The Movado Group, the upscale watchmaker, said Monday it will reduce U.S. wholesale distribution of Movado, its largest watch brand, by 35 percent by Jan. 31, 2009, from 4,000 stores now down to about 2,600.
The streamlining is part of a new “unified brand strategy” to take Movado to “a new level of performance, assuring long term health and growth,” Efraim Grinberg, Movado Group president and chief executive officer (pictured), in a follow-up conference call with financial analysts on Tuesday. Movado is the “dominant” Swiss watch in the $500 to $1,500 retail category in the U.S. market, he said, sold in Movado boutiques, jewelry stores, and department stores.
The Movado Group has also reduced it projected sales results for fiscal 2008 (ended Jan. 31), citing a “weak” 2007 holiday season sales results, the new brand strategy, and “a weak macroeconomic environment.”
Movado Group, Inc., Paramus, N.J., 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 30 Movado boutiques and company stores in the United States.
The 1,400 “least productive” outlets to be eliminated represents about $10 million of Movado brand sales, less than five percent of overall brand revenue, and two percent of the Group’s consolidated revenue. The company announcement said it will “continue to partner with retailers it believes will support and enhance the Movado brand image and strategy.”
The downsizing is part of a new “unified strategy to leverage the strength of the Movado brand across all distribution channels” and consolidate its product development, merchandising, and marketing across its wholesale and retail channels, according to the company.
“Taking this decisive action now, will allow us enhanced opportunities to generate strong sustained growth in the future,” Grinberg said.
“Managing our brand proactively, we believe there are significant opportunities to harness the power of Movado across all channels of distribution and to build on the aspirational nature of the brand.
“This comprehensive strategy,” he said, was developed over the past several months through a thorough analysis of the brand and its opportunities, extensive customer research, and its end-consumers.”
The Movado Group also said it has changed its preliminary fiscal 2008 sales estimate to $543 million, down from $560 million, citing the new brand strategy, the effects of “lower holiday replenishment,” “a weak macroeconomic environment,” which it sees continuing into the next fiscal year. That excludes $31 million of excess discontinued product sales and a one-time accrual of $15 million for product returns associated with the wholesale door closings. The company will announce its fourth quarter and fiscal 2008 results on March 27.
The company also said it expects 2009 full-year sales to be between $555 million to $565 million.
Rick Cote, executive vice president and chief operating officer, added that, “We believe now is the opportune time to further invest in our business and better position Movado for long-term growth.” Despite the “uncertain consumer spending environment,” the company has the “financial strength and flexibility to successfully implement” its new brand strategy.
He said the company has “adjusted gross margins in excess of 63 percent (excluding discontinued product sales and the accrual for product returns), exceptional cash flow generation and a strong cash position in excess of $160 million at year-end.”