Movado Group, Inc. Announces Third Quarter Results
~ Third Quarter Revenue of
~ EPS of
~ Raises Fiscal 2018 Outlook ~
~ Board Declares Quarterly Dividend ~
-
Net sales increased 6.0% to
$190.7 million , or 5.4% on a constant dollar basis -
Operating income of
$25.2 million ; Adjusted operating income of$33.6 million versus operating income of$31.1 million in the prior year period -
Diluted EPS of
$0.75 ; Adjusted diluted EPS of$1.04 compared to adjusted diluted EPS of$0.91 in prior year period
Mr. Grinberg continued, “We believe we are well positioned as we enter
the final quarter of the year. Our strong product innovation and
marketing programs will allow us to capitalize on the holiday season. We
have a strong balance sheet with
During the third quarter of fiscal 2018, the Company recorded a
In the prior year period, during the third quarter of fiscal 2017, the
Company recorded a pre-tax charge to non-operating expense of
Third Quarter Fiscal 2018 (See attached table for GAAP and Non-GAAP measures)
-
Net sales increased 6.0% to
$190.7 million compared to$179.8 million in the third quarter of fiscal 2017. Net sales on a constant dollar basis increased 5.4% compared to net sales in the third quarter of fiscal 2017. -
Gross profit was
$104.1 million , or 54.6% of sales, compared to$98.6 million , or 54.8% of sales, in the third quarter last year. Adjusted gross profit was$104.7 million , or 54.9% of sales, which primarily excludes$0.6 million of amortization of acquisition accounting adjustments related to the Olivia Burton brand. The increase in adjusted gross margin percentage was primarily the result of a reduction of certain fixed costs due to the cost savings initiatives and favorable changes in foreign currency exchange rates, partially offset by channel and product mix. -
Operating expenses increased
$11.4 million to $78.9 million compared to$67.5 million in the third quarter last year. Adjusted operating expenses in the third quarter of fiscal 2018 were$71.1 million which excludes$0.8 million of expenses and amortization related to the acquisition of the Olivia Burton brand and$7.0 million of expenses related to the cost savings initiatives. The increase in adjusted operating expenses was primarily the result of higher performance-based compensation of$1.5 million , higher distribution costs of$1.3 million , higher marketing expenses of$1.2 million and other selling and other operating costs, offset by a decrease in compensation and benefit expenses primarily related to the Company’s cost savings initiatives. -
Operating income was
$25.2 million compared to operating income of$31.1 million in the same period last year. Adjusted operating income in the third quarter of fiscal 2018 was$33.6 million which excludes$1.4 million of expenses and amortization related to the acquisition of the Olivia Burton brand and$7.0 million of expenses related to the cost savings initiatives. -
The Company recorded a tax provision of
$7.5 million , which equates to an effective tax rate of 30.1%, as compared to a tax provision of$9.3 million or an effective tax rate 31.5% in the third quarter of fiscal 2017. For the third quarter of fiscal 2018, the Company recorded an adjusted tax provision of$9.0 million or an adjusted tax rate of 27.1%, as compared to an adjusted tax provision of$9.7 million or adjusted tax rate of 31.5% for the third quarter of fiscal 2017. -
Net income was
$17.4 million , or$0.75 per diluted share, compared to net income of$20.2 million , or$0.87 per diluted share, in the third quarter of fiscal 2017. For the third quarter of fiscal 2018, adjusted net income was$24.3 million , or$1.04 per diluted share, which excludes$1.1 million of expenses and amortization, net of$0.3 million of tax, related to the acquisition of the Olivia Burton brand, and$5.8 million associated with the cost savings initiatives, net of$1.2 million of tax. For the third quarter of fiscal 2017, adjusted net income was$21.1 million , or$0.91 per diluted share, which excludes$0.9 million , net of$0.4 million of tax, related to the impairment charge on a long-term investment in a privately held company.
Nine Month Results Fiscal 2018 (See attached table for GAAP and Non-GAAP measures)
-
Net sales decreased 0.8% to
$418.7 million compared to$422.0 million in the same period of fiscal 2017. Net sales on a constant dollar basis decreased 0.3% compared to net sales in the first nine months of fiscal 2017. -
Gross profit was
$219.3 million , or 52.4% of sales, compared to$230.1 million , or 54.5% of sales, in the same period last year. Adjusted gross profit for the first nine months of fiscal 2018, which excludes$0.8 million of amortization of acquisition accounting adjustments related to the Olivia Burton brand and$1.4 million in charges related to the cost savings initiatives, was$221.6 million , or 52.9% of sales. The decrease in the adjusted gross margin percentage from the first nine months of last year was primarily the result of channel and product mix as well as changes in foreign currency exchange rates, partially offset by a reduction of certain fixed costs as a result of cost savings initiatives. -
Operating expenses were
$189.5 million as compared to$183.6 million in the same period last year. For the first nine months of fiscal 2018, adjusted operating expenses were$172.4 million , excluding$5.1 million of expenses and amortization related to the acquisition of the Olivia Burton brand and$12.0 million of expenses related to the cost savings initiatives. For the first nine months of fiscal 2017, adjusted operating expenses were$181.8 million , which excludes$1.8 million of expenses related to the COO’s retirement in the first quarter of fiscal 2017. The decrease in adjusted operating expenses was primarily the result of decreased compensation and benefit expenses primarily related to the Company’s cost savings initiatives, fluctuations in foreign currency rates and decreased marketing expenses, partially offset by higher performance-based compensation. -
Operating income was
$29.9 million compared to operating income of$46.5 million in the same period last year. Adjusted operating income for the first nine months of fiscal 2018 was$49.2 million , which excludes$5.9 million of expenses and amortization related to the acquisition of the Olivia Burton brand and$13.4 million of expenses related to the cost savings initiatives. Adjusted operating income for the first nine months of fiscal 2017 was$48.3 million , which excludes$1.8 million of expenses related to the COO’s retirement in the first quarter of fiscal 2017. -
The Company recorded a tax provision of
$10.3 million as compared to$14.5 million for the first nine months of fiscal 2017. Based upon adjusted pre-tax income, the adjusted tax provision was$13.9 million in the first nine months of fiscal 2018 compared to an adjusted tax provision of$15.5 million in the first nine months of fiscal 2017. -
Net income was
$18.7 million , or$0.80 per diluted share, compared to net income for the first nine months of fiscal 2017 of$29.8 million , or$1.28 per diluted share. Adjusted net income for the first nine months of fiscal 2018 was$34.5 million , or$1.48 per diluted share, which excludes$5.5 million of expenses and amortization related to the acquisition of the Olivia Burton brand, net of tax, and$10.3 million of expenses related to the cost savings initiatives, net of tax. For the first nine months of fiscal 2017, adjusted net income was$31.8 million , or$1.37 per diluted share, 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.
Baselworld Update
Given the expanding digital world and the changing retail landscape, the
Company has decided to no longer exhibit its brands at the annual
Baselworld Watch and Jewelry Fair in
Fiscal 2018 Outlook
The Company is updating its outlook for fiscal 2018. The Company now
expects net sales will be in a range of
The above outlook excludes
Quarterly Dividend and Share Repurchase Program
The Company also announced that on
During the third quarter of fiscal 2018, the Company repurchased 49,000
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 | Nine Months Ended | ||||||||||||||||||||
October 31, | October 31, | ||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Net sales | $ | 190,693 | $ | 179,818 | $ | 418,739 | $ | 421,967 | |||||||||||||
Cost of sales | 86,623 | 81,268 | 199,406 | 191,837 | |||||||||||||||||
Gross profit | 104,070 | 98,550 | 219,333 | 230,130 | |||||||||||||||||
Operating expenses | 78,885 | 67,479 | 189,479 | 183,590 | |||||||||||||||||
Operating income | 25,185 | 31,071 | 29,854 | 46,540 | |||||||||||||||||
Other expense | - | (1,282 | ) | - | (1,282 | ) | |||||||||||||||
Interest expense | (445 | ) | (333 | ) | (1,191 | ) | (1,039 | ) | |||||||||||||
Interest income | 110 | 45 | 361 | 138 | |||||||||||||||||
Income before income taxes | 24,850 | 29,501 | 29,024 | 44,357 | |||||||||||||||||
Provision for income taxes | 7,490 | 9,286 | 10,341 | 14,450 | |||||||||||||||||
Net income | 17,360 | 20,215 | 18,683 | 29,907 | |||||||||||||||||
Less: Net income attributed to noncontrolling interests | - | - | - | 78 | |||||||||||||||||
Net income attributed to Movado Group, Inc. | $ | 17,360 | $ | 20,215 | $ | 18,683 | $ | 29,829 | |||||||||||||
Per Share Information: | |||||||||||||||||||||
Net income attributed to Movado Group, Inc. | $ | 0.75 | $ | 0.87 | $ | 0.80 | $ | 1.28 | |||||||||||||
Weighted diluted average shares outstanding | 23,273 | 23,230 | 23,261 | 23,259 |
MOVADO GROUP, INC. | ||||||||||||||
GAAP AND NON-GAAP MEASURES | ||||||||||||||
(In thousands, except for percentage data) | ||||||||||||||
(Unaudited) | ||||||||||||||
As Reported | % Change | |||||||||||||
Three Months Ended | % Change | Constant | ||||||||||||
October 31, | As Reported | Dollar | ||||||||||||
2017 | 2016 | |||||||||||||
Total Net sales | $ | 190,693 | $ | 179,818 | 6.0 | % | 5.4 | % | ||||||
As Reported | % Change | |||||||||||||
Nine Months Ended | % Change | Constant | ||||||||||||
October 31, | As Reported | Dollar | ||||||||||||
2017 | 2016 | |||||||||||||
Total Net sales | $ | 418,739 | $ | 421,967 | -0.8 | % | -0.3 | % |
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 October 31, 2017 | |||||||||||||||||||||||||||
As Reported (GAAP) | $ | 190,693 | $ | 104,070 | $ | 25,185 | $ | 24,850 | $ | 7,490 | $ | 17,360 | $ | 0.75 | |||||||||||||
Olivia Burton Costs (1) | 567 | 1,383 | 1,383 | 263 | 1,120 | 0.05 | |||||||||||||||||||||
Cost Savings Initiatives (2) | 37 | 7,018 | 7,018 | 1,245 | 5,773 | 0.24 | |||||||||||||||||||||
Adjusted Results (Non-GAAP) | $ | 190,693 | $ | 104,674 | $ | 33,586 | $ | 33,251 | $ | 8,998 | $ | 24,253 | $ | 1.04 | |||||||||||||
Three Months Ended October 31, 2016 | |||||||||||||||||||||||||||
As Reported (GAAP) | $ | 179,818 | $ | 98,550 | $ | 31,071 | $ | 29,501 | $ | 9,286 | $ | 20,215 | $ | 0.87 | |||||||||||||
Impairment of a Long-Term Investment (3) | - | - | - | 1,282 | 398 | 884 | 0.04 | ||||||||||||||||||||
Adjusted Results (Non-GAAP) | $ | 179,818 | $ | 98,550 | $ | 31,071 | $ | 30,783 | $ | 9,684 | $ | 21,099 | $ | 0.91 | |||||||||||||
Nine Months Ended October 31, 2017 | |||||||||||||||||||||||||||
As Reported (GAAP) | $ | 418,739 | $ | 219,333 | $ | 29,854 | $ | 29,024 | $ | 10,341 | $ | 18,683 | $ | 0.80 | |||||||||||||
Olivia Burton Costs (1) | 846 | 5,898 | 5,898 | 387 | 5,511 | 0.24 | |||||||||||||||||||||
Cost Savings Initiatives (2) | - | 1,439 | 13,437 | 13,437 | 3,181 | 10,256 | 0.44 | ||||||||||||||||||||
Adjusted Results (Non-GAAP) | $ | 418,739 | $ | 221,618 | $ | 49,189 | $ | 48,359 | $ | 13,909 | $ | 34,450 | $ | 1.48 | |||||||||||||
Nine Months Ended October 31, 2016 | |||||||||||||||||||||||||||
As Reported (GAAP) | $ | 421,967 | $ | 230,130 | $ | 46,540 | $ | 44,357 | $ | 14,450 | $ | 29,829 | $ | 1.28 | |||||||||||||
Impairment of a Long-Term Investment (3) | - | - | - | 1,282 | 398 | 884 | 0.04 | ||||||||||||||||||||
Retirement Charge (4) | - | - | 1,806 | 1,806 | 687 | 1,119 | 0.05 | ||||||||||||||||||||
Adjusted Results (Non-GAAP) | $ | 421,967 | $ | 230,130 | $ | 48,346 | $ | 47,445 | $ | 15,535 | $ | 31,832 | $ | 1.37 |
(1) | Related to transaction charges and the amortization of acquisition accounting adjustments associated with the acquisition of the Olivia Burton brand. | |
(2) | Related to a charge for severance and payroll related, asset retirement, other expenses and occupancy expenses. | |
(3) | Related to a charge for the impairment of a long-term investment. | |
(4) | 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) | ||||||||||||||
October 31, | January 31, | October 31, | ||||||||||||
2017 | 2017 | 2016 | ||||||||||||
ASSETS |
||||||||||||||
Cash and cash equivalents | $ | 155,484 | $ | 256,279 | $ | 199,758 | ||||||||
Trade receivables, net | 132,941 | 66,847 | 130,076 | |||||||||||
Inventories | 169,866 | 153,167 | 169,402 | |||||||||||
Other current assets | 26,361 | 28,487 | 28,096 | |||||||||||
Total current assets | 484,652 | 504,780 | 527,332 | |||||||||||
Property, plant and equipment, net | 24,637 | 34,173 | 34,867 | |||||||||||
Deferred and non-current income taxes | 23,610 | 24,837 | 20,614 | |||||||||||
Goodwill | 56,316 | - | - | |||||||||||
Other intangibles, net | 22,568 | 1,633 | 1,730 | |||||||||||
Other non-current assets | 47,783 | 42,379 | 39,935 | |||||||||||
Total assets | $ | 659,566 | $ | 607,802 | $ | 624,478 | ||||||||
LIABILITIES AND EQUITY |
||||||||||||||
Loans payable to bank, current | $ | 5,000 | $ | 5,000 | $ | 3,000 | ||||||||
Accounts payable | 28,014 | 27,192 | 22,443 | |||||||||||
Accrued liabilities | 62,666 | 35,061 | 52,895 | |||||||||||
Income taxes payable | 5,192 | 4,149 | 5,601 | |||||||||||
Total current liabilities | 100,872 | 71,402 | 83,939 | |||||||||||
Loans payable to bank | 25,000 | 25,000 | 35,000 | |||||||||||
Deferred and non-current income taxes payable | 7,501 | 3,322 | 3,145 | |||||||||||
Other non-current liabilities | 38,752 | 34,085 | 32,297 | |||||||||||
Noncontrolling interests | - | - | - | |||||||||||
Shareholders' equity | 487,441 | 473,993 | 470,097 | |||||||||||
Total liabilities and equity | $ | 659,566 | $ | 607,802 | $ | 624,478 |
MOVADO GROUP, INC. | |||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||
(In thousands) | |||||||||||||
(Unaudited) | |||||||||||||
Nine Months Ended | |||||||||||||
October 31, | |||||||||||||
2017 | 2016 | ||||||||||||
Cash flows from operating activities: | |||||||||||||
Net income | $ | 18,683 | $ | 29,907 | |||||||||
Depreciation and amortization | 9,842 | 8,520 | |||||||||||
Other non-cash adjustments | 5,434 | 11,805 | |||||||||||
Cost savings initiatives | 13,437 | - | |||||||||||
Changes in working capital | (56,087 | ) | (59,668 | ) | |||||||||
Changes in non-current assets and liabilities | (735 | ) | (1,405 | ) | |||||||||
Net cash (used in) operating activities | (9,426 | ) | (10,841 | ) | |||||||||
Cash flows from investing activities: | |||||||||||||
Capital expenditures | (3,575 | ) | (3,847 | ) | |||||||||
Acquisition, net of cash acquired | (78,991 | ) | - | ||||||||||
Restricted cash deposits | 1,018 | (1,156 | ) | ||||||||||
Short-term investment | - | (151 | ) | ||||||||||
Trademarks and other intangibles | (500 | ) | (296 | ) | |||||||||
Net cash (used in) investing activities | (82,048 | ) | (5,450 | ) | |||||||||
Cash flows from financing activities: | |||||||||||||
Proceeds from bank borrowings | - | 3,000 | |||||||||||
Repayments of bank borrowings | - | (5,000 | ) | ||||||||||
Dividends paid | (8,953 | ) | (8,951 | ) | |||||||||
Stock repurchase | (3,004 | ) | (3,263 | ) | |||||||||
Purchase of incremental ownership of U.K. joint venture | - | (1,320 | ) | ||||||||||
Other financing | (626 | ) | (1,256 | ) | |||||||||
Net cash (used in) financing activities | (12,583 | ) | (16,790 | ) | |||||||||
Effect of exchange rate changes on cash and cash equivalents | 3,262 | 4,651 | |||||||||||
Net change in cash and cash equivalents | (100,795 | ) | (28,430 | ) | |||||||||
Cash and cash equivalents at beginning of period | 256,279 | 228,188 | |||||||||||
Cash and cash equivalents at end of period | $ | 155,484 | $ | 199,758 |
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Source:
ICR, Inc.
Rachel Schacter/Allison Malkin
203-682-8200