Movado Group, Inc. Announces Second Quarter Results
~ Gross Margin Expands to 62% ~
~ Operating Profit Increases 14.6% from LY ~
PARAMUS, N.J., Sept. 7 /PRNewswire-FirstCall/ -- Movado Group, Inc. (NYSE: MOV), today announced second quarter results for the period ended July 31, 2006.
Second Quarter Fiscal 2007
* Net sales increased 9.8% to $126.6 million from $115.3 million last
year.
* Comparable store sales increased 9.3% at the Company's Movado boutiques
versus a 2.3% increase in the year-ago period.
* Gross margin improved 130 basis points to 62.0% compared to 60.7% last
year.
* Operating profit increased 14.6% to $14.1 million, or 11.1% of sales,
versus $12.3 million, or 10.7% of sales in the year-ago period.
* Net interest expense was $0.3 million versus $0.9 million last year:
* Interest expense for the quarter was the same as the year-ago
period, $0.9 million, with average borrowings in the quarter of
$99.3 million at an average borrowing rate of 3.7%.
* Interest income for the quarter was $0.6 million due to short term
investments of cash-on-hand resulting from the repatriation of
foreign earnings under the American Jobs Creation Act.
* Income tax expense of $2.4 million reflects a 17.5% tax rate in the
second quarter compared to income tax expense of $2.9 million, or a
25.0% tax rate, recorded last year. The favorable tax rate benefited
second quarter diluted earnings per share by $0.04 and reflects the
continued utilization of a Swiss net operating loss carryforward (NOL)
acquired with the Ebel brand in fiscal 2005. The Company anticipates
maintaining the 17.5% tax rate for the balance of fiscal 2007.
* Net income increased to $11.3 million, or $0.43 per diluted share,
compared to net income of $8.6 million, or $0.33 per diluted share, in
the prior year period.
First Half Fiscal 2007
* Net sales increased 10.5% to $224.3 million from $203.1 million last
year.
* Comparable store sales increased 7.0% at the Company's Movado boutiques
versus a 2.7% comparable store sales gain in the year-ago period.
* Gross margin was 61.6% compared to 60.5% last year.
* Operating profit was $17.5 million versus $14.4 million in the year-ago
period.
* Net interest expense was $0.4 million versus $1.7 million last year:
* Interest expense for the first half of fiscal 2007 was $1.9 million
compared to $1.8 million in the year-ago period. Average borrowings
for the year-to-date period were $102.8 million at an average
borrowing rate of 3.6%.
* Interest income for the first half of fiscal 2007 was $1.5 million
due to short term investments of cash-on-hand resulting from the
repatriation of foreign earnings under the American Jobs Creation
Act.
* Net income was $14.2 million, or $0.54 per diluted share, compared to
net income of $9.5 million, or $0.37 per diluted share, in the prior
year period.
Efraim Grinberg, President and Chief Executive Officer, commented, "We are very pleased with our performance for the first half of this year. Our strong results reflect the continued customer appeal of our diverse portfolio of brands, including the growing prominence of Ebel around the world, the introduction of our new Hugo Boss watch collection, and the very successful launch and delivery of Series 800, a bold new sport collection from Movado. Looking ahead to the fall season, we are excited about the multitude of powerful marketing programs we have in place to support each of our brands."
Rick Cote, Executive Vice President and Chief Operating Officer, stated, "Improving our financial returns -- namely operating margin -- remains a top priority for our company. We are encouraged by the continued momentum we experienced in the second quarter with solid expansion achieved in both our gross margin and operating margin results."
Movado Group continues to project fiscal 2007 diluted earnings per share to range between $1.53 and $1.58. This guidance includes an approximate $0.08 per diluted share expense associated with the adoption of FASB 123R and the shift in the composition of the Company's equity-based compensation plan from options toward restricted stock.
The Company's management will host a conference call today, September 7, 2006 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, manufactures, and distributes Movado, Ebel, Concord, ESQ, Coach, Tommy Hilfiger and HUGO BOSS watches worldwide, and operates Movado boutiques and company stores in the United States. The Company plans to launch Juicy Couture watches in the fall of 2006 and LACOSTE watches in the spring of 2007.
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, 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, 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 Operations
(in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
July 31, July 31,
2006 2005 2006 2005
Net sales $126,588 $115,326 $224,332 $203,082
Cost of sales 48,076 45,340 86,230 80,258
Gross profit 78,512 69,986 138,102 122,824
Selling, general and
administrative expenses 64,438 57,701 120,594 108,400
Operating profit 14,074 12,285 17,508 14,424
Interest expense (919) (926) (1,862) (1,804)
Interest income 616 42 1,507 111
Minority interest (15) - 64 -
Income before income taxes 13,756 11,401 17,217 12,731
Income tax 2,407 2,850 3,013 3,183
Net income $11,349 $8,551 $14,204 $9,548
Net income per diluted share $0.43 $0.33 $0.54 $0.37
Shares used in per share
computation 26,584 26,126 26,506 26,074
MOVADO GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
July 31, January 31, July 31,
2006 2006 2005
ASSETS
Cash and cash equivalents $78,126 $123,625 $50,323
Trade receivables, net 128,416 109,852 108,775
Inventories 215,461 198,582 203,047
Other 34,712 26,596 33,392
Total current assets 456,715 458,655 395,537
Property, plant and equipment, net 51,931 52,168 52,687
Other assets 40,464 39,069 38,519
$549,110 $549,892 $486,743
LIABILITIES AND SHAREHOLDERS' EQUITY
Loans payable to banks $0 $0 $37,500
Current portion of long-term debt 5,000 5,000 -
Accounts payable 40,266 35,529 35,283
Accrued liabilities 31,990 43,065 41,129
Deferred and current taxes payable 2,550 8,227 4,756
Total current liabilities 79,806 91,821 118,668
Long-term debt 91,978 104,955 45,000
Deferred and non-current income taxes 13,278 11,947 9,031
Other liabilities 20,112 19,491 17,363
Minority interest 245 - -
Shareholders' equity 343,691 321,678 296,681
$549,110 $549,892 $486,743
SOURCE Movado Group, Inc.
CONTACT: Investor Relations - Suzanne Rosenberg, Vice President,
Corporate Communications, Movado Group, Inc.,
+1-201-267-8000;
Melissa Myron,
or Rachel Albert, both of Financial Dynamics for Movado Group, Inc.,
+1-212-850-5600