~ Full Year Diluted EPS of $1.51 and
Adjusted Full Year Diluted EPS of $1.59 ~
~ Announces Cost Savings Initiatives
~
~ Introduces Fiscal 2018 Outlook ~
~ Board Approves Regular Quarterly Dividend
~
Movado Group, Inc. (NYSE:MOV) today announced fourth quarter and
fiscal year 2017 results for the periods ended January 31,
2017.
Efraim Grinberg, Chairman and Chief Executive Officer, stated,
“In a challenging holiday selling season, we were pleased to see
our brands outperform the overall watch category in key markets
around the world and to have delivered on our annual revenue and
earnings targets. Our global teams executed well against our
strategies that are centered on delivering innovative and
beautifully designed watches. Notably, our Ultra Slim collections
across our portfolio and the relaunch of our iconic Movado
Esperanza during the holidays resonated well with consumers. We
also managed our expenses very well during the quarter while
continuing to invest in our global brand building initiatives.”
Mr. Grinberg continued, “Looking at fiscal 2018, we anticipate
the retail environment will remain difficult. We are seeing a
significant shift from brick and mortar to e-commerce and a
continuing challenged fashion watch market in the United States. As
a result, we are taking a more conservative view for fiscal 2018
compared to fiscal 2017 and are implementing certain cost savings
initiatives. Given the evolution of the retail market place, we are
consolidating certain operations and shifting a greater portion of
our investment into the continued development and growth of our
digital footprint, including allocating a larger percentage of our
marketing budget to online venues. While we believe in the
continued growth potential of the traditional watch category, we
are also excited about our recently announced partnership with
Google to launch a new smartwatch collection, Movado Connect. We
remain committed to our strategy which we believe positions us to
deliver sustained profitable long-term growth and increase
shareholder value through our strong balance sheet.”
The Company recorded no unusual items during the fourth quarter
of fiscal 2017. During the third quarter of fiscal 2017, the
Company recorded a charge to non-operating expense of $0.9 million,
net of tax of $0.4 million, or $0.03 per diluted share, for an
impairment of a long-term investment in a privately held company.
During the first quarter of fiscal 2017, the Company recorded a
$1.1 million charge, net of tax 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 (“COO’s retirement”). During the fourth
quarter of fiscal 2016, the Company recorded a $1.3 million charge,
or $0.06 per diluted share, related to operating efficiency
initiatives and other items. During the first quarter of fiscal
2016, the Company recorded a $2.5 million charge, net of tax of
$0.2 million, or $0.10 per diluted share, also related to operating
efficiency initiatives and other items.
Fourth Quarter Fiscal 2017 Results (See
attached table for GAAP and non-GAAP measures)
- Net sales decreased 8.7% to $130.8
million compared to $143.3 million in the fourth quarter of fiscal
2016. Net sales on a constant dollar basis decreased 7.5% compared
to net sales in the fourth quarter of fiscal 2016.
- Gross profit was $64.7 million, or
49.5% of sales, compared to $75.4 million, or 52.6% of sales in the
same period last year. Adjusted gross profit for the fourth quarter
of fiscal 2016, which excludes a $0.1 million adjustment in
expenses related to operating efficiency initiatives and other
items, was $75.3 million, or 52.5% of sales. The decrease in
adjusted gross margin percentage was primarily driven by an
unfavorable shift in channel and product mix, partially offset by
the favorable impact of changes in foreign currency exchange
rates.
- Operating expenses decreased $6.6
million or 10.3% to $57.2 million in the fourth quarter of fiscal
2017 from $63.8 million in the fourth quarter last year. For the
fourth quarter of fiscal 2016, adjusted operating expenses were
$62.4 million, which excludes $1.4 million of expenses related to
operating efficiency initiatives and other items. The decrease in
adjusted operating expenses was primarily the result of lower
performance based compensation and payroll related expenses, the
favorable impact of foreign currency exchange rates and a decrease
in other operating expenses, partially offset by higher marketing
expenses.
- Operating income in the fourth quarter
was $7.4 million compared to operating income of $11.5 million in
the prior year period. Adjusted operating income for the fourth
quarter of fiscal 2016, excluding $1.3 million of expenses related
to operating efficiency initiatives and other items, was $12.9
million.
- The tax provision was $1.9 million
compared to both a tax provision and an adjusted tax provision of
$2.9 million in the fourth quarter of fiscal 2016.
- Net income was $5.2 million, or $0.22
per diluted share, compared to net income of $7.9 million, or $0.34
per diluted share, for the same period in the prior year. Adjusted
net income in the fourth quarter of fiscal 2016, excluding $1.3
million of expenses, net of tax, related to operating efficiency
initiatives and other items, was $9.2 million, or $0.40 per diluted
share.
Full Year Fiscal 2017 Results (See
attached table for GAAP and Non-GAAP measures)
- Net sales decreased 7.1% to $552.8
million compared to net sales of $594.9 million in fiscal 2016. Net
sales on a constant dollar basis decreased 6.0% compared to net
sales in fiscal 2016.
- Gross profit was $294.8 million, or
53.3% of sales, compared to gross profit of $316.9 million, or
53.3% of sales, last year. Adjusted gross profit for fiscal 2016,
which excludes $0.6 million in charges related to operating
efficiency initiatives and other items, was $317.6 million, or
53.4% of sales. The decrease in adjusted gross margin percentage
was primarily driven by reduced leverage of certain fixed costs as
a result of lower net sales, mostly offset by the favorable impact
of changes in foreign currency exchange rates.
- Operating expenses decreased $6.0
million or 2.4% to $240.8 million in fiscal 2017 from operating
expenses of $246.8 million last year. For fiscal 2017, adjusted
operating expenses were $239.0 million, which excludes $1.8 million
of expenses related to the COO’s retirement in the first quarter.
For fiscal 2016, adjusted operating expenses were $243.4 million,
which excludes $3.4 million of expenses related to operating
efficiency initiatives and other items. The decrease in adjusted
operating expenses was primarily the result of lower performance
based compensation, lower depreciation and amortization expense,
and the favorable impact of foreign currency exchange rates.
- Operating income for fiscal 2017 was
$54.0 million as compared to operating income of $70.1 million for
fiscal 2016. Adjusted operating income for fiscal 2017, which
excludes $1.8 million of expenses related to the COO’s retirement
in the first quarter of fiscal 2017, was $55.8 million. Adjusted
operating income for fiscal 2016, excluding $4.0 million of
expenses related to operating efficiency initiatives and other
items, was $74.1 million.
- The effective tax rate for fiscal 2017
was 31.7% compared to 33.8% in the prior year. The adjusted
effective tax rate for fiscal 2017 was 31.9% as compared to the
adjusted effective tax rate of 32.1% in fiscal 2016. The decrease
in the adjusted effective tax rate is primarily due to the mix of
global pre-tax income.
- Net income was $35.1 million, or $1.51
per diluted share, for fiscal 2017 compared to net income of $45.1
million, or $1.90 per diluted share, for the prior year. Adjusted
net income in fiscal 2017, which excludes $1.1 million in expenses,
net of tax, related to the COO’s retirement in the first quarter of
fiscal 2017, as well as $0.9 million, net of tax, related to the
impairment charge on a long-term investment in a privately held
company in the third quarter of fiscal 2017, was $37.1 million or
$1.59 per diluted share. Adjusted net income in fiscal 2016, which
excludes $3.9 million of expenses, net of tax, related to operating
efficiency initiatives and other items, was $49.0 million or $2.06
per diluted share.
Cost Savings Initiatives
Following a review of the Company’s current cost structure,
Movado Group is implementing a number of cost savings initiatives
to better align its global infrastructure with the current business
environment by consolidating certain operations and streamlining
functions to reduce costs and improve profitability. More
specifically, the Company is addressing the current challenging
conditions of the U.S. fashion watch category and traditional
retail channels, while at the same time increasing its investments
in the fastest growth opportunities including digital and
e-commerce. While this is a difficult decision, the Company
believes these actions are necessary to compete in the shifting
consumer and retail marketplace. The cost savings initiatives
include a reduction in the Company’s workforce predominantly
impacting the Company’s North American and Swiss operations. The
Company expects 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. The Company
expects to record a pre-tax charge in connection with the
completion of these initiatives in a range of approximately $7.0
million to $10.0 million, predominantly in the first quarter fiscal
2018 with the balance throughout the remainder of the fiscal
year.
Rebecca Minkoff License
As previously announced, the Company entered into a new
long-term global partnership with Rebecca Minkoff. The companies
will collaborate on design, development, distribution and marketing
of women’s watches for Rebecca Minkoff’s global lifestyle brand and
men’s watches for the Uri Minkoff brand. The collections will
launch in North America in the summer of 2017.
Fiscal 2018 Outlook
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. The
Company expects the majority of this charge to be recorded in the
first quarter.
Regular Quarterly Dividend and Share
Repurchase Program
The Company also announced that on March 20, 2017, the Board of
Directors approved the payment on April 14, 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 March 31, 2017.
During the fourth quarter of fiscal 2017, the Company
repurchased approximately 20,000 shares under its share repurchase
program. As of January 31, 2017, the Company had $46.1 million
remaining under the $50.0 million share repurchase authorization
which expires on September 30, 2017, subject to extension or
earlier termination by the Board.
Conference Call
The Company’s management will host a conference call and audio
webcast to discuss its results today, March 20th, at 9:00 a.m.
Eastern Time. The conference call may be accessed by dialing (877)
545-1409. 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 re-play of the call will be
available from 12:00 p.m. ET on March 20, 2017 until 11:59 p.m. ET
on March 27, 2017 and can be accessed by dialing (844) 512-2921 and
entering replay pin number 1443480.
Movado Group, Inc. designs, sources, and distributes MOVADO®,
EBEL®, CONCORD®, COACH®, TOMMY HILFIGER®, HUGO BOSS®, JUICY
COUTURE®, LACOSTE® and SCUDERIA FERRARI® watches worldwide (REBECCA
MINKOFF® watches will launch in the summer of 2017), and operates
Movado company stores in the United States.
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 COO’s retirement and operating efficiency initiatives and other
unusual items. The Company is also presenting adjusted tax
provision, which is the tax provision under GAAP, adjusted to
eliminate charges for the impairment of a long-term investment in a
private company, the COO’s retirement and operating efficiency
initiatives and other unusual items. 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 impairment of
a long-term investment in a private company, COO’s retirement and
operating efficiency initiatives and other unusual items. 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 Twelve Months Ended January 31,
January 31, 2017
2016 2017
2016 Net sales $ 130,785 $ 143,264 $
552,752 $ 594,923 Cost of sales 66,098
67,913 257,935 277,993
Gross profit 64,687 75,351 294,817 316,930 Operating
expenses 57,246 63,807 240,836
246,823 Operating income 7,441 11,544
53,981 70,107 Other expense - - (1,282 ) - Interest expense
(425 ) (382 ) (1,464 ) (1,109 ) Interest income 81
22 219 127 Income
before income taxes 7,097 11,184 51,454 69,125 Provision for
income taxes 1,865 2,902 16,315
23,360 Net income 5,232 8,282 35,139
45,765 Less: Net income attributed to noncontrolling
interests - 394 78
671 Net income attributed to Movado Group, Inc. $
5,232 $ 7,888 $ 35,061 $ 45,094
Per Share Information: Net income attributed to Movado
Group, Inc. $ 0.22 $ 0.34 $ 1.51 $ 1.90 Weighted diluted average
shares outstanding 23,334 23,317 23,267 23,774
MOVADO GROUP,
INC. GAAP AND NON-GAAP MEASURES (In thousands, except
for percentage data) (Unaudited)
As Reported % Change Three Months
Ended % Change Constant January 31,
As Reported Dollar
2017 2016 Total Net
sales $ 130,785 $ 143,264 -8.7 % -7.5 %
As Reported
% Change Twelve Months Ended % Change
Constant January 31, As Reported
Dollar 2017
2016 Total Net sales $ 552,752 $ 594,923
-7.1 % -6.0 %
MOVADO GROUP, INC. GAAP AND NON-GAAP
MEASURES (In thousands, except per share data)
(Unaudited)
Net Sales Gross Profit Operating Income
Pre-tax Income Provisions for Income Taxes
Net Income Attributed to Movado Group,
Inc.
EPS Three Months Ended January 31, 2017
As Reported (GAAP) $ 130,785 $ 64,687 $ 7,441 $ 7,097
$ 1,865 $ 5,232 $ 0.22
Three Months Ended January
31, 2016 As Reported (GAAP) $ 143,264 $ 75,351 $ 11,544
$ 11,184 $ 2,902 $ 7,888 $ 0.34 Operating Efficiency Initiatives
and Other Items (1) - (72 ) 1,326 1,326
(7 ) 1,333 0.06
Adjusted Results
(Non-GAAP) $ 143,264 $ 75,279 $ 12,870 $ 12,510 $ 2,895
$ 9,221 $ 0.40
Twelve Months Ended January
31, 2017 As Reported (GAAP) $ 552,752 $ 294,817 $ 53,981
$ 51,454 $ 16,315 $ 35,061 $ 1.51 Impairment of a Long-Term
Investment (2) - - - 1,282 398 884 0.03 Retirement Charge (3)
- - 1,806 1,806 687
1,119 0.05
Adjusted Results (Non-GAAP)
$ 552,752 $ 294,817 $ 55,787 $ 54,542 $ 17,400 $
37,064 $ 1.59
Twelve Months Ended January 31, 2016
As Reported (GAAP) $ 594,923 $ 316,930 $ 70,107 $ 69,125 $
23,360 $ 45,094 $ 1.90 Operating Efficiency Initiatives and Other
Items (1) - 621 3,996 3,996
127 3,869 0.16
Adjusted Results
(Non-GAAP) $ 594,923 $ 317,551 $ 74,103 $ 73,121 $
23,487 $ 48,963 $ 2.06 (1) Related to a charge
for severance, occupancy expenses and the write-off of certain
fixed assets. (2) Related to the impairment of a long-term
investment. (3) 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) January 31,
January 31, 2017
2016
ASSETS
Cash and cash equivalents $ 256,279 $ 228,188 Trade
receivables, net 66,847 71,030 Inventories 153,167 162,465 Other
current assets 28,487 27,352 Total current assets
504,780 489,035 Property, plant and equipment,
net 34,173 38,553 Deferred and non-current income taxes 24,837
20,323 Other non-current assets 44,012 37,259 Total
assets $ 607,802 $ 585,170
LIABILITIES AND
EQUITY
Loans payable to bank, current $ 5,000 $ 5,000 Accounts
payable 27,192 27,308 Accrued liabilities 28,241 28,570 Accrued
payroll and benefits 6,820 11,047 Income taxes payable 4,149
6,257 Total current liabilities 71,402 78,182
Loans payable to bank 25,000 35,000 Deferred and non-current
income taxes payable 3,322 2,640 Other non-current liabilities
34,085 28,201 Noncontrolling interests - 595 Shareholders' equity
473,993 440,552 Total liabilities and equity $
607,802 $ 585,170
MOVADO GROUP, INC. CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
(Unaudited) Twelve Months Ended
January 31, 2017
2016 Cash flows from operating
activities: Net income $ 35,139 $ 45,765 Depreciation and
amortization 11,507 13,156 Other non-cash adjustments 9,873 5,367
Operating efficiency initiatives and other items - 3,996 Changes in
working capital 3,969 5,290 Changes in non-current assets and
liabilities (2,070 ) 1,016
Net cash
provided by operating activities 58,418
74,590 Cash flows from investing
activities: Capital expenditures (5,920 ) (8,070 ) Restricted
cash deposits (1,156 ) (435 ) Short-term investment (152 ) -
Trademarks and other intangibles (328 ) (650 )
Net
cash (used in) investing activities (7,556
) (9,155 ) Cash flows from
financing activities: Proceeds from bank borrowings 3,000
50,000 Repayments of bank borrowings (13,000 ) (10,000 ) Dividends
paid (11,930 ) (10,312 ) Stock repurchase (3,864 ) (48,748 )
Purchase of incremental ownership of joint venture (1,320 ) (4,267
) Other financing (561 ) (395 )
Net cash (used in)
financing activities (27,675 )
(23,722 ) Effect of exchange rate changes on
cash and cash equivalents 4,904 (13,377 ) Net change in cash and
cash equivalents 28,091 28,336 Cash and cash equivalents at
beginning of year 228,188 199,852
Cash and cash equivalents at end of year $
256,279 $ 228,188
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ICR, Inc.Rachel Schacter/Allison Malkin, 203-682-8200
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