~ Board Approves Increase in Share
Repurchase Program to $100 million and Declares a Regular Quarterly
Dividend ~
Movado Group, Inc. (NYSE:MOV) today announced third quarter
results for the period ended October 31, 2014.
Efraim Grinberg, Chairman and Chief Executive Officer, stated,
“Our third quarter results were in line with the updated guidance
we issued on November 14, 2014 and reflected softer than expected
sales and earnings that were impacted by our strategic investment
in initiatives that position our Company to drive long-term growth.
Our largest brand, Movado, continues to perform very well in the
United States and, although the brand had recent weaker than
expected performance overseas, we believe it continues to have
significant international growth opportunities in the future. On
the licensed brand front, our largest brands continue to experience
growth. As we begin the fourth quarter, we believe we are well
positioned to capitalize on the holiday season with our powerful
portfolio of brands, strong product innovation and high impact
advertising campaigns.”
The Company recorded no unusual items in the third quarter of
fiscal 2015 or the third quarter of fiscal 2014. During the second
quarter of fiscal 2014, the Company recorded a $1.0 million tax
benefit, or $0.04 per diluted share, primarily related to the
release of liabilities for uncertain tax positions as a result of
favorable U.S. and foreign audit settlements. Also, during the
first quarter of fiscal 2014, the Company recorded a $1.5 million
pre-tax gain, or $0.04 per diluted share, related to the sale of a
Company-owned building in Switzerland, which was reflected in other
income.
Third Quarter Fiscal
2015
- Net sales decreased 0.6% to $188.6
million compared to $189.7 million in the third quarter of fiscal
2014 driven by a decline in the luxury brand category and certain
licensed brands.
- Gross profit was $99.8 million, or
53.0% of sales, compared to $101.3 million, or 53.4% of sales, in
the third quarter last year. The decrease in gross margin
percentage was primarily the result of a shift in channel and
product mix and the unfavorable impact of fluctuations in foreign
currency exchange rates, partially offset by a reduction of certain
fixed costs.
- Operating expenses decreased $0.7
million, or 1.0%, to $66.5 million compared to $67.2 million in the
third quarter last year. The decrease in operating expenses was
primarily the result of a decrease in the accrual for
performance-based compensation offset by higher compensation and
benefit expense in support of our brand building and growth
initiatives, marketing expense and other operating expenses.
- Operating income decreased to $33.3
million compared to operating income of $34.1 million in the same
period last year.
- The Company recorded a tax provision of
$10.9 million in the third quarter of fiscal 2015 as compared to a
tax provision of $10.6 million in the prior year. The effective tax
rate in the third quarter of fiscal 2015 was 32.7% compared to an
effective tax rate of 31.1% in the third quarter of fiscal
2014.
- Net income was $22.2 million, or $0.87
per diluted share, compared to net income of $23.0 million, or
$0.89 per diluted share, in the third quarter of fiscal 2014.
Nine Month Results Fiscal
2015
- Net sales increased 3.4% to $453.1
million compared to $438.0 million in the same period of fiscal
2014 led by growth in our licensed brand and retail
categories.
- Gross profit was $242.6 million, or
53.5% of sales, compared to $236.0 million, or 53.9% of sales in
the same period last year. The decrease in gross margin percentage
was primarily the result of the unfavorable impact of changes in
foreign currency exchange rates and a shift in channel and product
mix, partially offset by leverage gained on certain fixed costs due
to increased sales volume.
- Operating expenses increased $6.3
million, or 3.6%, to $181.2 million versus $174.9 million in the
same period last year. The $6.3 million increase in operating
expenses was primarily the result of increased compensation and
benefit costs in support of our brand building and growth
initiatives, the unfavorable effects of foreign currency exchange
rates, selling expenses, expenses associated with the Baselworld
Watch and Jewelry Show and higher marketing expenses, partially
offset by a decrease in the accrual for performance-based
compensation.
- Operating income increased to $61.4
million compared to operating income of $61.1 million in the same
period last year.
- The Company recorded a tax provision of
$19.2 million for the nine month period of fiscal 2015 as compared
to a tax provision of $18.2 million for the nine month period of
fiscal 2014. The effective tax rate in the fiscal 2015 period was
31.4% compared to an effective tax rate of 29.1% in the fiscal 2014
period. As mentioned above, the Company recorded a $1.0 million tax
benefit, or $0.04 per diluted share, related to certain items, and
a $1.5 million pre-tax gain, or $0.04 per diluted share, related to
the sale of a Company-owned building in Switzerland, which resulted
in an adjusted effective tax rate of 30.8% for the first nine
months of fiscal 2014. (See attached table for GAAP and Non-GAAP
measures.)
- Net income was $41.7 million, or $1.63
per diluted share, compared to net income for the nine month period
of fiscal 2014 of $43.7 million, or $1.69 per diluted share.
Adjusted net income for the first nine months of fiscal 2014 was
$41.6 million, or $1.61 per diluted share, excluding the $1.0
million tax benefit, or $0.04 per diluted share, taken in the
second quarter of fiscal 2014 and the $1.5 million pre-tax gain, or
$0.04 per diluted share, related to the sale of a building in
Switzerland in the first quarter of fiscal 2014. (See attached
table for GAAP and Non-GAAP measures.)
Rick Coté, Vice Chairman and Chief Operating Officer, stated,
“We remain confident in our ability to drive sustainable profitable
growth for next year and the long-term. Our brands are performing
well in the marketplace and given what we are seeing in the
strength of our brands, we would expect to continue to outperform
the watch category at retail. Going forward, we expect wholesale
and retail sales will trend together and our expenses will be in
line with sales. We are pleased to announce that our Board has
approved an increase in our share buyback program authorization to
$100 million, as well as a $0.10 quarterly dividend, which
highlights the strength of our financial position and our
commitment to shareholder value.”
Fourth Quarter and Fiscal 2015
Guidance
As announced on November 14, 2014 for fiscal 2015, the Company
currently anticipates that net sales will increase approximately 1%
to 2% to a range of $585 million to $590 million, operating profit
will be approximately $68 million to $70 million and earnings per
diluted share will be in the range of $1.80 to $1.85, assuming a
31% effective tax rate, excluding any unusual items. For the fourth
quarter, the Company currently anticipates net sales in the range
of $132 million to $137 million, operating profit of $6.5 million
to $8.5 million and earnings per diluted share in the range of
$0.18 to $0.23 assuming no significant fluctuations in foreign
currency exchange rates. Our operating profit will continue to be
impacted due to our continued strategic investment in brand
building and growth initiatives despite lower sales growth. This
guidance is on a comparable basis to non-GAAP fiscal 2014 results
adjusted for unusual items.
The Company also anticipates recording a $3.0 million one-time
pre-tax charge related to operating savings initiatives in either
the fourth quarter of fiscal 2015 or early in fiscal 2016. This
charge is excluded from the guidance provided above.
Share Repurchase Program and Quarterly
Dividend
On November 25, 2014, the Board of Directors approved an
increase in the Company’s share buyback program from the original
authorized amount of $50 million to $100 million. The authorization
expires on January 31, 2016. Under this share buyback program, the
Company may purchase its outstanding common shares from time to
time, depending on market conditions, share price and other
factors. As of October 31, 2014, $23.6 million was utilized of the
original $50 million that was authorized on March 21, 2013.
Additionally, the Board of Directors approved a regular quarterly
cash dividend of $0.10 for each share of the Company’s outstanding
common stock and class A common stock. This dividend will be paid
on December 19, 2014 to all shareholders of record as of the close
of business on December 5, 2014.
Conference Call
The Company’s management will host a conference call and audio
webcast to discuss its results today, November 25th at 9:00 a.m.
Eastern Time. The conference call may be accessed by dialing (888)
277-7115. 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 November 25, 2014 until 11:59 p.m. ET
on December 2, 2014 and can be accessed by dialing (877) 870-5176
and entering replay pin number 2250251.
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 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
effects of the sale of a building and tax adjustments resulting
from favorable changes in connection with domestic and foreign tax
audits. 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, 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 licensing arrangements with third parties, 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,
potential effects of economic and currency instability in Europe
and countries using the Euro as their functional currency, the
ability of the Company to successfully manage its expenses on a
continuing basis, 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, 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.
MOVADO GROUP, INC. CONSOLIDATED STATEMENTS OF
OPERATIONS (In thousands, except per share data)
(Unaudited) Three Months Ended Nine Months
Ended October 31, October 31,
2014 2013
2014
2013 Net sales $ 188,557 $
189,685 $ 453,069 $ 437,996 Cost of sales 88,715
88,415 210,470 201,989
Gross profit 99,842 101,270 242,599 236,007
Operating expenses 66,509 67,186
181,177 174,878 Operating income 33,333
34,084 61,422 61,129 Other income - - - 1,526 Interest
expense (78 ) (114 ) (272 ) (294 ) Interest income 51
14 97 53 Income
before income taxes 33,306 33,984 61,247 62,414 Provision
for income taxes 10,889 10,570
19,231 18,166 Net income 22,417 23,414
42,016 44,248 Less: Net income attributed to noncontrolling
interests 208 395 291
564 Net income attributed to Movado Group,
Inc. $ 22,209 $ 23,019 $ 41,725 $ 43,684
Per Share Information: Net income attributed
to Movado Group, Inc. $ 0.87 $ 0.89 $ 1.63 $ 1.69 Weighted diluted
average shares outstanding 25,616 25,842 25,661 25,855
MOVADO GROUP, INC. GAAP AND NON-GAAP MEASURES (In
thousands, except for percentage data) (Unaudited)
As Reported % Change Three Months Ended
% Change Constant October 31,
As Reported Dollar
2014 2013 Total Net
sales $ 188,557 $ 189,685 -0.6 % 0.1 %
As
Reported % Change Nine Months Ended %
Change Constant October 31,
As Reported Dollar
2014 2013 Total Net
sales $ 453,069 $ 437,996 3.4 % 3.0 %
MOVADO
GROUP, INC. GAAP AND NON-GAAP MEASURES (In thousands,
except per share data) (Unaudited) Net
Sales Gross Profit Operating Income Pre-tax
Income Net Income Earnings Per Share Three
Months Ended October 31, 2014 As Reported (GAAP) $
188,557 $ 99,842 $ 33,333 $ 33,306 $ 22,209 $ 0.87
Three Months Ended October 31, 2013 As
Reported (GAAP) $ 189,685 $ 101,270 $ 34,084 $ 33,984 $
23,019 $ 0.89
Nine Months Ended
October 31, 2014 As Reported (GAAP) $ 453,069 $ 242,599
$ 61,422 $ 61,247 $ 41,725 $ 1.63
Nine Months Ended October 31, 2013 As Reported (GAAP)
$ 437,996 $ 236,007 $ 61,129 $ 62,414 $ 43,684 $ 1.69 Tax
Adjustment (1) (1,000 ) (0.04 ) Building Sale (2)
(1,526 ) (1,099 ) (0.04 )
Adjusted
Results (Non-GAAP) (3) $ 437,996 $ 236,007 $ 61,129 $ 60,888
$ 41,585 $ 1.61 (1)
Reflects the release of liabilities for uncertain tax
positions as a result of favorable U.S. and foreign audit
settlements. (2) Reflects a gain on a sale of a building in
Switzerland. (3) The adjusted tax rate for the nine months ended
October 31, 2013, was 30.8%.
MOVADO GROUP, INC. CONSOLIDATED BALANCE
SHEETS (In thousands) (Unaudited)
October 31, January 31, October 31,
2014 2014
2013
ASSETS
Cash and cash equivalents $ 157,937 $ 157,659 $ 163,146
Short-term investments - 33,099 - Trade receivables 128,638 68,683
120,043 Inventories 182,663 181,305 178,714 Other current assets
37,927 44,564 35,429 Total current assets
507,165 485,310 497,332 Property, plant
and equipment, net 45,340 47,796 46,512 Deferred income taxes
13,899 14,891 21,881 Other non-current assets 35,365
30,613 29,266 Total assets $ 601,769 $ 578,610 $ 594,991
LIABILITIES AND
EQUITY
Accounts payable $ 29,746 $ 33,598 $ 36,620 Accrued
liabilities 49,933 43,573 51,172 Deferred and current income taxes
payable 12,713 6,422 15,272 Total current
liabilities 92,392 83,593 103,064
Deferred and non-current income taxes payable 3,578 3,518 3,930
Other non-current liabilities 28,989 25,509 25,329 Noncontrolling
interests 2,472 2,686 2,593 Shareholders' equity 474,338
463,304 460,075 Total liabilities and equity $
601,769 $ 578,610 $ 594,991
MOVADO GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (In thousands) (Unaudited)
Nine Months Ended October 31,
2014 2013
Cash flows from operating activities: Net income $
42,016 $ 44,248 Depreciation and amortization 9,195 8,693 Other
non-cash adjustments 4,309 1,898 Changes in working capital (54,051
) (36,608 ) Changes in non-current assets and liabilities
(120 ) (1,615 )
Net cash provided by operating
activities 1,349 16,616
Cash flows from investing activities: Capital
expenditures (7,485 ) (11,895 ) Proceeds from short-term
investments 33,736 - Proceeds from sale of an asset held for sale -
2,196 Long-term investments (1,200 ) - Other investing 232
(225 )
Net cash provided by / (used in) investing
activities 25,283 (9,924
) Cash flows from financing activities:
Dividends paid (7,591 ) (4,604 ) Stock repurchase (13,150 ) (7,450
) Other financing 1,242 334
Net cash
(used in) financing activities (19,499 )
(11,720 ) Effect of exchange rate
changes on cash and cash equivalents (6,855 ) 285 Net change in
cash and cash equivalents 278 (4,743 ) Cash and cash equivalents at
beginning of year 157,659 167,889
Cash and cash equivalents at end of period $
157,937 $ 163,146
ICR, Inc.Rachel Schacter/Allison Malkin203-682-8200
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