Movado Group, Inc. Announces Second Quarter and Six-Month Results
~ Q2 Includes Charge Associated with Previously Announced Expense Reduction
Plan ~
~ Company Reiterates Full Year Guidance ~
PARAMUS, N.J., Sept. 4 /PRNewswire-FirstCall/ -- Movado Group, Inc. (NYSE: MOV), today announced second quarter and six-month results for the period ended July 31, 2008. For the second quarter, adjusted diluted earnings per share were $0.39 compared with $0.45 in fiscal 2008 (see attached table for reconciliation of GAAP to non-GAAP measures). On a GAAP basis, diluted earnings per share were $0.32 and included a $2.2 million pre-tax charge related to the Company's previously announced expense reduction plan.
Second Quarter Fiscal 2009
-- Net sales in the second quarter of fiscal 2009 were $129.7 million. Fiscal 2008 net sales of $139.5 million included $8.3 million of excess discontinued product. Excluding the sales of discontinued product, net sales decreased 1.1%.
-- Gross profit was $83.9 million, or 64.7% of sales, compared to $83.3 million, or 59.8% of sales last year. Excluding excess discontinued product sales in the second quarter of fiscal 2008, year-ago adjusted gross profit was $83.4 million, or 63.6% of sales. On a comparable basis, gross margin in the second quarter of fiscal 2009 expanded 110 basis points.
-- Operating profit was $11.1 million and included a $2.2 million charge related to the implementation of the Company's expense reduction plan. Excluding this charge, adjusted operating profit was $13.3 million versus $16.3 million in the year-ago period.
-- Income tax expense of $2.7 million reflects a 24.6% tax rate in the second quarter compared to income tax expense of $4.1 million, or a 24.9% tax rate, recorded last year.
-- Net income in the quarter was $8.1 million. Excluding the after-tax effect of the aforementioned charge, adjusted net income was $9.8 million compared to net income of $12.3 million in the prior year period.
First Half Fiscal 2009
-- Net sales were $231.0 million. Year-ago net sales of $240.8 million included $11.0 million of excess discontinued product. Excluding the sales of discontinued product, net sales increased 0.5%.
-- Gross profit was $148.9 million, or 64.5% of sales, compared to $145.0 million, or 60.2% of sales last year. Excluding excess discontinued product sales in the year-ago period, adjusted gross profit was $145.4 million, or 63.3% of sales. On a comparable basis, gross margin in the first half of fiscal 2009 expanded 120 basis points.
-- Operating profit was $12.8 million. Excluding the aforementioned charge recorded in the second quarter of fiscal 2009, adjusted operating profit was $14.9 million versus $19.1 million in the year-ago period.
-- Income tax expense of $3.2 million reflects a 25.4% tax rate for the year-to-date period compared to income tax expense of $4.8 million, or a 24.2% tax rate, recorded last year.
-- Net income was $9.4 million. Excluding the after-tax effect of the charge recorded in the second quarter of fiscal 2009, adjusted net income was $11.0 million, or $0.42 per diluted share, compared to net income of $14.7 million, or $0.54 per diluted share, in the prior year period.
Efraim Grinberg, President and Chief Executive Officer, commented, "While our second quarter results reflect the continued challenging macroeconomic environment, the decisive actions we've taken to reduce expenses and improve productivity are designed to position our company to emerge quickly and even stronger than before, as the economy recovers. At the same time, we continue to gain market share with a combination of strong product innovation and a powerful presence at the point-of-sale, along with consistent marketing support and advertising investment across our spectrum of brands."
Mr. Grinberg continued, "Our business is well positioned as we enter the second half of the year and we remain on track to achieve our financial objectives and strategic initiatives. The importance of branding is paramount in today's consumer spending environment and we will continue to strongly support and differentiate each of our brands with exciting new product introductions and bold new image-building advertising campaigns."
Rick Cote, Executive Vice President and Chief Operating Officer, stated, "As previously announced on August 7, 2008, we have initiated an expense reduction plan to streamline operations, reduce expenses, and improve efficiencies across the Company's global organization. Our expense reduction plan is targeted to generate $25 million in annualized savings, or 8% of the Company's operating expenses, with $6 million of these savings expected to be realized in the current fiscal year. These actions, together with continued gross margin improvement, will enable us to achieve our mid-teen operating margin objective on an accelerated basis. Importantly, our balance sheet remains strong and we will continue to leverage our solid financial flexibility to invest in the future growth of our business."
Excluding the charge and cost savings associated with Movado Group's previously announced expense reduction plan, and recognizing the limited visibility on the economic environment, the Company is maintaining its fiscal 2009 diluted earnings per share guidance of approximately $1.65 to $1.72, based on a projected tax rate of 24%. In fiscal 2008, the Company reported adjusted diluted earnings per share of $1.71, which excluded a net realized tax benefit and an accrual for product returns recorded in the fourth quarter.
Upon completion of a one million share repurchase program in April of fiscal 2009, Movado Group initiated a new repurchase program during the first quarter of fiscal 2009 to buyback up to one million additional shares of its common stock. To-date, with both programs, the Company has repurchased a total of 1.9 million shares at a total cost of $38.9 million.
The Company's management will host a conference call today, September 4, 2008 at 10:00 a.m. Eastern Time to discuss its second quarter financial results. A live broadcast of the call will be available on the Company's website: www.movadogroup.com. This call will be archived online within one hour of the completion of the conference call.
Movado Group, Inc. designs, sources, and distributes Movado, Ebel, Concord, ESQ, Coach, Tommy Hilfiger, HUGO BOSS, Juicy Couture and Lacoste watches worldwide, and operates Movado boutiques and company stores in the United States.
In this release, the Company presents certain adjusted financial measures that are not calculated according to generally accepted accounting principles in the United States ("GAAP"). These non-GAAP financial measures are designed to complement the GAAP financial information presented in this release because management believes they present information regarding the Company that management believes is useful to investors. The non-GAAP financial measures presented should not be considered in isolation from or as a substitute for the comparable GAAP financial measure.
The Company is presenting net sales excluding excess discontinued product sales (and gross profit excluding such sales) because the Company believes that it is useful to investors to eliminate the effect of these unusual sales in order to improve the comparability of the Company's results for the periods presented. Adjusted gross margin is based on net sales excluding excess discontinued product sales, which did not contribute to gross profit in any of the periods presented.
The Company is presenting adjusted operating profit, which is operating profit excluding the effect of a pre-tax charge associated with the Company's expense reduction program, and adjusted net income, which is net income excluding the after-tax effect of such charge. The company is presenting adjusted operating profit and adjusted net income because it believes that it is useful to investors to eliminate the effect of such a non-recurring charge, in order to improve the comparability of the periods presented and to better show trends in the Company's results of operations for the periods presented.
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 similar expressions. Similarly, statements in this press release that describe the Company's business strategy, outlook, trends, 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: the Company's ability to successfully introduce and sell new products, the Company's ability to successfully integrate the operations of newly acquired and/or licensed brands without disruption to its other business activities, changes in consumer demand for the Company's products, reduced discretionary spending by consumers due to the recent tightening of credit, risks relating to the fashion and retail industry, import restrictions, competition, seasonality, commodity price and exchange rate fluctuations, changes in local or global economic conditions, and the other factors discussed in the Company's Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. These statements reflect the Company's current beliefs and are based upon information currently available to it. Be advised that developments subsequent to this press release are likely to cause these statements to become outdated with the passage of time.
MOVADO GROUP, INC.
Consolidated Statements of Income
(in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
July 31, July 31,
2008 2007 2008 2007
Net sales $129,689 $139,467 $231,042 $240,830
Cost of sales 45,786 56,121 82,119 95,832
Gross profit 83,903 83,346 148,923 144,998
Selling, general and
administrative expenses 72,763 67,009 136,170 125,889
Operating profit 11,140 16,337 12,753 19,109
Interest expense (794) (872) (1,500) (1,751)
Interest income 523 1,062 1,480 2,309
Income before income taxes and
minority interests 10,869 16,527 12,733 19,667
Provision for income tax 2,669 4,117 3,236 4,764
Minority interests 64 146 112 239
Net income $8,136 $12,264 $9,385 $14,664
Net income per diluted share $0.32 $0.45 $0.36 $0.54
Number of shares outstanding 25,384 27,272 26,033 27,259
MOVADO GROUP, INC.
Reconciliation tables
(in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
July 31, July 31,
2008 2007 2008 2007
Operating profit (GAAP) $11,140 $16,337 $12,753 $19,109
Severance related expenses (1) 2,192 - 2,192 -
Adjusted operating profit
(non-GAAP) $13,332 $16,337 $14,945 $19,109
Three Months Ended Six Months Ended
July 31, July 31,
2008 2007 2008 2007
Net income (GAAP) $8,136 $12,264 $9,385 $14,664
Severance related expenses (1) 1,644 - 1,644 -
Adjusted net income (Non-GAAP) $9,780 $12,264 $11,029 $14,664
Number of shares outstanding 25,384 27,272 26,033 27,259
Adjusted net income per share
(non-GAAP) $0.39 $0.45 $0.42 $0.54
(1) Charges related to the implementation of the Company's expense
reduction plan.
MOVADO GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
July 31, January 31, July 31,
2008 2008 2007
ASSETS
Cash and cash equivalents $84,503 $169,551 $112,456
Trade receivables, net 96,372 94,328 100,611
Inventories 238,736 205,129 215,557
Other current assets 48,352 50,317 37,443
Total current assets 467,963 519,325 466,067
Property, plant and equipment, net 71,472 68,513 61,040
Deferred income taxes 20,223 20,024 27,863
Other non-current assets 38,404 38,354 37,417
Total assets $598,062 $646,216 $592,387
LIABILITIES AND EQUITY
Current portion of long-term debt $10,000 $10,000 $5,000
Accounts payable 21,331 38,397 30,708
Accrued liabilities 43,543 42,770 38,037
Deferred and current taxes payable 568 8,526 5,717
Total current liabilities 75,442 99,693 79,462
Long-term debt 49,776 50,895 62,475
Deferred and non-current income
taxes 6,577 6,363 32,181
Other liabilities 24,306 24,205 24,384
Minority Interests 1,977 1,865 1,467
Shareholders' equity 439,984 463,195 392,418
Total liabilities and equity $598,062 $646,216 $592,387
SOURCE Movado Group, Inc.
CONTACT: Investor Relations, Suzanne Rosenberg, Vice President,
Corporate Communications, Movado Group, Inc., +1-201-267-8000; Leigh Parrish,
or Melissa Merrill, both of Financial Dynamics, +1-212-850-5600/
Web site: http://www.movadogroupinc.com
(MOV)