A shareholder class action is targeting Movado, claiming the watchmaker issued overoptimistic forecasts that artificially inflated its stock.
According to the suit filed Feb. 4 in New Jersey federal court on behalf of plaintiff Gregory L. Batty, for most of 2014 executives at the Paramus, N.J.–based company projected double-digit jumps in sales and profits for fiscal year 2015.
However, in November 2014, it announced disappointing third-quarter sales and trimmed its full-year outlook. It now foresaw a profit decrease of 7–10 percent and 1–2 percent sales rise. The news caused the stock to crater nearly 33 percent.
The release blamed underperformance in its Lacoste, Scuderia Ferrari, and Movado brands, as well as weaker growth in the category as a whole.
“Defendants’ growth projections for sales and operating income were unrealistic and simply unattainable given declining demand in the watch market, a generally weaker retail economy, and retailers’ broad efforts to trim inventory levels,” the suit argues, calling the statements “materially false and misleading.”
The suit, which seeks class-action status, charges that chairman and CEO Efraim Grinberg sold 200,000 shares of stock over the period, netting $8.6 million, while “investors suffered.”
A Movado spokesperson declined comment.