of the European
Union (including the impact of the June 23, 2016 referendum
advising that the United Kingdom exit from the European Union) and
defaults on or downgrades of sovereign debt and the impact of any
of those events on consumer spending, changes in consumer
preferences and popularity of particular designs, new product
development and introduction, the ability of the Company to
successfully implement its business strategies, competitive
products and pricing, the impact of “smart” watches and other
wearable tech products on the traditional watch market,
seasonality, availability of alternative sources of supply in the
case of the loss of any significant supplier or any supplier’s
inability to fulfill the Company’s orders, the loss of or curtailed
sales to significant customers, the Company’s dependence on key
employees and officers, the ability to successfully integrate the
operations of acquired businesses without disruption to other
business activities, the continuation of the company’s major
warehouse and distribution centers, the continuation of licensing
arrangements with third parties, losses possible from pending or
future litigation, the ability to secure and protect trademarks,
patents and other intellectual property rights, the ability to
lease new stores on suitable terms in desired markets and to
complete construction on a timely basis, the ability of the Company
to successfully manage its expenses on a continuing basis,
information systems failure or breaches of network security, the
continued availability to the Company of financing and credit on
favorable terms, business disruptions, disease, general risks
associated with doing business outside the United States including,
without limitation, import duties, tariffs, quotas, political and
economic stability, changes to existing laws or regulations, and
success of hedging strategies with respect to currency exchange
rate fluctuations, 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. The Company assumes no duty to update its
forward looking statements and this release shall not be construed
to indicate the assumption by the Company of any duty to update its
outlook in the future.
MOVADO GROUP, INC. CONSOLIDATED STATEMENTS OF
OPERATIONS (In thousands, except per share data)
(Unaudited) Three
Months Ended April 30, 2017
2016 Net sales $ 99,265 $ 114,063
Cost of sales 50,128 52,746
Gross profit 49,137 61,317 Operating expenses 52,785
55,939 Operating (loss) / income (3,648
) 5,378 Interest expense (356 ) (375 ) Interest income
122 57 (Loss) / Income before
income taxes (3,882 ) 5,060 Provision for income taxes
277 1,723 Net (loss) / income
(4,159 ) 3,337 Less: Net income attributed to noncontrolling
interests - 29 Net (loss) /
income attributed to Movado Group, Inc. ($4,159 ) $ 3,308
Per Share Information: Net (loss) / income
attributed to Movado Group, Inc. ($0.18 ) $ 0.14 Weighted diluted
average shares outstanding 23,075* 23,349 *Calculated using
basic weighted average shares as common stock equivalents would be
anti-dilutive.
MOVADO GROUP, INC. GAAP AND NON-GAAP
MEASURES (In thousands, except for percentage data)
(Unaudited) As
Reported % Change Three Months Ended %
Change Constant April 30, As
Reported Dollar 2017
2016 Total Net sales $ 99,265 $ 114,063
-13.0 % -11.0 %
MOVADO GROUP, INC. GAAP AND NON-GAAP
MEASURES (In thousands, except per share data)
(Unaudited) Net
(Loss) / Income Attributed to Movado Group, Inc. Net
Sales Gross Profit Operating (Loss) / Income
Pre-tax (Loss) / Income Provisions for Income Taxes
EPS Three Months Ended April 30, 2017 As Reported
(GAAP) $ 99,265 $ 49,137 ($3,648 ) ($3,882 ) $ 277 ($4,159 )
($0.18 ) Cost Savings Initiatives (1) - 1,402
6,334 6,334 1,917 4,417
0.19
Adjusted Results (Non-GAAP) $ 99,265 $
50,539 $ 2,686 $ 2,452 $ 2,194 $ 258 $ 0.01
Three Months Ended April 30, 2016 As
Reported (GAAP) $ 114,063 $ 61,317 $ 5,378 $ 5,060 $ 1,723 $
3,308 $ 0.14 Retirement Charge (2) - - 1,806
1,806 686 1,119
0.05
Adjusted Results (Non-GAAP) $ 114,063 $ 61,317 $
7,184 $ 6,866 $ 2,409 $ 4,427 $ 0.19
(1 )
Related to a charge for severance and
payroll related, other expenses and occupancy expenses.
(2 ) Related to a charge for the retirement of the former Vice
Chairman and Chief Operating Officer.
MOVADO GROUP, INC.
CONSOLIDATED BALANCE SHEETS (In thousands)
(Unaudited)
April 30, January 31,
April 30, 2017 2017
2016
ASSETS
Cash and cash equivalents $ 233,594 $ 256,279 $ 203,909
Trade receivables, net 66,457 66,847 75,771 Inventories 160,376
153,167 178,388 Other current assets 32,555 28,487
36,472 Total current assets 492,982 504,780
494,540 Property, plant and equipment, net 31,962
34,173 37,247 Deferred and non-current income taxes 24,864 24,837
20,697 Other non-current assets 45,233 44,012
41,578 Total assets $ 595,041 $ 607,802 $ 594,062
LIABILITIES AND
EQUITY
Loans payable to bank, current $ 5,000 $ 5,000 $ - Accounts
payable 22,981 27,192 27,677 Accrued liabilities 37,530 35,061
37,191 Income taxes payable 1,349 4,149 893
Total current liabilities 66,860 71,402 65,761
Loans payable to bank 25,000 25,000 35,000 Deferred and
non-current income taxes payable 3,312 3,322 3,008 Other
non-current liabilities 35,349 34,085 30,875 Noncontrolling
interests - - 632 Shareholders' equity 464,520
473,993 458,786 Total liabilities and equity $ 595,041 $
607,802 $ 594,062
MOVADO GROUP, INC. CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
(Unaudited) Three Months Ended April
30, 2017 2016
Cash flows from operating activities: Net (loss) / income
($4,159 ) $ 3,337 Depreciation and amortization 2,885 2,901 Other
non-cash adjustments 826 2,948 Cost savings initiatives 6,334 -
Changes in working capital (22,229 ) (29,167 ) Changes in
non-current assets and liabilities (211 ) (1,103 )
Net cash (used in) operating activities
(16,554 ) (21,084 )
Cash flows from investing activities: Capital expenditures
(397 ) (538 ) Restricted cash deposits - (1,070 ) Short-term
investment - (156 ) Trademarks and other intangibles (40 )
(226 )
Net cash (used in) investing activities
(437 ) (1,990 ) Cash
flows from financing activities: Repayments of bank borrowings
- (5,000 ) Dividends paid (2,982 ) (2,983 ) Stock repurchase (1,028
) (943 ) Other financing (692 ) (1,204 )
Net cash
(used in) financing activities (4,702 )
(10,130 ) Effect of exchange rate
changes on cash and cash equivalents (992 ) 8,925 Net change in
cash and cash equivalents (22,685 ) (24,279 ) Cash and cash
equivalents at beginning of period 256,279
228,188
Cash and cash equivalents at end of
period $ 233,594 $ 203,909
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ICR, Inc.Rachel Schacter/Allison Malkin, 203-682-8200
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