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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, 2013.

Efraim Grinberg, Chairman and Chief Executive Officer, stated, “We continued our positive momentum from the beginning of the year reporting a 17% increase in sales and a 59% rise in operating income in the second quarter. Our topline strength was fueled by strong innovation across our Movado and licensed brands and included the continued successful introduction of our Scuderia Ferrari watch brand and our newly repositioned Coach watch brand into the fashion watch category. As expected, the quarter also benefited from the later timing of Baselworld, the international watch and jewelry fair held annually in Basel, Switzerland. This, combined with the disciplined execution of our growth strategies, enabled us to leverage our infrastructure and produced operating income growth more than triple the rate of our sales increase.”

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 favorable changes in connection with domestic and foreign tax audits.

Second Quarter Fiscal 2014

  • Net sales increased 17.2% to $138.3 million compared to $118.0 million in the second quarter of fiscal 2013 driven by growth in every brand category.
  • Gross profit was $74.8 million, or 54.1% of sales, compared to $65.8 million, or 55.7% of sales, in the second quarter last year. The decrease in gross margin percentage was primarily the result of a shift in channel and product mix, partially offset by the leverage gained on certain fixed costs and the favorable impact of changes in foreign currency exchange rates.
  • Operating expenses increased $2.8 million, or 5.0%, to $57.8 million compared to $55.0 million in the second quarter last year. This increase was primarily the result of higher marketing expense and other operating expenses, partially offset by lower compensation expense primarily related to the accrual for performance-based compensation.
  • Operating income increased to $17.0 million, or 12.3% of net sales compared to operating income of $10.7 million, or 9.1% of net sales in the second quarter of fiscal 2013.
  • The Company recorded a tax provision of $4.3 million, which equates to an effective tax rate of 25.3% compared to an effective tax rate of 23.6% in the second quarter of fiscal 2013. As mentioned above, the Company recorded a $1.0 million tax benefit, or $0.04 per diluted share, related to certain items which equates to an adjusted effective tax rate of 31.2% for the second quarter of fiscal 2014. The effective tax rate for second quarter fiscal 2013 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 $12.5 million, or $0.48 per diluted share compared to $8.1 million, or $0.32 per diluted share, in the second quarter of fiscal 2013. Excluding the $1.0 million tax benefit, or $0.04 per diluted share, discussed above, adjusted net income was $11.5 million, or $0.44 per diluted share.
  • EBITDA increased to $20.1 million compared to EBITDA of $13.4 million in the second quarter of fiscal 2013. (See attached table for GAAP and Non-GAAP measures.)

First Half Fiscal 2014

  • Net sales increased 12.0% to $248.3 million compared to $221.7 million in the first six months of fiscal 2013 driven by growth in every brand category.
  • Gross profit was $134.7 million, or 54.3% of sales, compared to $124.8 million, or 56.3% of sales in the same period last year. The decrease in gross margin percentage was primarily the result of a shift in channel and product mix, partially offset by the favorable impact of changes in foreign currency exchange rates and the leverage gained on certain fixed costs.
  • Operating expenses increased $2.2 million, or 2.0%, to $107.7 million versus $105.5 million in the same period last year. This increase was primarily the result of higher marketing expenses and other operating expenses, partially offset by lower compensation expense primarily related to the accrual for performance-based compensation.
  • Operating income increased to $27.0 million, or 10.9% of net sales compared to operating income of $19.2 million, or 8.7% of net sales in the first six months of fiscal 2013.
  • The Company recorded a tax provision in the first six months of fiscal 2014 of $7.6 million, which equates to an effective tax rate of 26.7% compared to an effective tax rate of 21.7% for the first six months of fiscal 2013. As mentioned above, the Company recorded a $1.0 million tax benefit, or $0.04 per diluted share, related to certain items which equates to an adjusted effective tax rate of 30.2% for the first six months of fiscal 2014. The effective tax rate for the first six months of fiscal 2013 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 $20.7 million, or $0.80 per diluted share compared to $14.7 million, or $0.58 per diluted share, in the first six months of fiscal 2013. Excluding the $1.0 million tax benefit, or $0.04 per diluted share, discussed above, 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, adjusted net income was $18.6 million, or $0.72 per diluted share.
  • EBITDA was $32.8 million compared to EBITDA of $24.9 million in the same period of fiscal 2013. (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 operating margin expansion of 320 basis points to 12.3% from 9.1% in the second quarter last year. Given our strong results in the first half of fiscal 2014, we are poised to exceed our previously issued guidance and we now expect to earn $1.90 per diluted share for fiscal 2014 up from $1.80 per diluted share previously. Looking at our balance sheet, we ended the quarter with over $150 million in cash and no debt and our inventory levels increased 5.6% while sales grew over 17%. In addition, we are pleased to announce that our Board approved a 60% increase in our quarterly cash dividend. We believe this is a strong reflection of the Board’s confidence in our long-term strategy and is consistent with our focus on returning value to shareholders.”

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