~ Second Quarter Revenue of $145.6 Million
and Operating Income of $18.2 Million ~
~ Maintains Full Year Guidance ~
~ Board Declares Quarterly Dividend
~
Movado Group, Inc. (NYSE:MOV) today announced second quarter and
six month results for the period ended July 31, 2015.
Efraim Grinberg, Chairman and Chief Executive Officer, stated,
“We are pleased with our second quarter results which included
increased sales, expansion in gross margin and operating income
above last year, despite a challenging retail environment and
significant currency headwinds. Our Movado and licensed brands
continue to outperform the overall watch category.”
“We believe we are well positioned for the second half of the
year,” continued Mr. Grinberg. “We have a number of exciting new
product introductions planned for the holiday season as we continue
to drive innovation across our brand portfolio. We are expecting to
deliver our first connected Movado timepiece during the fourth
quarter and believe wearable technology represents a great
opportunity for Movado Group.”
There were no unusual items recorded during the second quarter
of fiscal 2016. During the first quarter of fiscal 2016, the
Company recorded a $2.7 million pre-tax charge, or $0.10 per
diluted share, related to operating efficiency initiatives and
other items in fiscal 2016. There were no unusual items recorded in
the first half of fiscal 2015.
Second Quarter Fiscal 2016 (See
attached table for GAAP and Non-GAAP measures)
- Net sales increased 1.4% to $145.6
million compared to $143.6 million in the second quarter of fiscal
2015. Net sales on a constant dollar basis increased 6.1% compared
to net sales in the second quarter of fiscal 2015.
- Gross profit was $79.0 million, or
54.3% of sales, compared to $77.6 million, or 54.0% of sales, in
the second quarter last year. The increase in gross margin
percentage was due to channel and product mix, selective price
increases and certain sourcing improvements, partially offset by
the unfavorable impact of changes in foreign currency exchange
rates.
- Operating expenses increased $0.4
million, or 0.6%, to $60.8 million. This increase was primarily the
result of an increase in compensation and benefit expenses as well
as higher marketing expenses, partially offset by the favorable
impact of foreign currency exchange rates.
- Operating income increased to $18.2
million, or 12.5% of net sales, compared to operating income of
$17.2 million, or 12.0% of net sales, in the second quarter of
fiscal 2015.
- The Company recorded a tax provision of
$6.1 million, which equates to an effective tax rate of 33.8%,
compared to an effective tax rate of 28.7% in the second quarter of
fiscal 2015. The increase in the effective tax rate was primarily
due to not recognizing tax benefits on losses incurred by certain
foreign operations.
- Net income was $12.1 million, or $0.50
per diluted share, compared to $12.2 million, or $0.47 per diluted
share, in the second quarter of fiscal 2015.
First Half Fiscal 2016 (See attached
table for GAAP and Non-GAAP measures)
- Net sales increased 0.6% to $266.0
million compared to $264.5 million in the first six months of
fiscal 2015. Net sales on a constant dollar basis increased 5.6%
compared to net sales in the first six months of fiscal 2015.
- Gross profit was $141.5 million, or
53.2% of sales, compared to $142.8 million, or 54.0% of sales in
the same period last year. Adjusted gross profit for the first six
months of fiscal 2016, which excludes $0.7 million in charges
related to operating efficiency initiatives and other items in the
first quarter of fiscal 2016, was $142.2 million, or 53.4% of
sales. The decline in adjusted gross margin percentage was
primarily the result of the unfavorable impact of changes in
foreign currency exchange rates partially offset by channel and
product mix, selective price increases and certain sourcing
improvements.
- Operating expenses were $116.4 million
as compared to $114.7 million in the first half of last year. For
the first six months of fiscal 2016, adjusted operating expenses
were $114.4 million, excluding $2.0 million of expenses related to
operating efficiency initiatives and other items recorded in the
first quarter. Operating expenses remained relatively flat due to
the favorable impact of foreign currency exchange rates partially
offset by an increase in compensation and benefit expenses as well
as other higher miscellaneous operating costs.
- Operating income was $25.1 million, or
9.4% of net sales, compared to operating income of $28.1 million,
or 10.6% of net sales in the first six months of fiscal 2015.
Adjusted operating income for the first half of fiscal 2016,
excluding $2.7 million of expenses related to operating efficiency
initiatives and other items recorded in the first quarter, was
$27.8 million or 10.4% of net sales.
- The Company recorded a tax provision in
the first six months of fiscal 2016 of $9.2 million, which equates
to an effective tax rate of 37.2% compared to an effective tax rate
of 29.9% for the first six months of fiscal 2015. The adjusted
effective tax rate for first half of fiscal 2016 was 34.1%.
- Net income was $15.7 million, or $0.65
per diluted share, compared to $19.5 million, or $0.76 per diluted
share, in the first six months of fiscal 2015. Adjusted net income
for the first six months of fiscal 2016 was $18.2 million, or $0.75
per diluted share, excluding $2.5 million in expenses, net of tax,
related to operating efficiency initiatives and other items in the
first quarter of fiscal 2016.
Rick Coté, Vice Chairman and Chief Operating Officer, stated,
“We delivered a solid second quarter driven by the successful
execution of our growth and efficiency strategies by our team. The
quarter saw the initial benefit of our selective price increases,
operating efficiencies and sourcing improvements across our supply
chain, which combined drove our gross margin expansion. We continue
to invest in our infrastructure and growth initiatives and believe
our strategies will position us to achieve our goal of delivering
sustainable profitable growth. While we are maintaining our
guidance at this time, we do believe there is uncertainty in the
global economic environment as we enter the second half of the
year.”
Fiscal 2016 Guidance
The Company is maintaining its guidance for fiscal 2016. In
fiscal 2016, the Company expects net sales to be in the range of
$590 million to $600 million, gross margin percent to be
approximately 53.5%, and operating income to increase to
approximately $72.0 million to $75.0 million. The Company
anticipates net income for fiscal 2016 to be in the range of
approximately $48.5 million to $51.0 million, or $2.00 to $2.10 per
diluted share, reflecting a 30.0% anticipated effective tax rate
and reduced share count. The Company's guidance reflects its
current outlook and does not take into account a potential
worsening in the global economies in which it operates. This
guidance also assumes no further significant fluctuations from
prevailing foreign currency exchange rates as well as no unusual
items for fiscal 2016.
The Company also anticipates recording the remainder of the
previously announced $3.0 million to $4.0 million pre-tax charge
related to operating efficiency initiatives by the end of fiscal
2016, which is excluded from its guidance.
Quarterly Dividend and Share Repurchase
Program
The Company also announced that on August 27, 2015, the Board of
Directors approved the payment on September 22, 2015 of a cash
dividend in the amount of $0.11 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 September 8,
2015.
During the second quarter of fiscal 2016, the Company
repurchased approximately 613,000 shares under its share repurchase
program. As of July 31, 2015, the Company had $24.0 million
remaining under the $100.0 million share repurchase
authorization.
Conference Call
The Company’s management will host a conference call and audio
webcast to discuss its results today, August 27th at 9:00 a.m.
Eastern Time. The conference call may be accessed by dialing
1-888-437-9445. 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 re-play of the
call will be available at 12:00 p.m. ET on August 27, 2015 until
11:59 p.m. ET on September 3, 2015 and can be accessed by dialing
1-877-870-5176 and entering replay pin number 6762180.
Movado Group, Inc. designs, sources, and distributes MOVADO®,
EBEL®, CONCORD®, ESQ® Movado, COACH®, TOMMY HILFIGER®, HUGO BOSS®,
JUICY COUTURE®, LACOSTE® and SCUDERIA FERRARI® watches worldwide,
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 margin and adjusted operating
expenses, which are relevant measures under GAAP, adjusted to
eliminate a charge for the operating efficiency initiatives and
other items. The Company is also presenting adjusted operating
income, which is operating income under GAAP, adjusted to eliminate
a charge for the operating efficiency initiatives and other 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 is net income,
earnings per share and effective tax rate under GAAP adjusted to
eliminate the after tax impact of the charge for the operating
efficiency initiatives and other 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 year. 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 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
guidance in the future.
(Tables to follow)
MOVADO GROUP, INC. CONSOLIDATED STATEMENTS OF
OPERATIONS (In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended July 31,
July 31, 2015
2014 2015
2014 Net sales $ 145,569 $ 143,591 $
266,030 $ 264,512 Cost of sales 66,531
65,985 124,543 121,755
Gross profit 79,038 77,606 141,487 142,757 Operating
expenses 60,804 60,438 116,378
114,668 Operating income 18,234 17,168
25,109 28,089 Interest expense (256 ) (100 ) (408 ) (194 )
Interest income 35 11 88
46 Income before income taxes 18,013 17,079
24,789 27,941 Provision for income taxes 6,080
4,909 9,216 8,342
Net income 11,933 12,170 15,573 19,599 Less: Net (loss) /
income attributed to noncontrolling interests (120 )
19 (101 ) 83 Net income
attributed to Movado Group, Inc. $ 12,053 $ 12,151 $
15,674 $ 19,516
Per Share Information:
Net income attributed to Movado Group, Inc. $ 0.50 $ 0.47 $ 0.65 $
0.76 Weighted diluted average shares outstanding 23,904 25,674
24,230 25,685
MOVADO GROUP, INC. GAAP AND NON-GAAP
MEASURES (In thousands, except for percentage data)
(Unaudited) As
Reported % Change Three Months Ended %
Change Constant July 31, As
Reported Dollar 2015
2014 Total Net sales 145,569 143,591 1.4
% 6.1 %
As Reported % Change Six Months
Ended % Change Constant July 31,
As Reported Dollar 2015
2014 Total Net sales 266,030 264,512 0.6
% 5.6 %
MOVADO GROUP, INC. GAAP AND NON-GAAP MEASURES
(In thousands, except per share data) (Unaudited)
Net Sales Gross Profit Operating Income
Pre-tax Income Net Income EPS Three Months
Ended July 31, 2015 As Reported (GAAP) $ 145,569 $
79,038 $ 18,234 $ 18,013 $ 12,053 $ 0.50
Three Months
Ended July 31, 2014 As Reported (GAAP) $ 143,591 $
77,606 $ 17,168 $ 17,079 $ 12,151 $ 0.47
Six
Months Ended July 31, 2015 As Reported (GAAP) $ 266,030
$ 141,487 $ 25,109 $ 24,789 $ 15,674 $ 0.65 Operating Efficiency
Initiatives and Other Items (1) 693 2,670
2,670 2,536 0.10
Adjusted Results
(Non-GAAP) $ 266,030 $ 142,180 $ 27,779 $ 27,459 $ 18,210 $
0.75
Six Months Ended July 31, 2014 As Reported
(GAAP) $ 264,512 $ 142,757 $ 28,089 $ 27,941 $ 19,516 $ 0.76
(1) Related to a charge for
severance, occupancy expenses and the write-off of certain fixed
assets.
MOVADO GROUP, INC. CONSOLIDATED BALANCE SHEETS (In
thousands) (Unaudited)
July 31, January 31, July 31,
2015 2015
2014 ASSETS Cash and
cash equivalents $ 188,012 $ 199,852 $ 169,649 Trade receivables
80,818 74,106 91,214 Inventories 188,515 170,788 195,331 Other
current assets 37,962 40,532 41,018 Total
current assets 495,307 485,278 497,212
Property, plant and equipment, net 42,723 46,673 46,141 Deferred
income taxes 13,625 13,550 14,604 Other non-current assets
38,356 37,522 33,486 Total assets $ 590,011 $ 583,023
$ 591,443
LIABILITIES AND EQUITY
Accounts payable $ 31,687 $ 27,767 $ 37,604 Accrued liabilities
38,182 30,933 40,334 Deferred and current income taxes payable
1,703 7,372 4,819 Total current liabilities
71,572 66,072 82,757 Loans payable to
bank 40,000 - - Deferred and non-current income taxes payable 3,002
3,470 3,360 Other non-current liabilities 30,353 29,196 28,063
Noncontrolling interests 2,089 2,076 2,751 Shareholders' equity
442,995 482,209 474,512 Total liabilities and
equity $ 590,011 $ 583,023 $ 591,443
MOVADO GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In
thousands) (Unaudited) Six Months
Ended July 31, 2015
2014 Cash flows from operating
activities: Net income $ 15,573 $ 19,599 Depreciation and
amortization 6,131 6,097 Other non-cash adjustments 3,364 3,363
Operating efficiency initiatives and other items 2,670 - Changes in
working capital (25,748 ) (34,317 ) Changes in non-current assets
and liabilities 584 (421 )
Net cash
provided by / (used in) operating activities
2,574 (5,679 ) Cash
flows from investing activities: Capital expenditures (3,668 )
(4,294 ) Proceeds from short-term investments - 33,736 Other
investing (138 ) 275
Net cash (used in) /
provided by investing activities (3,806 )
29,717 Cash flows from financing
activities: Proceeds from bank borrowings 50,000 - Repayments
of bank borrowings (10,000 ) - Dividends paid (5,239 ) (5,059 )
Stock repurchase (39,129 ) (7,684 ) Other financing (447 )
1,312
Net cash (used in) financing activities
(4,815 ) (11,431 )
Effect of exchange rate changes on cash and cash equivalents (5,793
) (617 ) Net change in cash and cash equivalents (11,840 ) 11,990
Cash and cash equivalents at beginning of year 199,852
157,659
Cash and cash equivalents at
end of period $ 188,012 $
169,649
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ICR, Inc.Rachel Schacter/Allison Malkin, 203-682-8200
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