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Movado Group, Inc. Announces Second Quarter Results

Movado Group, Inc. (NYSE: MOV) today announced second quarter and six month results for the period ended July 31, 2012.

Efraim Grinberg, Chairman and Chief Executive Officer, stated, “Our positive momentum continued in the second quarter driven by the ongoing success of our strategic initiatives, which fueled a solid increase in net sales, expansion in gross margin and a more than doubling of operating income as compared to the second quarter last year. Our expansion strategies, strong operating infrastructure combined with the disciplined management of expenses and inventory has provided us with a sustained platform to continue our growth during the balance of fiscal 2013 and in the future. As we begin the third quarter, we are excited about our upcoming re-launch of our Ebel and ESQ collections and expect continued strength within our Movado and licensed brands.”

Second Quarter Fiscal 2013

  • Net sales increased 4.2% to $118.0 million and rose 7.6% on a constant dollar basis compared to $113.2 million in the second quarter of fiscal 2012 driven by growth in the Company’s Movado and licensed brands. This growth was partially offset by the planned reduction in sales of the Company’s ESQ and Ebel brands ahead of their fall re-launch. (See attached table for GAAP and Non-GAAP measures.)
  • Net sales on a constant dollar basis increased 15.1% over the prior year, excluding the impact of the ESQ and Ebel sales noted above. (See attached table for GAAP and Non-GAAP measures.)
  • Gross profit was $65.8 million, or 55.7% of sales, compared to $60.9 million, or 53.8% of sales, in the second quarter last year. The increase in gross margin percentage was primarily the result of reductions in and leverage gained on certain fixed costs as well as a favorable impact of changes in foreign currency exchange rates. During the second quarter of fiscal 2012, $0.8 million of excess movements were sold as part of the Company’s inventory reduction initiative and unfavorably impacted gross margin by 40 basis points.
  • Operating expenses decreased $0.9 million, or 1.6%, to $55.0 million compared to $55.9 million in the second quarter last year. This decrease was primarily the result of the favorable effect of fluctuations in foreign currency exchange rates partially offset by higher compensation expense and performance-based compensation.
  • Operating income increased to $10.7 million, or 9.1% of net sales compared to operating income of $5.0 million, or 4.4% of net sales in the second quarter of fiscal 2012.
  • The Company recorded a tax provision of $2.5 million, which equates to an effective tax rate of 23.6% compared to an effective tax rate of 16.0% in the second quarter of fiscal 2012. The effective tax rate for both periods was impacted by the application of guidelines related to accounting for income taxes in interim periods as well as accounting for valuation allowances.
  • Net income was $8.1 million, or $0.32 per diluted share compared to $4.4 million, or $0.18 per diluted share, in the second quarter of fiscal 2012. Net income for the second quarter of fiscal 2012 included a $0.7 million, or $0.02 per diluted share, pre-tax gain from the sale of a building.
  • EBITDA increased to $13.4 million compared to EBITDA of $8.0 million in the second quarter of fiscal 2012. (See attached table for GAAP and Non-GAAP measures.)

First Half Fiscal 2013

  • Net sales increased 9.2% to $221.7 million and rose 11.6% on a constant dollar basis compared to $203.1 million in the first six months of fiscal 2012 driven by growth in the Company’s Movado and licensed brands. This growth was partially offset by the planned reduction in sales of the Company’s ESQ and Ebel brands ahead of their fall re-launch. (See attached table for GAAP and Non-GAAP measures.)
  • Net sales on a constant dollar basis increased 19.2%, excluding the impact of both the ESQ and Ebel sales noted above. (See attached table for GAAP and Non-GAAP measures.)
  • Gross profit was $124.8 million, or 56.3% of sales, compared to $109.6 million, or 54.0% of sales in the same period last year. The increase in gross margin percentage was primarily the result of a favorable shift in channel and product mix, as well as reductions in and leverage gained on certain fixed costs.
  • Operating expenses increased $2.6 million, or 2.5%, to $105.5 million versus $103.0 million in the same period last year. This increase was primarily the result of higher compensation expense and performance-based compensation, partially offset by the favorable effect of fluctuations in foreign currency exchange rates.
  • Operating income increased to $19.2 million, or 8.7% of net sales compared to operating income of $6.6 million, or 3.2% of net sales in the first six months of fiscal 2012.
  • The Company recorded a tax provision in the first six months of fiscal 2013 of $4.1 million, which equates to an effective tax rate of 21.7% compared to an effective tax rate of 23.8% for the first six months of fiscal 2012. The effective tax rate for the first six months of both fiscal years was impacted by the application of guidelines related to accounting for income taxes in interim periods as well as accounting for valuation allowances.
  • Net income was $14.7 million, or $0.58 per diluted share compared to $4.9 million, or $0.19 per diluted share, in the first six months of fiscal 2012. Net income included a $0.7 million, or $0.02 per diluted share, pre-tax gain from the sale of a building in the second quarter of fiscal 2012.
  • EBITDA was $24.9 million compared to EBITDA of $12.5 million in the same period of fiscal 2012. (See attached table for GAAP and Non-GAAP measures.)

Rick Coté, President and Chief Operating Officer, stated, “We are pleased to deliver another strong quarter that included a 7.6% increase in net sales on a constant dollar basis. More reflective of the strength of our business and the growing importance of our brands is our 15.1% increase in constant dollar sales, excluding the planned sales reduction in anticipation of our re-launch of Ebel and ESQ this fall. The disciplined execution of our strategies has resulted in improvement in key financial metrics and increased demand for our brands across geographies. We expanded gross margin by 190 basis points in the quarter and reduced SG&A as a percent of sales by 280 basis points, which led to expansion of operating margin to 9.1% from 4.4% in the second quarter last year. Our balance sheet remained in excellent shape with increased cash and no debt. We believe we remain well positioned to deliver our fiscal 2013 objectives as we enter the second half of the year.”

Stock quotes in this article: MOV 

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