Movado Group, Inc. Announces Fourth Quarter and Fiscal Year 2017 Results
~ Full Year Diluted EPS of
~ Announces Cost Savings Initiatives ~
~ Introduces Fiscal 2018 Outlook ~
~ Board Approves Regular Quarterly Dividend ~
Mr. Grinberg continued, “Looking at fiscal 2018, we anticipate the
retail environment will remain difficult. We are seeing a significant
shift from brick and mortar to e-commerce and a continuing challenged
fashion watch market in
The Company recorded no unusual items during the fourth quarter of
fiscal 2017. During the third quarter of fiscal 2017, the Company
recorded a charge to non-operating expense of
Fourth Quarter Fiscal 2017 Results (See attached table for GAAP and non-GAAP measures)
-
Net sales decreased 8.7% to
$130.8 million compared to$143.3 million in the fourth quarter of fiscal 2016. Net sales on a constant dollar basis decreased 7.5% compared to net sales in the fourth quarter of fiscal 2016. -
Gross profit was
$64.7 million , or 49.5% of sales, compared to$75.4 million , or 52.6% of sales in the same period last year. Adjusted gross profit for the fourth quarter of fiscal 2016, which excludes a$0.1 million adjustment in expenses related to operating efficiency initiatives and other items, was$75.3 million , or 52.5% of sales. The decrease in adjusted gross margin percentage was primarily driven by an unfavorable shift in channel and product mix, partially offset by the favorable impact of changes in foreign currency exchange rates. -
Operating expenses decreased
$6.6 million or 10.3% to$57.2 million in the fourth quarter of fiscal 2017 from$63.8 million in the fourth quarter last year. For the fourth quarter of fiscal 2016, adjusted operating expenses were$62.4 million , which excludes$1.4 million of expenses related to operating efficiency initiatives and other items. The decrease in adjusted operating expenses was primarily the result of lower performance based compensation and payroll related expenses, the favorable impact of foreign currency exchange rates and a decrease in other operating expenses, partially offset by higher marketing expenses. -
Operating income in the fourth quarter was
$7.4 million compared to operating income of$11.5 million in the prior year period. Adjusted operating income for the fourth quarter of fiscal 2016, excluding$1.3 million of expenses related to operating efficiency initiatives and other items, was$12.9 million . -
The tax provision was
$1.9 million compared to both a tax provision and an adjusted tax provision of$2.9 million in the fourth quarter of fiscal 2016. -
Net income was
$5.2 million , or$0.22 per diluted share, compared to net income of$7.9 million , or$0.34 per diluted share, for the same period in the prior year. Adjusted net income in the fourth quarter of fiscal 2016, excluding$1.3 million of expenses, net of tax, related to operating efficiency initiatives and other items, was$9.2 million , or$0.40 per diluted share.
Full Year Fiscal 2017 Results (See attached table for GAAP and Non-GAAP measures)
-
Net sales decreased 7.1% to
$552.8 million compared to net sales of$594.9 million in fiscal 2016. Net sales on a constant dollar basis decreased 6.0% compared to net sales in fiscal 2016. -
Gross profit was
$294.8 million , or 53.3% of sales, compared to gross profit of$316.9 million , or 53.3% of sales, last year. Adjusted gross profit for fiscal 2016, which excludes$0.6 million in charges related to operating efficiency initiatives and other items, was$317.6 million , or 53.4% of sales. The decrease in adjusted gross margin percentage was primarily driven by reduced leverage of certain fixed costs as a result of lower net sales, mostly offset by the favorable impact of changes in foreign currency exchange rates. -
Operating expenses decreased
$6.0 million or 2.4% to$240.8 million in fiscal 2017 from operating expenses of$246.8 million last year. For fiscal 2017, adjusted operating expenses were$239.0 million , which excludes$1.8 million of expenses related to the COO’s retirement in the first quarter. For fiscal 2016, adjusted operating expenses were$243.4 million , which excludes$3.4 million of expenses related to operating efficiency initiatives and other items. The decrease in adjusted operating expenses was primarily the result of lower performance based compensation, lower depreciation and amortization expense, and the favorable impact of foreign currency exchange rates. -
Operating income for fiscal 2017 was
$54.0 million as compared to operating income of$70.1 million for fiscal 2016. Adjusted operating income for fiscal 2017, which excludes$1.8 million of expenses related to the COO’s retirement in the first quarter of fiscal 2017, was$55.8 million . Adjusted operating income for fiscal 2016, excluding$4.0 million of expenses related to operating efficiency initiatives and other items, was$74.1 million . - The effective tax rate for fiscal 2017 was 31.7% compared to 33.8% in the prior year. The adjusted effective tax rate for fiscal 2017 was 31.9% as compared to the adjusted effective tax rate of 32.1% in fiscal 2016. The decrease in the adjusted effective tax rate is primarily due to the mix of global pre-tax income.
-
Net income was
$35.1 million , or$1.51 per diluted share, for fiscal 2017 compared to net income of$45.1 million , or$1.90 per diluted share, for the prior year. Adjusted net income in fiscal 2017, which excludes$1.1 million in expenses, net of tax, related to the COO’s retirement in the first quarter of fiscal 2017, as well as$0.9 million , net of tax, related to the impairment charge on a long-term investment in a privately held company in the third quarter of fiscal 2017, was$37.1 million or$1.59 per diluted share. Adjusted net income in fiscal 2016, which excludes$3.9 million of expenses, net of tax, related to operating efficiency initiatives and other items, was$49.0 million or$2.06 per diluted share.
Cost Savings Initiatives
Following a review of the Company’s current cost structure,
Rebecca Minkoff License
As previously announced, the Company entered into a new long-term global
partnership with
Fiscal 2018 Outlook
In fiscal 2018, the Company anticipates that net sales will be in a
range of
This outlook excludes the
Regular Quarterly Dividend and Share Repurchase Program
The Company also announced that on
During the fourth quarter of fiscal 2017, the Company repurchased
approximately 20,000 shares under its share repurchase program. As of
Conference Call
The Company’s management will host a conference call and audio webcast
to discuss its results today,
In this release, the Company presents certain financial measures that
are not calculated according to generally accepted accounting principles
in
This press release contains certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. The
Company has tried, whenever possible, to identify these forward-looking
statements using words such as “expects,” “anticipates,” “believes,”
“targets,” “goals,” “projects,” “intends,” “plans,” “seeks,”
“estimates,” “may,” “will,” “should” and variations of such words and
similar expressions. Similarly, statements in this press release that
describe the Company's business strategy, outlook, objectives, plans,
intentions or goals are also forward-looking statements. Accordingly,
such forward-looking statements involve known and unknown risks,
uncertainties and other factors that could cause the Company's actual
results, performance or achievements and levels of future dividends to
differ materially from those expressed in, or implied by, these
statements. These risks and uncertainties may include, but are not
limited to general economic and business conditions which may impact
disposable income of consumers in
MOVADO GROUP, INC. | |||||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||||||
January 31, | January 31, | ||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Net sales | $ | 130,785 | $ | 143,264 | $ | 552,752 | $ | 594,923 | |||||||||||||
Cost of sales | 66,098 | 67,913 | 257,935 | 277,993 | |||||||||||||||||
Gross profit | 64,687 | 75,351 | 294,817 | 316,930 | |||||||||||||||||
Operating expenses | 57,246 | 63,807 | 240,836 | 246,823 | |||||||||||||||||
Operating income | 7,441 | 11,544 | 53,981 | 70,107 | |||||||||||||||||
Other expense | - | - | (1,282 | ) | - | ||||||||||||||||
Interest expense | (425 | ) | (382 | ) | (1,464 | ) | (1,109 | ) | |||||||||||||
Interest income | 81 | 22 | 219 | 127 | |||||||||||||||||
Income before income taxes | 7,097 | 11,184 | 51,454 | 69,125 | |||||||||||||||||
Provision for income taxes | 1,865 | 2,902 | 16,315 | 23,360 | |||||||||||||||||
Net income | 5,232 | 8,282 | 35,139 | 45,765 | |||||||||||||||||
Less: Net income attributed to noncontrolling interests | - | 394 | 78 | 671 | |||||||||||||||||
Net income attributed to Movado Group, Inc. | $ | 5,232 | $ | 7,888 | $ | 35,061 | $ | 45,094 | |||||||||||||
Per Share Information: | |||||||||||||||||||||
Net income attributed to Movado Group, Inc. | $ | 0.22 | $ | 0.34 | $ | 1.51 | $ | 1.90 | |||||||||||||
Weighted diluted average shares outstanding | 23,334 | 23,317 | 23,267 | 23,774 |
MOVADO GROUP, INC. | ||||||||||||||
GAAP AND NON-GAAP MEASURES | ||||||||||||||
(In thousands, except for percentage data) | ||||||||||||||
(Unaudited) | ||||||||||||||
As Reported | % Change | |||||||||||||
Three Months Ended | % Change | Constant | ||||||||||||
January 31, | As Reported | Dollar | ||||||||||||
2017 | 2016 | |||||||||||||
Total Net sales | $ | 130,785 | $ | 143,264 | -8.7 | % | -7.5 | % | ||||||
As Reported | % Change | |||||||||||||
Twelve Months Ended | % Change | Constant | ||||||||||||
January 31, | As Reported | Dollar | ||||||||||||
2017 | 2016 | |||||||||||||
Total Net sales | $ | 552,752 | $ | 594,923 | -7.1 | % | -6.0 | % |
MOVADO GROUP, INC. | |||||||||||||||||||||||||||||
GAAP AND NON-GAAP MEASURES | |||||||||||||||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||
Net Sales | Gross Profit | Operating Income | Pre-tax Income | Provisions for Income Taxes |
Net Income Attributed to Movado Group, Inc. |
EPS | |||||||||||||||||||||||
Three Months Ended January 31, 2017 | |||||||||||||||||||||||||||||
As Reported (GAAP) | $ | 130,785 | $ | 64,687 | $ | 7,441 | $ | 7,097 | $ | 1,865 | $ | 5,232 | $ | 0.22 | |||||||||||||||
Three Months Ended January 31, 2016 | |||||||||||||||||||||||||||||
As Reported (GAAP) | $ | 143,264 | $ | 75,351 | $ | 11,544 | $ | 11,184 | $ | 2,902 | $ | 7,888 | $ | 0.34 | |||||||||||||||
Operating Efficiency Initiatives and Other Items (1) | - | (72 | ) | 1,326 | 1,326 | (7 | ) | 1,333 | 0.06 | ||||||||||||||||||||
Adjusted Results (Non-GAAP) | $ | 143,264 | $ | 75,279 | $ | 12,870 | $ | 12,510 | $ | 2,895 | $ | 9,221 | $ | 0.40 | |||||||||||||||
Twelve Months Ended January 31, 2017 | |||||||||||||||||||||||||||||
As Reported (GAAP) | $ | 552,752 | $ | 294,817 | $ | 53,981 | $ | 51,454 | $ | 16,315 | $ | 35,061 | $ | 1.51 | |||||||||||||||
Impairment of a Long-Term Investment (2) | - | - | - | 1,282 | 398 | 884 | 0.03 | ||||||||||||||||||||||
Retirement Charge (3) | - | - | 1,806 | 1,806 | 687 | 1,119 | 0.05 | ||||||||||||||||||||||
Adjusted Results (Non-GAAP) | $ | 552,752 | $ | 294,817 | $ | 55,787 | $ | 54,542 | $ | 17,400 | $ | 37,064 | $ | 1.59 | |||||||||||||||
Twelve Months Ended January 31, 2016 | |||||||||||||||||||||||||||||
As Reported (GAAP) | $ | 594,923 | $ | 316,930 | $ | 70,107 | $ | 69,125 | $ | 23,360 | $ | 45,094 | $ | 1.90 | |||||||||||||||
Operating Efficiency Initiatives and Other Items (1) | - | 621 | 3,996 | 3,996 | 127 | 3,869 | 0.16 | ||||||||||||||||||||||
Adjusted Results (Non-GAAP) | $ | 594,923 | $ | 317,551 | $ | 74,103 | $ | 73,121 | $ | 23,487 | $ | 48,963 | $ | 2.06 |
(1) | Related to a charge for severance, occupancy expenses and the write-off of certain fixed assets. | ||
(2) | Related to the impairment of a long-term investment. | ||
(3) | Related to a charge for the retirement of the former Vice Chairman and Chief Operating Officer. |
MOVADO GROUP, INC. | |||||||||||
CONSOLIDATED BALANCE SHEETS | |||||||||||
(In thousands) | |||||||||||
(Unaudited) | |||||||||||
January 31, | January 31, | ||||||||||
2017 | 2016 | ||||||||||
ASSETS |
|||||||||||
Cash and cash equivalents | $ | 256,279 | $ | 228,188 | |||||||
Trade receivables, net | 66,847 | 71,030 | |||||||||
Inventories | 153,167 | 162,465 | |||||||||
Other current assets | 28,487 | 27,352 | |||||||||
Total current assets | 504,780 | 489,035 | |||||||||
Property, plant and equipment, net | 34,173 | 38,553 | |||||||||
Deferred and non-current income taxes | 24,837 | 20,323 | |||||||||
Other non-current assets | 44,012 | 37,259 | |||||||||
Total assets | $ | 607,802 | $ | 585,170 | |||||||
LIABILITIES AND EQUITY |
|||||||||||
Loans payable to bank, current | $ | 5,000 | $ | 5,000 | |||||||
Accounts payable | 27,192 | 27,308 | |||||||||
Accrued liabilities | 28,241 | 28,570 | |||||||||
Accrued payroll and benefits | 6,820 | 11,047 | |||||||||
Income taxes payable | 4,149 | 6,257 | |||||||||
Total current liabilities | 71,402 | 78,182 | |||||||||
Loans payable to bank | 25,000 | 35,000 | |||||||||
Deferred and non-current income taxes payable | 3,322 | 2,640 | |||||||||
Other non-current liabilities | 34,085 | 28,201 | |||||||||
Noncontrolling interests | - | 595 | |||||||||
Shareholders' equity | 473,993 | 440,552 | |||||||||
Total liabilities and equity | $ | 607,802 | $ | 585,170 |
MOVADO GROUP, INC. | |||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||
(In thousands) | |||||||||||||
(Unaudited) | |||||||||||||
Twelve Months Ended | |||||||||||||
January 31, | |||||||||||||
2017 | 2016 | ||||||||||||
Cash flows from operating activities: | |||||||||||||
Net income | $ | 35,139 | $ | 45,765 | |||||||||
Depreciation and amortization | 11,507 | 13,156 | |||||||||||
Other non-cash adjustments | 9,873 | 5,367 | |||||||||||
Operating efficiency initiatives and other items | - | 3,996 | |||||||||||
Changes in working capital | 3,969 | 5,290 | |||||||||||
Changes in non-current assets and liabilities | (2,070 | ) | 1,016 | ||||||||||
Net cash provided by operating activities | 58,418 | 74,590 | |||||||||||
Cash flows from investing activities: | |||||||||||||
Capital expenditures | (5,920 | ) | (8,070 | ) | |||||||||
Restricted cash deposits | (1,156 | ) | (435 | ) | |||||||||
Short-term investment | (152 | ) | - | ||||||||||
Trademarks and other intangibles | (328 | ) | (650 | ) | |||||||||
Net cash (used in) investing activities | (7,556 | ) | (9,155 | ) | |||||||||
Cash flows from financing activities: | |||||||||||||
Proceeds from bank borrowings | 3,000 | 50,000 | |||||||||||
Repayments of bank borrowings | (13,000 | ) | (10,000 | ) | |||||||||
Dividends paid | (11,930 | ) | (10,312 | ) | |||||||||
Stock repurchase | (3,864 | ) | (48,748 | ) | |||||||||
Purchase of incremental ownership of joint venture | (1,320 | ) | (4,267 | ) | |||||||||
Other financing | (561 | ) | (395 | ) | |||||||||
Net cash (used in) financing activities | (27,675 | ) | (23,722 | ) | |||||||||
Effect of exchange rate changes on cash and cash equivalents | 4,904 | (13,377 | ) | ||||||||||
Net change in cash and cash equivalents | 28,091 | 28,336 | |||||||||||
Cash and cash equivalents at beginning of year | 228,188 | 199,852 | |||||||||||
Cash and cash equivalents at end of year | $ | 256,279 | $ | 228,188 |
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Source:
ICR, Inc.
Rachel Schacter/Allison Malkin, 203-682-8200