Reporting before the opening bell on December 9, Movado Group Inc. (MOV) confirmed that the company’s earnings for the 3Q were hurt by the lack of orders and a tax charge that pushed profits into the red. Movado is a designer, manufacturer and distributor of quality watches with prominent brands sold in almost every price category comprising the watch industry.
Offering products under such names as Movado, Ebel, Concord, ESQ, Coach, Hugo Boss, Juicy Couture, Tommy Hilfiger, and Lacoste brand names, Movado recorded a net loss of $20.9M, or $0.85 per share. That is a far cry from the previous year’s net profit of $15.7M, or $0.62 per share.
The latest results were greatly affected by a one-time tax charge of $22.95M, unlike last year, when the company benefited from a tax gain of $3.74M. However, Movado did manage to benefit from sales of discontinued inventory that amounted to $8.4M.
Excluding the one-time charge, Movado would have posted a net profit of $3M, or $0.12 per share, down substantially from the prior year’s net income of $13.43M, or $0.53 per share, a decrease in earnings of nearly 78%.
Quarterly sales fell year-over-year, slipping from $135.8M to $129M, a decrease in overall revenues of 5%. Sales have been hurt across the board for luxury makers, as consumers continue to curtail their spending habits. Retailers also played into Movado’s lack of sales, as stores have been keeping a keen eye on their inventories.
On average, analysts within the industry were looking for the luxury watch and jewelry maker to post a quarterly profit of $0.66 per share based on total sales of $141.2M.
Commenting on the results was Efraim Grinberg, CEO at Movado, “We are very disappointed in our third quarter and year-to-date results. We experienced higher levels of destocking in the marketplace than originally anticipated as retailers continued to focus on very tight inventory control. Further, the unprecedented level of U.S. jewelry retailers closing their operations and liquidating inventory has had a significant impact on our business.”
Movado’s gross margin plunged as well, falling from 62.9% to 46.8%. The decrease was attributed to the $8.4M in excess products that had been discontinued. Lower margins were affected by the company’s shift in product mix, as well as the adverse effect of fluctuations in the exchange rate.
Through the first nine months of fiscal 2010, Movado has suffered, posting a net loss of $31.07M, or $1.07 per share, compared to the same period a year ago in which the company recorded a profit of $25.11M, or $0.97 per share. Excluding charges throughout the year, the company posted an adjusted net loss of $5.31M, or $0.22 per share, versus a profit of $24.66M, or $0.96 per share.
Total revenues have declined through the first nine months as well, falling from $366.89M to $286.24M, a drop in sales of almost 22%.
Because Movado operates in an industry that has been devastated by the economic recession, the company is now looking to post a full-year loss between $1.40 and $1.50 per share, compared to a previously expected profit of $0.50 per share made during the 1Q. The expected loss will include a $0.94 reduction in earnings for tax charges, a $0.08 loss related to the sale of discontinued products and a $0.03 charge related to restructuring costs.
Excluding one-time items, Movado is expecting to record an annual loss between $0.35 and $0.45 per share. Analysts, on average, are projecting a yearly profit of $0.55 per share. Analysts typically exclude one-time items from their forecasts.
Movado, based in Paramus, N.J., is anticipating a 20% decrease in sales for the year, up from the company’s prior expectation of a high, single-digit percentage decline.
By the conclusion of trading on December 9, shares of Movado plunged on the company’s earnings report and yearly projections. The stock slipped nearly 13% by the end of the day, losing $1.40 to finish at $9.45 per share. Over the course of a year, shares of MOV have traded as high as $15.56 per share, while slipping as low as $4.65 per share.
