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RAPAPORT... Movado Group reported that revenue improved 3.8 percent year on year to $143.6 million for the second quarter that ended on July 31. Gross profit as a percentage of sales was basically flat at 54 percent due to an unfavorable impact of changes in foreign currency exchange rates, offset by the leverage gained on certain fixed costs due to increased sales. Operating expenses rose 4.6 percent to $60.4 million due largely to increased payroll and related costs and expenses associated with the Baselworld show. Profit fell 3.8 percent $12.17 million, or 47 cents per share. Efraim Grinberg, the CEO of Movado, explained that management was pleased to deliver increased sales, a strong gross margin performance and operating profit growth despite a more challenging retail climate. "Revenue growth in the second quarter was primarily driven by the Movado brand and our licensed brand and retail categories. During the latter part of the quarter, we took steps to further build our team in support of our long term growth with the hire of Ricardo Quintero as president,” Grinberg said. "We anticipate our sales growth to accelerate during the second half of the year, as strong sell-through rates at retail are expected to drive new shipments and replenishment growth and we continue to benefit from the expansion of our Movado and licensed brands around the world. We will also continue to invest in our infrastructure and growth initiatives, including investments in Asia and Latin America. We continue to believe that our strategies have us positioned to achieve our goal of delivering sustainable profitable growth,” he added. The company recorded a tax provision in the first six months of its fiscal year of $8.3 million, which equates to an effective tax rate of 29.9 percent compared with 26.7 percent one year earlier. Net income was $19.5 million, or 76 cents per share, down from $20.7 million, or 80 cents per share one year earlier. Rick Coté, Movado's vice chairman, defined the retail environment as "cautious." “We continue to gain share in our key global markets in both our largest brand, Movado, and also our largest business, our licensed brand division. Our outlet retail stores continue to deliver positive sales and profit increases. These positive results and trends allow us to reiterate our previously issued full year guidance of delivering 10 percent sales growth and 19 percent operating profit growth. Our balance sheet remains strong with approximately $170 million in cash, no debt and shareholders’ equity in excess of $470 million. We are also pleased to announce the continuation of our 10 cent quarterly cash dividend that our board approved today,” cote said.
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