The Movado Group, the upscale watchmaker, plans to streamline operations, reduce payroll 10 percent, and trim expenses to “improve efficiencies and effectiveness” in its global organization, it announced Aug. 7. It expects to save $25 million annually, or eight percent of its annual operating expenses, as a result.
“Streamlining our organization is a difficult decision, because it impacts the people who have contributed to Movado Group,” said Efraim Grinberg, Movado Group’s president and chief executive officer (pictured). “We’re extremely grateful to each of our employees and are very proud of their many contributions to the company.”
He added, “However, it’s necessary to make decisions that not only respond to the current challenging economic environment, but also strengthen the Movado Group for the long-term.”
The expense reduction plan follows an extensive review of the company’s current cost structure, said the announcement.
The Movado Group will reduce its payroll expenses by about 10 percent, cutting approximately 90 currently-filled positions or six percent of its full-time workforce. They will be spread primarily across its corporate and shared-service departments in its North American and European operations. Affected employees will be offered severance packages, and out-placement services.
To simplify its organizational reporting structure, the company will consolidate some functions, such as distribution, finance, administration and procurement.
Other cost savings will come from reductions in discretionary expenses.
“Our actions are creating a stronger and leaner organization that will operate more efficiently,” said Grinberg. “A streamlined cost structure will allow the company to be more nimble, as it responds to current market conditions, while capitalizing on future growth prospects, as the economy recovers.
“There are significant opportunities ahead” for the company, he said, and its “solid balance sheet and financial flexibility enables us to continue to invest in our business and execute our strategic initiatives.”
The Movado Group will initially save about $6 million from these reductions in fiscal year 2009, in which it is now. For the balance of FY2009, it expects to record a total pre-tax charge of about $9 million related to completion of this program.
Excluding the charge and cost savings associated with the expense reduction plan, and “recognizing the limited visibility on the economic environment,” the announcement said Movado Group is holding to its fiscal 2009 diluted earnings-per-share of about $1.65 to $1.72, based on a projected tax rate of 24%.
It will announce its second quarter FY2009 results in early September.
The Movado Group is headquartered in Paramus, N.J. It designs, manufactures, and distributes Movado watches worldwide, as well as Ebel, Concord, ESQ, Coach, Tommy Hilfiger, Hugo Boss, Juicy Couture, and Lacoste watches. It also operates Movado boutiques and company stores in the United States.