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RAPAPORT... The Movado Group Inc. lowered its outlook following a weak third quarter as the retail watch segment slows. The group added that certain brands, including Movado, did not perform so well in international markets.
While the company will release official results on November 25, preliminary revenue slipped less than 1 percent year on year to $188.6 million in the third quarter that ended on October 31. Earnings per share are expected to be between 86 cents and 87 cents compared with 89 cents one year ago. Given the market conditions, Movado anticipates that revenue will be nearly the same as last year, between $132 million and $133 million. But earnings per share are projected to be between 18 cents and 23 cents compared with 28 cents one year previously.
Efraim Grinberg, the chairman and CEO of Movado, said, “I am disappointed in our third quarter performance and our expectations for this trend to continue into the fourth quarter, which combined has caused us to reduce guidance for the full year. For fiscal 2015, our net sales are now expected to increase by approximately 1 percent to 2 percent and operating profit is expected to be down approximately 7 percent to 10 percent as compared to last fiscal year. Our brand portfolio remains strong as does our balance sheet. We have strong plans in place for the upcoming holiday season that should continue to drive increased sell-through at retail. As we begin planning for next year, we are confident that we will return to sustainable profitable growth.” Grinberg stated that Movado's sell-through throughout the year has been strong in the U.S. and the sell-through for its licensed brand portfolio has trended positively.
Rick Coté, the vice chairman, explained, “The retailer inventory build portion of our Movado / ESQ reallocation strategy did not fully materialize. Second, certain of our licensed brands substantially underperformed as compared to our expectations. Specifically, we anticipate our Lacoste brand business will be down versus last year as we continue working with Lacoste as they refine their global brand positioning. Our Scuderia Ferrari brand did not meet our expectations despite increasing sales 17 percent for the nine months. Third, we saw weaker than planned performance by Movado in international markets. Lastly, the overall watch category experienced weaker growth than expected in both the U.S. and European markets. Our profitability is also being negatively impacted by costs related to our brand building and growth initiatives which were only slightly curtailed.”
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