Financials

Movado Inks Deal with Calvin Klein

FinancialsAug 28, 2020

Movado Inks Deal with Calvin Klein

The watch company also released its second-quarter results, posting a 44 percent drop in sales.

A Movado Connect 2.0 smartwatch. The company also announced its second-quarter results, seeing sales decline across its owned and licensed watch brands.

Paramus, N.J.—Movado Group signed a licensing agreement with Calvin Klein to create a new line of watches and jewelry.

The five-year deal will begin in January 2022.

The company already partners with owner PVH Corp. on its Tommy Hilfiger licensed brand.

Calvin Klein was on the lookout for a partnership after the end of its 22-year-long licensing deal with Swatch Group.

Swatch chose to let the licensing agreement expire in October 2019, citing “turbulence and uncertainties at the management level,” which included office closings, layoffs and changes to executive management.

PVH Corp. said in a statement the decision to end the long-standing agreement was mutual as “both partners believe that they have been unable to achieve the maximum potential in key markets.”

Movado CEO Efraim Grinberg said in a press release the company is “thrilled” to partner with Calvin Klein.

“The Calvin Klein brand has tremendous global awareness, with a significant online presence and a footprint that spans the world,” he said.

The billion-dollar brand was founded in 1968 by Calvin Klein and his business partner Barry Schwartz and acquired by PVH Corp. in 2003.

Movado has plans for men’s and women’s watch collections, offering Swiss-made and fashion watches featuring “modern designs with a clean aesthetic.”

The company will take a “refined and minimal” approach to its jewelry, working with stainless steel, rose and yellow gold plating.

“The watch and jewelry categories are important businesses for Calvin Klein, and we are optimistic about the potential growth the category holds,” said Cheryl Abel-Hodges, CEO of Calvin Klein, in a press release.

The collections are expected to debut in spring 2022.

The price points will be in the $150 to $500 range, Grinberg estimated during an earnings call Thursday.

“What we’re also really excited about is that it includes both watches and jewelry, and jewelry for us is a growth opportunity,” Grinberg said.

The company sells jewelry through its Tommy Hilfiger, Hugo Boss, Olivia Burton, MVMT and Movado brands.

The news of the Calvin Klein collaboration followed the announcement of Movado’s second-quarter results.

The watch company posted a steep drop in overall sales due to the impact of COVID-19 but looked to online sales as a bright spot.

Net sales in the second quarter fell 44 percent to $88.5 million, compared with $157.8 million a year ago.

In the first half, net sales were down 48 percent to $158.2 million compared with $304.4 million a year ago.

Quarterly gross profit was down 48 percent to $45.4 million,

or 51 percent of sales, compared to $85.3 million, or 54 percent of sales, in the second quarter last year, which Movado attributed the “unfavorable changes” in channel and product mix, foreign currency exchange rates, and U.S. special tariffs.

Year-to-date gross profit was $80.8 million, or 51 percent of sales, as compared to $164.4 million, or 54 percent, of sales last year, attributed to similar reasons.

Following temporary store closures due to COVID-19, its outlet stores in North America reopened in June.

Though all stores are open now, they were closed for most of the quarter, which ended July 31, Chief Financial Officer Sallie DeMarsilis noted during the earnings call.

Movado said it has seen sequential improvements in July despite operating with reduced store hours.

Sales declined across all segments, including owned brands, licensed brands and company stores, both in the U.S. and internationally.

Online sales were strong, Movado said, posting a 130 percent increase in its own and third-party e-commerce sales.

Grinberg said the company is “focused on reaching consumers in an increasingly digital environment, wherever they choose to shop.”

He forecast future digital growth through its own e-commerce, wholesale partners and global digital marketplaces, highlighting Amazon’s growth in Europe and the growth of Zalando, a Berlin-based fashion and lifestyle ecommerce platform.

Looking at the U.S., Grinberg noted department stores are doing especially well since many have street-side entrances at malls and a strong digital presence.

Internationally, Movado’s retail performance varies, he said. Germany and France are close to normal and the U.K. is making progress while Latin America and India are more challenging markets.

Quarterly sales in China were up 16 percent, as both digital and physical sales performed well.

As for its brands, both owned and licensed, the company has new things in the works.

This includes the Movado Museum SE, a luxury sports collection starting at $995, starring in a holiday television campaign ad, while the Movado jewelry collection will expand and include online exclusives.

MVMT, acquired by Movado in 2018, will launch the Legacy Slim collection, with a starting price of $115.

It will also offer the Minimal Sport Automatic, a limited-edition 500-piece collection and the most expensive watch the brand has offered at $350.

The new Tommy Hilfiger Mason collection will give a sporty look with branded rubber straps, and the Hugo Boss brand will introduce the Globetrotter 46 mm athleisure chronograph collection, marked by bold pops of color.

Coach will introduce Arden, a new design with its signature “C” on the crown, and the C001, a new analog digital watch for men, which will be promoted by a social media campaign.

Lacoste Boston is the new sporty collection with the classic Lacoste green dial.

Looking at the company’s financials, Grinberg pointed to the company’s recent restructuring, which included cost-cutting measures like employee layoffs and reduced expenditures, as the reason the company is well-positioned to withstand the current challenges.

The company reduced its headcount by 24 percent, Grinberg said.

It expects to see $90 million in cost savings in the fiscal year.

“As we look to the remainder of the year, we continue to expect improving sales trends in the second half relative to the first half with improved profitability, and we will continue to be disciplined and agile in managing the business given the continued uncertainty,” Grinberg said.

Movado will not provide financial guidance for the year ahead, due to the “dynamic nature of the COVID-19 crisis and lack of visibility.”
Lenore Fedowis the associate editor, news at National Jeweler, covering the retail beat and the business side of jewelry.

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