Movado ’09 Sales Down 17.6%; Q4 Sales Down 32%

Movado Group logoMovado Group Inc. said Thursday that net sales in fiscal 2009, ended Jan. 31, decreased 17.6 percent, year-over-year, $460.9 million.

Fiscal 1998 net sales included $31.2 million of excess discontinued product sales and a one-time accrual of $15 million for product returns associated with the company’s closure of approximately 1,400 wholesale doors selling the Movado brand in the United States. Adjusting for these items recorded in fiscal 2008, net sales for fiscal 2009 decreased 15.2 percent. 

Fiscal 2009 adjusted net income was $14.2 million, compared to adjusted net income of $46.6 million, in fiscal 2008. Fiscal 2009 net income was $2.3 million, compared to net income of $60.8 million in fiscal 2008.

The company’s full-year fiscal 2009 net income included the following one-time items: A pre-tax charge of $11.1 million, resulting from the company’s previously announced expense reduction plans; A pre-tax, non-cash impairment charge of $4.5 million, related to five Movado boutiques, which the company continues to operate; And the tax impact of a non-cash tax provision recorded in the fourth quarter of fiscal 2009 for the future repatriation of $30 million in funds from the company’s international operations. This was mostly offset by the tax benefit of the utilization of a Swiss net operating loss carryforward (NOL) acquired with the Ebel brand in fiscal 2005, which was recorded in the third quarter of fiscal 2009.

Gross margin in fiscal 2009 was 62.4 percent of sales compared to 60.2 percent last year. Adjusting for the aforementioned items recorded in fiscal 2008, gross margin in the year-ago period was 64 percent of sales. Gross profit in fiscal 2009 was $287.6 million versus $336.7 million last year. Year-ago adjusted gross profit was $347.7 million. 

Adjusting for the previously mentioned items recorded in both fiscal 2009 and fiscal 2008, operating profit in fiscal 2009 was $19 million compared to $61.8 million in fiscal 2008. Without adjustments, operating profit in fiscal 2009 was $3.4 million compared to $50.8 million in fiscal 2008.

Net sales for the fourth quarter of fiscal 2009 decreased 32.2 percent from last year to $94 million.

1988 net sales included the aforementioned one-time accrual of $15 million and $8.9 million of excess discontinued product sales. Adjusting for these items recorded in the fourth quarter of fiscal 2008, net sales for the fourth quarter of fiscal 2009 decreased 35 percent.   

The company recorded a fourth quarter adjusted net loss of $10.5 million, compared to adjusted net income of $10.8 million in fiscal 2008

Fourth quarter fiscal 2009 net loss was $22.8 million, compared to net income of $19.6 million in fiscal 2008. The company’s fiscal 2009 fourth quarter results included: A pre-tax charge of $5.5 million, resulting from the company’s previously announced expense reduction plans, A non-cash impairment charge of $4.5 million, related to the Movado Boutiques; And a $7.4 million non-cash tax provision, primarily related to the future repatriation of $30 million in funds from the Company’s international operations.

Gross margin in the fourth quarter of fiscal 2009 was 55.9 percent of sales compared to 59 percent last year. The unusual deterioration in gross margin was primarily due to fluctuations in currency, the heightened promotional activity in the company’s Movado Boutiques, and the impact of the overall mix of business. Adjusting for the aforementioned items recorded in the fourth quarter of fiscal 2008, gross margin in the year-ago period was 64.3 percent of sales. Gross profit in the fiscal 2009 fourth quarter was $52.5 million versus $81.8 million last year. In the year-ago period adjusted gross profit was $93 million.

Adjusting for the previously mentioned items recorded in the fourth quarters of both fiscal 2009 and fiscal 2008, the Company recorded an operating loss for the fiscal 2009 fourth quarter of $13.9 million compared to operating income of $14.2 million in fiscal 2008 (see attached table for a reconciliation of GAAP to non-GAAP measures). Without adjustments, the operating loss in the fourth quarter of fiscal 2009 was $24.0 million compared to operating profit of $3.2 million in fiscal 2008.

“We are operating in the most challenging economic environment that I have seen in my 30 years in the watch industry,” said Efraim Grinberg, president and chief executive Officer. “Fiscal 2009 was extremely difficult as we experienced the dual impact on our business of weak consumer spending and increasingly aggressive curtailment of retailers’ replenishment orders, particularly in January, which resulted in our recording a loss for the fourth quarter. We believe our retail customers will continue to focus on lowering their inventory levels during the first half of this year. Accordingly, we expect lower sales throughout the first half of fiscal 2010 with an improvement during the second half of the year as retailers start to replenish inventory in preparation for the holiday selling season. Our greatest assets continue to be our strong brands and we believe that strong brands like Movado Group’s will be well positioned to rebound when we begin to exit the recessionary environment.”