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FinancialsNov 26, 2019
Movado’s Q3 US Sales Sink 12%
Challenges “intensified” within the watch category and retail landscape, CEO Efraim Grinberg said.
The updated Movado Connect 2.0, released in the fall, performed well in the third quarter, the company said.
Paramus, N.J.—Movado Group fell short of revenue expectations in its third quarter, lowering its forecast for the year ahead.
Third-quarter net sales fell 2 percent to $205.6 million, compared with $208.9 million a year ago, below the $220 million analysts had expected.
The New Jersey-based company’s shares plummeted double digits in pre-market trading Wednesday.
Watch and accessories sales totaled $185.6 million in the third quarter, compared with $189.4 million a year ago.
“The decrease in overall sales was driven by a decline in our owned brands,” Chief Financial Officer Sallie DeMarsilis said on the company’s earnings call Wednesday morning.
Licensed brands and retail outlets saw a slight year-over-year increase in sales.
Sales in Movado’s U.S. watch and accessories segment decreased 12 percent to $66.3 million, down from $75 million last year, with the decrease driven by both licensed and owned brands.
Internationally, sales grew 4 percent to $119.3 million, compared with $114.3 million last year, with the strongest sales growth in Europe and the Middle East.
Sales from the company’s stores increased 2 percent. Movado has 46 outlet locations, two more than last year.
Gross profit was $110.1 million, or 54 percent of net sales, compared with $113.4 million, or 54 percent of net sales, in the third quarter last year.
CEO Efraim Grinberg attributed the third-quarter decline in part to the company’s boost in marketing investments, including a holiday television campaign for Movado, set to air next week, and the first national television campaign for its recently acquired MVMT brand, which launched this week.
The company spent $7.3 million more in marketing in this quarter than it did last year and expects to invest an additional $30 million by the end of the year, he noted on the earnings call.
“While this effort led to market share gains, we fell short of our sales plan due to the category performing below our expectations as challenges intensified within the watch category and retail landscape, which, combined with our increased marketing expenditures, impacted our results,” he said in a press release announcing the results.
Grinberg said while the U.S. wholesale business continues to impact Movado’s results, the company still holds the leading position within the $500 to $1,500 price category in the U.S.
“While the category and channel has been challenged, we see an opportunity to further enhance our position in watches between $1,000 and $3,000,” he said.
Sales of licensed brands, meanwhile, have grown 6 percent to date this
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year, said Grinberg, noting strong growth in Tommy Hilfiger, Lacoste and Coach.
Coach will be launching a new men’s line in time for the holiday season while Hugo Boss recently debuted its “Land, Air, and Sea” collection.
Among owned brands, Movado Bold and Fusion performed well as did the Movado Connect 2.0, an updated version of its smartwatch.
Looking ahead, the company lowered its outlook for fiscal 2020 to reflect its lower-than-expected results to-date as well as “the challenging watch category and retail environment, and currency headwinds.”
The company now expects net sales to be in the range of $690 million to $700 million compared with its previous guidance of $725 million to $740 million.
Coach will be launching a new men’s line in time for the holiday season while Hugo Boss recently debuted its “Land, Air, and Sea” collection.
Among owned brands, Movado Bold and Fusion performed well as did the Movado Connect 2.0, an updated version of its smartwatch.
Looking ahead, the company lowered its outlook for fiscal 2020 to reflect its lower-than-expected results to-date as well as “the challenging watch category and retail environment, and currency headwinds.”
The company now expects net sales to be in the range of $690 million to $700 million compared with its previous guidance of $725 million to $740 million.
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