Movado Group posts strong half-year, second-quarter gains

The Movado Group, headquartered in Paramus, N.J., on Sept. 8 announced strong half-year and second-quarter results, ending July 31. The results include the impact of the Ebel luxury watch business, acquired March 1.

Half year. In the first half, net sales rose 25.8% to $172 million, up from $136.7 million the prior year. The Ebel acquisition accounted for net sales of $12.8 million. Comparable store sales rose 18.4% at the company’s Movado boutiques.

Gross margin was 58.9%, compared to 61.2% the previous year. The addition of Ebel had a negative effect of about 0.8% on gross margins in fiscal 2005’s first half. Operating profit was $10.5 million versus $10.8 million; Ebel caused a $4.1 million decrease.

Net income was $7.8 million, or $0.31 per diluted share, compared to $6.6 million, or $0.27 per diluted share, the prior year. That includes the dilutive impact of Ebel, which was partially offset by $835,000, or $0.03 per diluted share, from a legal settlement the company reached with Swiss Army Brands. The combined effect of the two reduced half-year net income approximately $2.3 million, or $0.09 per diluted share. (All share data in the report was adjusted to reflect a two-for-one stock split in June.)

“Throughout the first half, top line initiatives—including product development efforts, marketing, and advertising—drove consumer interest and translated into strong sales gains,” said Rick Cote, executive vice president and chief operating officer. “Those were supported and enhanced by an efficient operating structure,” he noted, “allowing us to generate strong bottom line results, despite the planned dilutive impact of the Ebel acquisition.”

Second Quarter. In the second quarter alone, net sales rose 27.8% to $97.8 million, up from $76.5 million. Ebel accounted for net sales of $9.4 million. Comp store sales went up 11.8% at Movado boutiques.

Gross margin was 59.3%, compared to 61.7% last year. Ebel’s acquisition had a negative effect of approximately 0.7%, said the report. Operating profit was $8.7 million, versus $8.8 million. The Ebel addition resulted in a $1.7 million decrease in operating profit.

Net income was $7.1 million, or $0.28 per diluted share, up from $5.8 million, or $0.23 per diluted share. Ebel’s dilutive impact was partially offset by the previously mentioned gain from the settlement with Swiss Army Brands, reached in the second quarter. The combined effect of the two led to a second quarter net income reduction of about $500,000, or $0.02 per diluted share.

“Our solid results during the second quarter reflect strength across our brands, geographic regions, and channels of business,” said Efraim Grinberg, Movado Group president and chief executive officer. He cited the company’s “strategy to support our brands with innovative advertising campaigns, deliver unique and compelling product assortments, and maintain an intense focus on our customers” as reasons for success.

The Movado Group expects fiscal 2005’s full-year sales to be about $410 million—a gain of more than 20%—including Ebel sales, projected at between $40 million and $45 million. It also anticipates the year’s diluted earnings per share to be between $0.95 and $1.00 (including the dilutive impact of Ebel and the legal settlement gain).

Ebel. Meanwhile, “the integration and revitalization of the Ebel brand continues,” Grinberg said, “and we are encouraged by our progress thus far.” Customers will begin to see results of those efforts in the fall, he continued, with a new “powerful image-building global campaign” for Ebel featuring internationally-known German supermodel Claudia Schiffer wearing women’s watches by Ebel, and a new Ebel men’s campaign. Both will have “a prominent presence in the key fall fashion publications,” he noted.

In addition, “new products and refined marketing programs” are planned for Ebel in fiscal 2005’s second half that “represent a return to the successful roots of the brand and truly convey [its] luxury image and rich heritage,” said Grinberg.

Movado Group Inc., designs, manufactures, and distributes Movado, Ebel, Concord, ESQ, Coach, and Tommy Hilfiger watches worldwide, and operates Movado boutiques and Company stores in the United States.

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