SEC Filing | Movado Group, Inc.

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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )

Filed by the Registrant [x]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[x] Preliminary Proxy Statement

[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))

[ ] Definitive Proxy Statement

[ ] Definitive Additional Materials

[ ] Soliciting Material Pursuant to Section 240.14(a)-11(c) or Section
240.14a-12

Movado Group, Inc.
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(Name of Registrant as Specified In Its Charter)

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(Name of Person(s) Filing proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[x] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.

1) Title of each class of securities to which transaction applies:

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2) Aggregate number of securities to which transaction applies:

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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):

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4) Proposed maximum aggregate value of transaction:

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5) Total fee paid:

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[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.

1) Amount Previously Paid:

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2) Form, Schedule or Registration Statement No.:

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3) Filing Party:

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4) Date Filed:

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MOVADO GROUP, INC.
125 CHUBB AVENUE
LYNDHURST, NEW JERSEY 07071

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

June 10, 1997

Notice is hereby given that the Annual Meeting of Shareholders of Movado Group,
Inc. will be held on Tuesday, June 10, 1997 at 10:00 a.m., Eastern Daylight
Time, at the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New
York, New York for the following purposes:

1. To elect six directors to serve until the next Annual Meeting
and until their successors are elected and qualified;

2. To ratify the selection of Price Waterhouse LLP as the
Company's independent accountants for the fiscal year ending
January 31, 1998;

3. To consider and vote upon an amendment to the Company's
Certificate of Incorporation modifying the definition of
"Permitted Transferee" in Paragraph 4.1(d)(i) with respect
to the Class A Common Stock; and

4. To transact such other business as may properly come before
the meeting or any adjournment thereof.

Holders of the Company's Common Stock and Class A Common Stock of record at the
close of business on May 5, 1997 are entitled to notice of and to vote at the
Annual Meeting of Shareholders or any postponements or adjournments thereof.

Dated: May 23, 1997 By order of The Board of Directors

Timothy F. Michno
Secretary and General Counsel

WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND
RETURN THE ENCLOSED PROXY AS SOON AS POSSIBLE IN THE ENVELOPE PROVIDED, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
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MOVADO GROUP, INC.
125 CHUBB AVENUE
LYNDHURST, NJ 07071

PROXY STATEMENT

INFORMATION CONCERNING THE SOLICITATION

This proxy statement and the accompanying proxy are being furnished to
the shareholders of Movado Group, Inc. (the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company to be used for
voting at the Annual Meeting of Shareholders (the "Annual Meeting") to be held
on Tuesday, June 10, 1997 at 10:00 a.m., Eastern Daylight Time, at the offices
of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York and at
any adjournments thereof. It is expected that this proxy statement and the form
of proxy will first be sent to shareholders on or about May 23, 1997.

At the Annual Meeting, the holders of the Company's Common Stock and
Class A Common Stock (together the "Capital Stock") will be asked to consider
and vote upon the following proposals:

1. To elect six directors to serve until the next annual meeting
and until their successors are elected and qualified;

2. To ratify the selection of Price Waterhouse LLP as the
Company's independent accountants for the fiscal year ending
January 31, 1998;

3. To consider and vote upon an amendment to the Company's
Certificate of Incorporation modifying the definition of
"Permitted Transferee" in Paragraph 4.1 (d) (i) with respect
to the Class A Common Stock; and

4. To transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.

The Board of Directors knows of no other business to be presented at
the Annual Meeting. If any other business is properly presented, the persons
named in the enclosed proxy will have the power to vote all proxies received,
and not theretofore revoked, in accordance with the recommendations of the Board
of Directors. If the enclosed proxy is properly executed, duly returned to the
Company in time for the Annual Meeting and not revoked, your shares will be
voted in accordance with the instructions contained thereon. Where a signed
proxy is returned, but no specific instructions are indicated, your shares will
be voted FOR the nominees for Directors identified below, FOR the ratification
of the appointment of Price Waterhouse LLP as the Company's independent
accountants for fiscal year 1998 and FOR the approval of the amendment to the
Company's Certificate of Incorporation.

Abstentions will be treated as present for purposes of determining a
quorum for the Annual Meeting. Proxies returned by brokers as "non-votes" will
not be treated as present for purposes of determining the presence of a quorum.

Any shareholder who executes and returns a proxy may revoke it in
writing at any time before it is voted at the Annual Meeting by: (i) filing with
the Secretary of the Company, at the above address, written notice of such
revocation bearing a later date than the proxy or a subsequent proxy relating to
the same shares or (ii) attending the Annual Meeting and voting in person
(although attendance at the Annual Meeting will not in and of itself constitute
revocation of a proxy).

The solicitation of proxies in the enclosed form is made on behalf of
the Board of Directors. The entire cost of soliciting these proxies will be
borne by the Company. In addition to use of the mails, proxies may be solicited
personally or by telephone by officers, directors and employees of the Company,
who will receive no additional compensation for such activities. Arrangements
will be made with brokerage houses and other custodians, nominees and
fiduciaries to forward solicitation materials to the beneficial owners of shares
held of record by such persons, who will be reimbursed for their reasonable
expenses incurred in such connection.
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OUTSTANDING VOTING SECURITIES

The Board of Directors has fixed the close of business on May 5, 1997
as the record date for the determination of shareholders entitled to notice of
and to vote at the Annual Meeting (the "Record Date"). Only holders of record of
the Capital Stock at the close of business on the Record Date are entitled to
notice of and to vote at the Annual Meeting or any and all adjournments thereof.
On the Record Date there were 4,313,135 shares of Common Stock outstanding and
3,215,302 shares of Class A Common Stock outstanding reflecting the Company's
five for four stock split effected by means of a stock dividend distributed May
1, 1997. Each share of Common Stock
is entitled to one vote, and each share of Class A Common Stock is entitled to
10 votes. The holders of a majority in voting power of the outstanding shares of
Capital Stock entitled to vote at the Annual Meeting, present in person or
represented by proxy, constitute a quorum at the Annual Meeting. The affirmative
vote of the holders of a majority in voting power, present in person or
represented by proxy and entitled to vote, is required to ratify the selection
of Price Waterhouse LLP as the Company's independent accountants for fiscal
1998; and the affirmative vote of the holders of a plurality in voting power,
present in person or represented by proxy and entitled to vote, is sufficient
for the election of Directors.

The approval of the proposal to amend the Company's Certificate of
Incorporation requires the affirmative vote of the holders of at least sixty-six
and two-thirds percent (66 2/3%) of the voting power of the outstanding shares
of Capital Stock entitled to vote at the Annual Meeting.

SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

The following table sets forth certain information with respect to the
beneficial ownership of the Class A Common Stock and the Common Stock as of the
Record Date (except as otherwise noted in footnotes 4 , 5 and 10) by (i) each
shareholder who is known by the Company to beneficially own in excess of 5% of
the outstanding shares of Class A Common Stock or of the outstanding shares of
Common Stock, (ii) each director, (iii) each Named Executive Officer (as
hereinafter defined) and (iv) all executive officers and directors as a group.
Unless otherwise noted, all shares are beneficially owned by the persons
indicated.

PERCENT OF OUTSTANDING
SHARES OF CAPITAL STOCK
-----------------------
SHARES OF
CLASS A SHARES OF
COMMON COMMON PERCENT OF
STOCK STOCK CLASS A TOTAL
BENEFICIALLY BENEFICIALLY COMMON COMMON VOTING
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OWNED STOCK STOCK POWER (1)
- ----------------------------------------------------------------------------------------------------------------

Margaret Hayes Adame ................ - 1,250 - * *

Kenneth J. Adams (2) ................ - 8,131 - * *

Michael J. Bush (3) ................. - 31,250 - * *

FMR Corp. (4) ....................... - 748,875 - 17.4% 2.0%

Goldman Sachs & Co. (5) ............ - 767,750 - 17.8% 2.1%

Efraim Grinberg (6) ................. 572,732 88,418 17.8% 2.0% 15.9%

Gedalio Grinberg (7) ................ 2,173,767 39,668 67.6% * 59.7%

Timothy F. Michno(8) ................ - 2,631 - * *

Donald Oresman ...................... 1,307 - * - *

Leonard L. Silverstein (9) .......... 331,120 21,882 10.3% * 9.15%

Thomson Hortsmann & Bryant, Inc. (10) - 404,875 - 9.4% 1.1%

All officers and directors as a group 2,747,806 156,062 85.5% 3.6% 75.8%
(8 persons) (11)

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* DENOTES LESS THAN ONE PERCENT

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(1) In calculating the percent of total voting power, the voting power of
shares of Common Stock (one vote per share) and Class A Common Stock
(10 votes per share) has been aggregated.

(2) The total shares of Common Stock reported as beneficially owned by Mr.
Adams includes 8,125 shares which he has the right to acquire by the
exercise of options under the Company's 1996 Stock Incentive Plan.

(3) The total shares of Common Stock reported as beneficially owned by Mr.
Bush includes 25,000 shares which he has the right to acquire by the
exercise of options under the Company's 1996 Stock Incentive Plan.

(4) In a joint filing on Schedule 13G dated February 14, 1997, under the
Securities Exchange Act of 1934, as amended, (the "Exchange Act"), FMR
Corp., through its wholly owned subsidiary, Fidelity Management and
Research Company, and Edward C. Johnson 3d and Abigail P. Johnson each
reported beneficial ownership of 599,100 shares of Common Stock as to
which each such reporting person has sole dispositive power and which,
as adjusted for the Company's five for four stock split effected by
means of a stock dividend distributed on May 1, 1997 (the "Stock
Split"), equaled 748,875 shares. Each reporting person reported having
no shared dispositive power as to any of such shares nor any voting
power, either sole or shared, as to any such shares. Each such
reporting person also reported that all of the shares of Common Stock
which it beneficially owns were acquired in the ordinary course of
business and not for the purpose or with the effect of changing or
influencing control of the Company, or in connection with any
transaction having such purpose or effect. The address of FMR Corp. and
Mr. and Mrs. Johnson is 82 Devonshire Street, Boston, Massachusetts
02109.

(5) On February 14, 1997, in a joint filing on Schedule 13G under the
Exchange Act, Goldman Sachs Equity Portfolios, Inc. on behalf of
Goldman Sachs Small Cap Equity Fund ("GS Equity"), reported beneficial
ownership of 541,600 shares of Common Stock as to which it has shared
investment and voting power and which, as adjusted for the Company's
Stock Split, equaled 677,000 shares. The Goldman Sachs Group, L.P.
("Group") and Goldman, Sachs & Co. ("GS & Co.") each reported
beneficial ownership of 614,200 shares of Common Stock, including the
shares owned by GS Equity. Each of Group and GS & Co. reported that it
has shared investment and voting power as to all 614,200 shares of
Common Stock. As adjusted for the Stock Split, the total shares of
Common Stock beneficially owned by Group and GS & Co. equaled 767,750.
None of Group, GS & Co. or GS Equity reported having sole voting or
investment power as to any of the shares of Common Stock, and each
reported in their Schedule 13G filing that all these shares were
acquired in the ordinary course of business and not for the purpose, or
with the effect, of changing or influencing the control of the Company,
or in connection with any transaction having such purpose or effect.
The address of Group, and GS & Co., is 85 Broad Street, New York, New
York 10004. The address of GS Equity is 1 New York Plaza, New York, New
York 10004.

(6) The total number of shares of Class A Common Stock beneficially owned
by Mr. Efraim Grinberg includes an aggregate of 187,769 shares held by
several trusts for the benefit of Mr. E. Grinberg's siblings and
himself, of which trusts Mr. E. Grinberg is sole trustee. As sole
trustee, Mr. E. Grinberg has sole investment and voting power with
respect to the shares held by such trusts. In addition, the amount of
shares of Class A Common Stock reported for Mr. E. Grinberg includes an
aggregate of 287,647 shares of Class A Common Stock held by several
trusts for the benefit of Mr. E. Grinberg's siblings and himself, of
which trusts Mr. E. Grinberg is co-trustee with Mr. Leonard L.
Silverstein. As a co-trustee, Mr. E. Grinberg has shared investment and
voting power with Mr. Silverstein with respect to the shares of Class A
Common Stock held by such trusts. The total number of shares of Common
Stock owned by Mr. E. Grinberg includes 37,168 shares of Common Stock
held under the Company's Employee Savings and Investment Plan ("401(k)
Plan"), the trustees of which are Messrs. G. Grinberg and E. Grinberg,
both of whom have shared investment and voting power as to such shares.
Mr. E. Grinberg disclaims beneficial ownership as to the 318,073 shares
of Class A Common Stock held by the trusts for the benefit of his
siblings of which he is trustee or co-trustee and of the 37,168 shares
of Common Stock held under the Company's 401(k) Plan except to the
extent of his pecuniary interest therein. The total number of shares of
Common Stock owned by Mr. E. Grinberg also includes 50,000 shares of
Common Stock which he has the right to acquire by the exercise of
options under the Company's 1996 Incentive Stock Plan.

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(7) The total number of shares of Class A Common Stock beneficially owned
by Mr. G. Grinberg includes 43,473 shares of Class A Common Stock owned
by the Grinberg Foundation, a non-profit corporation of which Mr. G.
Grinberg, Sonia Grinberg and Mr. Leonard L. Silverstein are the
directors and officers and as to which shares these three individuals
have shared investment and voting power. The total number of shares of
Common Stock owned by Mr. G. Grinberg includes 37,168 shares of Common
Stock held under the Company's 401(k) Plan, the trustees for which are
Messrs. G. Grinberg and E. Grinberg, both of whom have shared
investment and voting power as to such shares. Mr. G. Grinberg
disclaims beneficial ownership as to the 43,473 shares of Class A
Common Stock owned by the Grinberg Foundation and the 37,168 shares of
Common Stock owned by the Company's 401(k) Plan except to the extent of
his pecuniary interest therein.

(8) The total number of shares of Common Stock reported as beneficially
owned by Mr. Michno includes 2,625 shares which he has the right to
acquire by the exercise of options under the Company's 1996 Stock
Incentive Plan.

(9) The total number of shares of Class A Common Stock beneficially owned
by Mr. Leonard L. Silverstein includes an aggregate of 287,647 shares
of Class A Common Stock held by several trusts for the benefit of Mr.
G. Grinberg's three children, of which trusts Mr. Silverstein is
co-trustee with Mr. E. Grinberg, with whom he has shared investment and
voting power as to the shares held by such trusts. The total number of
shares of Class A Common Stock reported for Mr. Silverstein also
includes 43,473 shares of Class A Common Stock owned by the Grinberg
Foundation, of which Mr. G. Grinberg, his wife and Mr. Silverstein are
the directors and officers and as to which shares these three
individuals have shared investment and voting power. Mr. Silverstein
disclaims beneficial ownership of the shares of Class A Common Stock
held by the trusts and the Grinberg Foundation.

(10) Thomson Hortsmann & Bryant, Inc. ("TH&B"), in a filing under the
Exchange Act on Schedule 13G dated January 7, 1997, reported beneficial
ownership of 323,900 shares of Common Stock as to all of which shares
it has sole investment power. TH&B also reported that it has sole
voting power with respect to 198,700 of such shares and shared voting
power as to 5,300 of such shares. As adjusted for the Stock Split,
TH&B's total beneficial ownership equals 404,875 shares of Common
Stock, as to 248,375 of which it has sole voting power and shared
voting power of 6,625 shares TH&B reported that all of the shares of
Common Stock which it beneficially owns were acquired in the ordinary
course of business and not for the purpose, or with the effect, of
changing or influencing control of the Company, or in connection with
any transaction having such purpose or effect. The address of TH&B is
Park 80 West, Plaza Two, Saddle Brook, New Jersey 07663.

(11) Excludes double counting of shares deemed to be beneficially owned by
more than one person. Unless otherwise indicated, the individuals named
have sole investment and voting power.

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ITEM 1 - ELECTION OF DIRECTORS

Directors hold office until the next annual meeting of shareholders and
until the election and qualification of their successors. The Company's By-laws
provide that the number of Directors constituting the Board may be changed by
action of the Board of Directors, so long as the number is not less than three.
The Board currently consists of six directors. All of the nominees are members
of the present Board of Directors. If any nominee for election to the Board of
Directors of the Company should be unable to accept nomination or election as a
director, which is not expected, the proxies may be voted with discretionary
authority for a substitute or substitutes designated by the Board of Directors
or the number of Directors constituting the Board may be reduced in accordance
with the Company's By-Laws. Directors shall be elected by the holders of a
plurality of the voting power present in person or represented by proxy and
entitled to vote. Abstentions and broker "non-votes" shall not be counted for
purposes of the election of directors. THE BOARD OF DIRECTORS RECOMMENDS THE
ELECTION OF THE NOMINEES LISTED BELOW. THE BOARD RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE ELECTION OF THE NOMINEES. PROXIES SOLICITED BY THE BOARD WILL BE SO
VOTED EXCEPT WHERE AUTHORITY HAS BEEN WITHHELD.

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The following table lists information with respect to the nominees for
election as directors of the Company.

NAME AGE POSITION
---- --- --------

Margaret Hayes Adame 57 Director

Michael J. Bush 36 Executive Vice President and Chief
Operating Officer

Efraim Grinberg 39 President
and Director

Gedalio Grinberg 65 Chief Executive Officer and Chairman of
the Board of Directors

Donald Oresman 71 Director

Leonard L. Silverstein 75 Director

There are no family relationships between any of the Company's
directors with the exception of Efraim Grinberg, who is the son of Gedalio
Grinberg. There are no arrangements between any director and any other person
pursuant to which any of them was elected director.

Ms. Hayes Adame was elected to the Board of Directors of the Company on
September 8, 1993. Ms. Hayes Adame is the President of the Fashion Group
International, Inc. which she joined in March 1993. From 1981 to March 1993, Ms.
Hayes Adame was a senior vice president and general merchandise manager at Saks
Fifth Avenue. She is also a member of the board of directors of International
Flavors & Fragrances, Inc.

Mr. Bush joined the Company in August 1995 as Executive Vice President
and Chief Operating Officer. From 1991 to 1995, Mr. Bush was the Senior Vice
President, Marketing and Strategic Planning for Ross Stores, Inc., a California
based retailer. Prior to assuming his position at Ross Stores, Mr. Bush was a
Senior Consultant with Bain & Company, Inc., a strategic consulting firm which
he joined in 1985.

Mr. E. Grinberg joined the Company in June 1980 and served as the
Company's Vice President of Marketing from February 1985 until July 1986, at
which time he was elected to the position of Senior Vice President of Marketing.
In 1988, Mr. E. Grinberg was elected to the Board of Directors of the Company,
and in June 1990, he was elected President and Chief Operating Officer. Mr. E.
Grinberg also serves on the board of directors of the American Watch Association
and the Jeweler's Security Alliance.

Mr. G. Grinberg founded the Company in 1961 and, since then, has served
as the Company's Chairman and Chief Executive Officer.

Mr. Oresman has served on the Board of Directors of the Company since
1981. He was Executive Vice President and General Counsel of Paramount
Communications, Inc., a publishing and entertainment company, from December 1983
until his retirement in March 1994. Prior to December 1983, Mr. Oresman was
engaged in the practice of law as a partner of Simpson Thacher & Bartlett where
he is now Of Counsel.

Mr. Silverstein has served on the Board of Directors of the Company
since 1975. He has been engaged in the practice of law at Silverstein and
Mullens, Washington, D.C., for 39 years. Mr. Silverstein also serves as Vice
President and Director of Tax Management, Inc., a wholly owned subsidiary of
BNA, Inc., and a director of Chevy Chase Federal Savings Bank. He is a former
Vice Chairman and currently honorary trustee of the John F. Kennedy Center for
the Performing Arts, Past President of the Alliance Francaise of Washington, a
director of the National Symphony Orchestra Association and a trustee of the
White House Historical Association.

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INFORMATION REGARDING THE BOARD OF DIRECTORS
AND ITS COMMITTEES; DIRECTOR COMPENSATION

Messrs. G. Grinberg and E. Grinberg serve on the Executive Committee of
the Board of Directors. The Executive Committee of the Board of Directors has,
in the intervals between meetings of the Board of Directors, all the authority
of the Board of Directors except for those matters that the New York Business
Corporation Law reserves to the full Board of Directors. The Executive Committee
held three meetings in fiscal 1997.

Ms. Hayes Adame and Messrs. Oresman and Silverstein serve on the
Compensation Committee of the Board of Directors. The Compensation Committee of
the Board of Directors reviews remuneration levels for executive officers of the
Company, reviews significant employee benefits programs and establishes and
administers executive compensation programs, including bonus plans, stock option
and other equity-based programs, deferred compensation plans and any other cash
or stock incentive programs. The Compensation Committee is comprised solely of
independent directors. The Compensation Committee held one meeting in fiscal
1997.

Ms. Hayes Adame and Messrs. Oresman and Silverstein serve on the Audit
Committee of the Board of Directors. The Audit Committee of the Board of
Directors recommends to the Board of Directors the independent public
accountants to be selected to audit the Company's annual financial statements
and approves any special assignments given to such accountants. The Audit
Committee also reviews the planned scope of the annual audit and the independent
accountants' letter of comments and management's responses thereto, any
significant accounting changes made or contemplated and the effectiveness and
efficiency of the Company's internal accounting staff. In addition, the Audit
Committee meets periodically with the Company's Internal Audit staff with
respect to internal control issues generally. The Audit Committee is comprised
solely of independent directors. The Audit Committee held two meetings in the
fiscal year ended January 31, 1997.

The Board of Directors held three meetings during fiscal 1997 and each
director attended all the meetings of the Board of Directors and all the
meetings held by all committees of the Board on which such director served.

No executive officer of the Company receives any additional
compensation for serving the Company as a member of the Board of Directors or
any of its committees. Directors who are not executive officers of the Company
receive a fee of $3,000 for each Board meeting attended and $1,000 for each
committee meeting attended.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities ( the "10% Stockholders"), to file reports of
ownership and changes of ownership with the Securities and Exchange Commission
and the NASDAQ National Market. Executive officers, directors and 10%
Stockholders of the Company are required by law to furnish the Company with
copies of all Section 16(a) forms so filed. Based solely on review of copies of
such forms received or written representations that no other reports were
required, the Company believes that, during the last fiscal year, its executive
officers, directors and 10% Stockholders complied with all filing requirements
under Section 16(a) applicable to them with respect to their beneficial
ownership of Capital Stock except that one report on Form 4 due on February 10,
1996 was filed late on a Form 5 on March 18, 1996 by each of Mr. Gedalio
Grinberg, Chairman and Chief Executive Officer, and Mrs. Sonia Grinberg, a 10%
stockholder, covering a total of twelve small acquisitions of phantom stock
units under the Company's Deferred Compensation Plan. Although Mrs. Grinberg is
not a participant in and is not eligible to participate in the Deferred
Compensation Plan, the requirement that she file the report arose solely by
virtue of her indirect pecuniary interest in the phantom stock units
attributable to her spouse. The report was filed late
for each reporting person due to the fact that the acquisitions had been
eligible for deferred reporting on Form 5 under Rule 16a-6 of the 1934 Act as
small acquisitions not exceeding $10,000 in market value within the prior
six-month period until the final of such acquisitions made prior to the date the
Plan statement was issued to Mr. Grinberg.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In August 1995, the Company hired Mr. Michael Bush as Executive Vice
President and Chief Operating Officer. Pursuant to its offer of employment, the
Company made a $150,000 interest free loan to Mr. Bush to partially compensate
Mr. Bush for the loss of certain stock options he forfeited when he left Ross
Stores, Inc. to join the Company. Under the terms of a promissory note, as
amended, the loan is payable on or before January 31, 1998, provided, however,
that so long as Mr. Bush remains at all times an employee of the Company the
unpaid principal amount of

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the loan will be automatically reduced by $75,000 on January 31, 1997 and by an
amount equal to the then remaining outstanding balance on January 31, 1998. In
accordance with the terms of the amended note, the outstanding balance of the
loan was reduced to $75,000 on January 31, 1997 which was the amount
outstanding on January 31, 1997. In the event his employment with the Company
should, for any reason, terminate prior to January 31, 1998, the note provides
that the entire unpaid balance then outstanding would become automatically
payable as of the date of such termination.

In fiscal 1996, the Company entered into an agreement with a trust
which owns an insurance policy issued on the lives of the Company's Chairman and
Chief Executive Officer and his spouse. The insurance policy provides for a
death benefit of $27 million. The trustees of the trust are the three children
of the Chairman and his spouse, namely, Efraim Grinberg, Alexander Grinberg, and
Miriam Grinberg-Phalen. Under the agreement, the trust has assigned the
insurance policy to the Company as collateral to secure repayment by the trust
of interest free loans to be made annually by the Company to the trust in
amounts sufficient for the trust to pay the premiums on the insurance policy
(approximately $740,000 per annum). Under the agreement, the trust will repay
the loans from the death benefit proceeds of the policy. At January 31, 1997 the
Company had loaned the trust $878,426 under this agreement.

EXECUTIVE OFFICERS

For detailed information concerning Michael Bush, Gedalio Grinberg and
Efraim Grinberg, see the listing for each under the heading "Election of
Directors" above. The names of the other executive officers of the Company (and
their respective ages as of the filing date of this report) are set forth below
together with the positions held by each during the past five years.

NAME AGE POSITION
---- --- --------

Kenneth J. Adams 39 Senior Vice President and Chief
Financial Officer

Timothy F. Michno 40 Secretary and General Counsel

Howard Regenbogen 67 Treasurer and Assistant Secretary

Mr. Adams, who served as Corporate Controller since coming to the
Company in December 1992, was elected Senior Vice President and Chief Financial
Officer on April 14, 1995. Before joining the Company, Mr. Adams worked for
twelve years at Price Waterhouse LLP where he progressed to the position of
Senior Manager, serving clients in the international and middle market arenas.

Mr. Michno joined the Company in April 1992 and since then has served
as its Secretary and General Counsel. He has been engaged in the practice of law
for the past 14 years, immediately prior to joining the Company and since 1986,
as an associate at the New York firm of Chadbourne & Parke. From 1988 to 1991 he
served as a resident outside counsel to American Brands, Inc., a consumer
products company.

Mr. Regenbogen joined the Company in 1972 as its Controller and has
served as Treasurer of the Company since 1987. From September 1994 until April
14, 1995 Mr. Regenbogen served, in addition, as the Company's Chief Financial
Officer.

ITEM 2 - RATIFICATION OF APPOINTMENT OF ACCOUNTANTS

The Board of Directors has appointed Price Waterhouse LLP to be the
Company's independent accountants for the year ending January 31, 1998, subject
to ratification of such appointment by the Company's shareholders. Price
Waterhouse LLP has served as the Company's independent accountants since fiscal
year 1977. If the appointment of Price Waterhouse is not approved by the
shareholders, or Price Waterhouse ceases to act as the Company's independent
accountants, or the Board of Directors removes Price Waterhouse as the Company's
independent accountants, the Board will appoint other independent accountants.
The engagement of new accountants for periods following the 1998 Annual Meeting
will be subject to ratification by the shareholders at that meeting.

7
10
Representatives of Price Waterhouse LLP are expected to be present at
the Annual Meeting of Shareholders. Such representatives will have the
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions. THE BOARD RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR SUCH RATIFICATION. PROXIES SOLICITED BY THE BOARD WILL BE SO VOTED
UNLESS SHAREHOLDERS SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.

ITEM 3 - PROPOSAL TO AMEND CERTIFICATE OF INCORPORATION

At the Annual Meeting, Shareholders will be asked to consider and, if
deemed advisable, to approve an amendment to the Company's Certificate of
Incorporation ("Proposed Amendment"). The Proposed Amendment, if approved by the
Shareholders, would modify the definition of "Permitted Transferee" in Paragraph
4.1(d) (i) of the Company's Certificate of Incorporation with respect to the
Company's Class A Common Stock.

SUMMARY OF THE PROPOSED AMENDMENT

Under the Company's Certificate of Incorporation, in the event that the
beneficial or record ownership of any shares of Class A Common Stock is
transferred to any person other than a Permitted Transferee, as defined in
Paragraph 4.1(d) (i) each such share is converted automatically into Common
Stock. As of the Record Date there were 4,313,135 and 3,215,302 shares of the
Company's Common Stock and Class A Common Stock, respectively outstanding. There
are twenty million shares of Common Stock and ten million shares of Class A
Common Stock authorized. Each share of Common Stock is entitled to one vote per
share and each share of Class A Common Stock is entitled to 10 votes per share
on all matters submitted to a vote of the shareholders. Each holder of shares of
Class A Common Stock is entitled to convert, at any time, any and all such
shares into the same number of shares of Common Stock.

The Certificate of Incorporation provides that Permitted Transferees
include the spouse and certain family members of a holder of Class A Common
Stock ("Class A Holder") as well as: trusts established principally for the
benefit of such Class A Holders or their family members or other Permitted
Transferees; the executor, administrator or personal representative of the
estate of any Class A Holder; certain charitable organizations established by a
Class A Holder or such person's family members; and certain trust grantors and
trust beneficiaries.

The Proposed Amendment would modify Paragraph 4.1(d) (i) of the
Certificate of Incorporation by adding as two additional categories of Permitted
Transferees, a corporation and a partnership in which every beneficial owner or
partner, respectively, was either a Class A Holder, a family member or other
affiliated person of such Class A Holder or other Permitted Transferee. The
reason for the Proposed Amendment is to enable Class A Holders to transfer
shares of Class A Common Stock to such entities without such shares
automatically converting to Common Stock. Such transfers may be desirable for
tax or estate planning purposes or other purposes depending on the individual
circumstances of each Class A Holder. If adopted, the Proposed Amendment will
have no effect on the rights of existing security holders other than modifying
the restrictions on transfer of the Class A Common Stock as set forth above and
in the Proposed Amendment.

SHAREHOLDER APPROVAL

On May 6, 1997 the Board of Directors of the Company unanimously
approved the Proposed Amendment in the form annexed as Exhibit A to this Proxy
Statement.

Approval of the Proposed Amendment requires the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting
power of the outstanding shares of Capital Stock entitled to vote at the Annual
Meeting. Abstentions and broker non-votes will have the effect of negative
votes. THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ADOPTION OF THE
PROPOSED AMENDMENT. PROXIES SOLICITED BY THE BOARD WILL BE SO VOTED UNLESS
SHAREHOLDERS SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.

EXECUTIVE COMPENSATION

The following summary compensation table sets forth the compensation
awarded to, earned by or paid to the Chief Executive Officer and each of the
five other most highly compensated executive officers of the Company
(collectively, the "Named Executive Officers") during fiscal 1997, 1996 and 1995
(each fiscal year ending January 31) for services rendered in all capacities to
the Company and its subsidiaries.

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SUMMARY COMPENSATION TABLE (1)
Long Term Compensation
Annual Compensation Awards
------------------------------------ -----------------------

Restricted Number of
Name and Other Annual Stock Securities All Other
Principal Position Year Salary Bonus($) Compensation Awards (s) Underlying Compensation
($) ($) (2) Options(#) ($)
- -----------------------------------------------------------------------------------------------------------------------

Gedalio Grinberg 1997 650,000 175,000 0 13,500 0 257,870(3)
Chairman and Chief 1996 650,000 150,000 0 11,775 0 217,746
Executive Officer 1995 550,000 100,000 0 0 0 109,264

Efraim Grinberg 1997 450,000 150,000 0 8,000 80,000 40,950(4)
President 1996 400,000 125,000 0 8,000 0 38,924
1995 310,000 75,000 0 0 0 6,924

Michael J. Bush 1997 350,000 115,000 159,128(5) 7,269 0 119,486(6)
Executive Vice President 1996 114,423 79,167 0 112,000 100,000 0
and Chief Operating Officer 1995 0 0 0 0 0 0

Kenneth J. Adams 1997 165,000 45,000 0 1,722 10,000 8,308(7)
Senior Vice President 1996 136,539 40,000 0 57 0 1,155
And Chief Financial Officer 1995 107,500 36,813 0 0 0 924

Timothy F. Michno 1997 160,000 14,000 0 1,600 3,000 8,409(8)
Secretary and 1996 150,000 12,500 0 390 0 2,454
General Counsel 1995 143,962 10,000 0 0 0 427

(1) The column designated by the United States Securities and Exchange
Commission ("Commission") for the reporting of Long Term Incentive Plan
Payouts has been deleted as no such compensation of a type required to
be reported under such column was awarded to, earned by, or paid to any
of the Named Executive Officers during the period covered by the table.

2) At January 31, 1997 the aggregate number of share units of restricted
stock held by each of the Named Executive Officers and the aggregate
value thereof (based on the closing price of the Company's Common Stock
as of January 31, 1997 were as follows: Mr. G. Grinberg: 1,370.729
share units, $30,670; Mr. E. Grinberg: 941.074 share units, $21,056;
Mr. Bush: 4,371.413 share units, $97,810; Mr. Adams: 87.392 share
units, $1,955; and Mr. Michno: 90.116 share units, $2,016. Except for
4000 shares of restricted stock granted to Mr. Bush on August 28, 1995
as to which the restrictions lapse on August 28, 1997, all of the share
units are phantom stock units awarded under the Company's Deferred
Compensation Plan for Executives ("Deferred Compensation Plan"). Such
phantom stock units ("Stock Units") vest 20% at the end of each
calendar year beginning in the calendar year in which awarded. Mr. G.
Grinberg was awarded 680.98 Stock Units in calendar year 1995, 650.126
Stock Units in calendar year 1996 and, for calendar year 1997, 39.639
Stock Units through January 31, 1997. Mr. E. Grinberg was awarded
439.82 Stock Units in calendar year 1995, 501.259 stock units in
calendar year 1996 and, for calendar year 1997, no Stock Units through
January 31, 1997. Mr. Bush was awarded 350.069 Stock Units in calendar
year 1996 and, for calendar year 1997, 21.344 Stock Units through
January 31, 1997. Mr. Adams was awarded 82.357 Stock Units in calendar
year 1996 and, for calendar year 1997, 5.031 Stock Units through
January 31, 1997. Mr. Michno was awarded 22.87 Stock Units in calendar
year 1995, 67.246 Stock Units in calendar year 1996 and, for calendar
year 1997, no Stock Units through January 31, 1997. No dividends are
paid on the 4000 shares of restricted stock awarded to Mr. Bush until
such shares vest. Dividends accrue in respect of the Stock Units at the
same rate as payable on shares of Capital Stock but no dividends in
respect of Stock Units are payable until after the retirement of the
holder in accordance with the terms of the Deferred Compensation Plan.

(3) Includes $ 104,920 in total annual premiums paid in respect of certain
life insurance policies and one travel accident policy purchased for
Mr. G. Grinberg by the Company. Under his arrangement with the

9
12
Company, Mr. G. Grinberg is entitled to the cash surrender value under
these life insurance policies and his beneficiary is entitled to the
applicable benefit without, in either event, reimbursement to the
Company of any premiums paid by the Company under such policies. Also
includes a $ 950 matching contribution made by the Company in respect
of fiscal 1997 for the account of Mr. G. Grinberg pursuant to the
Company's Employee Savings and Investment Plan ("401(k) Plan"). Also
includes $ 87,000 accrued by the Company in respect of a Death and
Disability Benefit Plan agreement with Mr. G. Grinberg. See "Contract
with Chief Executive Officer" below. Also includes a matching cash
contribution of $ 65,000 made by the Company for fiscal 1997 to Mr. G.
Grinberg's account pursuant the Company's Deferred Compensation Plan
for Executives.

(4) Represents a $950 matching contribution made by the Company in respect
of fiscal 1997 for the account of Mr. E. Grinberg pursuant to the
Company's 401(k) Plan and a matching cash contribution of $ 40,000 for
fiscal 1997 to his account under the Company's Deferred Compensation
Plan.

(5) Includes reimbursement of relocation related expenses of $147,128 in
connection with Mr. Bush's relocation from California to New Jersey
after joining the Company.

(6) Represents a $ 950 matching contribution made by the Company in respect
of fiscal 1997 for the account of Mr. Bush pursuant to the Company's
401(k) Plan and a matching cash contribution of $ 35,000 for fiscal
1997 to his account under the Company's Deferred Compensation Plan.
Also includes the forgiveness of $75,000 in principal amount of a
$150,000 loan which was made to Mr. Bush in August 1995 to partially
compensate Mr. Bush for the loss of certain stock options he forfeited
when he left Ross Stores, Inc. to join the Company. Under the terms of
a promissory note, as amended, the loan is payable on or before January
31, 1998, provided, however, that so long as Mr. Bush remains at all
times an employee of the Company the unpaid principal amount of the
loan will be automatically reduced by $75,000 on January 31, 1997 and
by an amount equal to the then remaining outstanding balance on January
31, 1998. In accordance with the terms of the amended note, the
outstanding balance of the loan was reduced to $75,000 on January 31,
1997 which was the amount outstanding on January 31, 1997. In the event
his employment with the Company should, for any reason, terminate prior
to January 31, 1998, the note provides that the entire unpaid balance
then outstanding would become automatically payable as of the date of
such termination. Also includes imputed interest on the loan to Mr.
Bush in the amount of $8,536.

(7) Represents a matching contribution made by the Company in respect of
fiscal 1997 for the account of Mr. Adams under the Company's Deferred
Compensation Plan.

(8) Represents a $409 matching contribution made by the Company in respect
of fiscal 1997 for the account of Mr. Michno pursuant to the Company's
401(k) Plan and a matching cash contribution of $8,000 for fiscal 1997
to his account under the Company's Deferred Compensation Plan.

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FISCAL YEAR END OPTION VALUES

The following table shows the number of shares of Common Stock represented by
unexercised stock options held by each of the Named Executive Officers as of
January 31, 1997. No stock options were exercised in fiscal 1997 by any of the
Named Executive Officers.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE
TABLE

NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR END (#) AT FISCAL YEAR END ($)
------------------------------------ ------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------------- ---------------- ---------------- ------------------

Gedalio Grinberg........... 0 0 0 0

Efraim Grinberg............ 24,000 96,000 201,000 433,600

Michael J. Bush............ 20,000 80,000 167,500 670,000

Kenneth J. Adams .......... 4,500 13,000 37,687 62,575

Timothy F. Michno.......... 1,500 6,000 12,562 36,360

CONTRACT WITH CHIEF EXECUTIVE OFFICER

Under a Death and Disability Benefit Plan Agreement with Mr. G.
Grinberg dated September 23, 1994, in the event of Mr. Grinberg's death or
disability while employed by the Company, the Company will pay to his spouse, if
she is then living, an annual benefit equal to $300,000 (increased each year
beginning October 1, 1995 by an amount equal to two percent of the benefit that
would have been payable in the prior year). Benefits are payable for the lesser
of 10 years or the life of Mr. Grinberg's spouse, and are payable only from the
general assets of the Company. Neither Mr. Grinberg nor his spouse may assign
the Agreement or any of the benefits payable thereunder and none of the benefits
are payable to the estates or any of the heirs of Mr. Grinberg or his spouse.

The Agreement provides that it automatically terminates in the event of
the termination of Mr. Grinberg's employment with the Company for any reason
other than his death or disability and further provides that it is not to be
considered a contract of employment. For purposes of the Agreement "disability"
means the inability of Mr. Grinberg to perform the duties pertaining to his job
because of accident, sickness or other illness as determined by a majority of
disinterested directors.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company's Compensation Committee was at all times during fiscal
year 1997 comprised entirely of directors who at no time were executive officers
or employees of the Company. The Compensation Committee for fiscal year 1997
consisted of Margaret Hayes Adame, Donald Oresman and Leonard L. Silverstein.
Mr. Silverstein is a partner at the law firm of Silverstein & Mullens, and Mr.
Oresman is of - Counsel at the law firm of Simpson Thacher & Bartlett, both of
which firms rendered legal services to the Company during fiscal 1997.

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FISCAL 1997 STOCK OPTION GRANTS

The following table provides certain information regarding grants of
stock options made during fiscal 1997 to the Named Executive Officers pursuant
to the Company's 1996 Stock Incentive Plan. All such options become exercisable
with respect to 20% of such options on each anniversary of the date of grant
thus becoming fully exercisable on the fifth such anniversary (February 6,
2001).

OPTION GRANTS IN LAST FISCAL YEAR

Grant
Individual Grants Date Value(1)
- --------------------------------------------------------------------------------------------------------------
% of Total
Number of Number of
Securities Securities
Underlying Underlying
Options Options Granted Exercise or Base Grant Date
Granted to Employees in Price Expiration Present Value
Name (#) Fiscal Year ($/Sh) Date ($)
- --------------------------------------------------------------------------------------------------------------

Gedalio Grinberg 0 0 - - 0

Efraim Grinberg 80,000 34.19 $ 18.63 February 6, 2006 418,400

Michael Bush 0 0 - - 0

Kenneth J. Adams 10,000 4.27 $ 18.63 February 6, 2006 52,300

Timothy F. Michno 3,000 1.28 $ 18.63 February 6, 2006 15,690

(1) The grant date present values set forth in the foregoing table were
arrived at using the Black-Scholes option pricing model based on the following
assumptions: volatility of 26% based on weekly closing prices of the underlying
common stock for the period ending March 31, 1997; a risk free rate of return
equal to 5.54% based on the yield on a U.S. Government Zero Coupon Bond with a
maturity equal to the expected term of the option prior to exercise (i.e. 7
years); a dividend yield of 2%; a grant date of February 6, 1996. This schedule
does not take into account provisions of the options providing for termination
of the option following termination of employment, nontransferability or vesting
over a period of five years. The dollar amounts under this column are the result
of calculations using a certain option pricing model and based on the foregoing
assumptions and, therefore, are not intended to forecast possible future
appreciation, if any, of the Company's stock price.

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COMPENSATION COMMITTEE REPORT

GENERAL

The Compensation Committee of the Board of Directors (the "Committee")
is comprised entirely of the three non-employee members of the Board and was
established in September 1993 in anticipation of the Company's public offering
which took place the following month. The Committee is responsible for reviewing
and approving the Company's compensation policies affecting senior management,
reviewing significant employee benefit programs and reviewing and administering
the Company's 1996 Stock Incentive Plan.

COMPENSATION POLICIES AND COMPONENTS OF COMPENSATION

The compensation policies established by the Company and which were in
effect during fiscal year 1997 are designed to enable the Company to attract,
retain, motivate and appropriately reward an exceptional group of highly
qualified individuals who are expected to contribute to the Company's continued
success. The three primary components of executive compensation are salary, cash
bonuses and stock based awards including stock grants and stock options. The
Committee reviews each component of executive compensation on an annual basis.

Base salary levels for members of the Company's senior management team
are reviewed by the Committee in light of the Committee's assessment of the
responsibilities relative to the position under consideration as well as each
individual's background, training and experience. Annual increases in base
salary levels, if warranted, are reviewed with reference to the executive
officer's performance and the performance of the Company as a whole. Executive
performance is evaluated by the Committee by reference to the extent to which
specific individual and departmental goals and objectives are met. These goals
and objectives vary from department to department and, within any single
department, from individual to individual. Corporate performance is measured by
the Committee by reference to the Company's achievement of pre-tax profit goals
and pre-tax operating cash flow goals set at the beginning of the fiscal year.

Cash bonuses, the second key component of executive compensation, are
intended to provide incentives to senior management in the short term to achieve
certain operating results which are generally determined at the beginning of the
fiscal year and, typically, tied to net income results. By thus placing a
significant percentage of each executive officer's compensation at risk, this
approach creates a direct incentive for executive officers to achieve desired
performance goals. Certain mid-level managers are also eligible to receive
bonuses which, just as for senior management, are used as an additional,
incentive-based element of compensation dependent on corporate performance and
individual merit.

Equity participation is the third key element of the Company's
executive compensation program and is afforded to executive officers and certain
employees through stock options and/or other stock based awards granted under
the Company's 1996 Stock Incentive Plan (the "Incentive Plan"). Options, and to
a lesser extent stock awards, have been awarded under the Incentive Plan on the
basis of the position held by the grantee, contributions already made by the
person meriting recognition and, more importantly, the Company's expectations of
the contribution the person will make over the long term to the Company's
growth. All options granted under the Incentive Plan have an exercise price
equal to the market value of the stock on the date of grant, vest cumulatively
in five annual installments of 20% and expire ten years from the date of grant.
In addition, all shares of Common Stock granted under the Incentive Plan are, in
each case, subject to vesting requirements. Thus, option and stock grants are
designed to retain executive officers and enhance shareholder value by aligning
the financial interests of each executive officer or other key employee with the
interests of the Company's shareholders over the long term.

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COMPENSATION OF CHIEF EXECUTIVE OFFICER FOR FISCAL 1997

The compensation paid to the Company's Chief Executive Officer ("CEO") in fiscal
1997 consisted primarily of salary and bonus.

The CEO's salary for fiscal 1997 was approved by the Committee on the basis of
its subjective evaluation of the CEO's performance for the year and the
profitable performance of the Company. The performance measures used by the
Committee in making its determination were the continued growth in pre-tax
earnings and net sales and increases in operating income and gross margins.

The bonus paid to the CEO for fiscal 1997 was approved by the Committee based
upon its assessment of the CEO's individual performance in achieving certain
strategic goals, specifically, the expansion and strengthening of the Company's
brand portfolio, the further penetration by the ESQ brand of the moderately
priced watch market, expansion of the international distribution of Concord and
Movado and the development of Vizio as a separate luxury division with the
Movado brand. The Committee believes that a substantial portion of the CEO's
bonus should be tied to the performance of the Company. Therefore, the CEO's
bonus for fiscal 1997 was approved on the basis of the Company's attainment of
certain performance targets, specifically the achievement of earnings per share
and net sales results, that were determined by the Committee at the beginning of
the fiscal year.

POLICY REGARDING DEDUCTIBILITY OF COMPENSATION

Section 162(m) of the Internal Revenue Code limits the tax deduction to
$1 million for compensation paid to the CEO and the four other most highly
compensated executive officers of the Company. No policy determination by the
Committee regarding this matter has yet been made.

COMPENSATION COMMITTEE

Margaret Hayes Adame
Donald Oresman
Leonard L. Silverstein

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PERFORMANCE GRAPH

The performance graph set forth below compares the cumulative total
shareholder return of the Company's Common Stock since the date of the Company's
public offering (i.e., September 30, 1993), through the fiscal year ended
January 31, 1997 with that of the Broad Market (CRSP Total Return Index for the
NASDAQ Stock Market) and a peer group index comprised of the following five
companies: Swiss Army Brands Inc., Fossil Inc., Jan Bell Marketing Inc., Jostens
Inc. and Tiffany & Co. The returns of each company in the peer group index have
been weighted according to the respective issuer's stock market capitalization.
The graph assumes an initial investment of $100 on September 30, 1993, and the
reinvestment of dividends (where applicable).

FISCAL 1997 COMPARATIVE TOTAL RETURNS
MOVADO GROUP, INC., NASDAQ
STOCK MARKET AND INDUSTRY PEER GROUP
(PERFORMANCE RESULTS FROM 9/30/93 THROUGH 1/31/97)

[GRAPH]

CRSP Total Returns Index for: 01/31/92 01/29/93 01/31/94 01/31/95 01/31/96 01/31/97

Movado Group, Inc. 99.1 104.2 134.7 162.7
Nasdaq Stock Market (US Companies 80.8 91.4 105.1 100.2 141.6 185.7
Self-Determined Peer Group 141.2 127.4 92.2 90.6 118.4 137.9

Companies in the Self-Determined Peer Group

FOSSIL INC JAN BELL MARKETING INC
JOSTENS INC SWISS ARMY BRANDS INC
TIFFANY & CO NEW

Notes:
A. The lines represent monthly index levels derived from compounded
daily returns that include all dividends.
B. The indexes are weighted daily, using the market capitalization on
the previous trading day.
C. If the monthly Interval, based on the fiscal year-end, is not a
trading day, the proceeding trading day is used.
D. The index level for all series was set to $100.0 on 09/30/93.

15
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DATE FOR RECEIPT OF SHAREHOLDER PROPOSALS

Shareholders' proposals intended to be presented at the 1998 Annual
Meeting of Shareholders must be received by the Company no later than February
2, 1998 for inclusion in the Company's proxy statement and form of proxy
relating to that meeting.

OTHER MATTERS

The Board of Directors, at the time of the preparation of this Proxy
Statement, knows of no business to come before the Annual Meeting other than
that referred to herein. If any other business should come before the Annual
Meeting, the persons named in the enclosed proxy will have discretionary
authority to vote all proxies received and not theretofore revoked in accordance
with their best judgment.

Upon the written request of any record holder or beneficial owner of
Common Stock or Class A Common Stock entitled to vote at the Annual Meeting, the
Company, without charge, will provide a copy of its Annual report on Form 10-K
for the year ended January 31, 1997, as filed with the Securities and Exchange
Commission. Requests should be directed to Howard Regenbogen, Treasurer, Movado
Group, Inc., 125 Chubb Avenue, Lyndhurst, New Jersey 07071.

The Company's consolidated balance sheets, and the related consolidated
statements of income, cash flows, and changes in shareholders' equity and the
notes thereto, and management's discussion and analysis of financial condition
and results of operations as set forth on pages 19 through 39 of the Company's
1997 Annual Report to Shareholders, a complete copy of which is being delivered
to shareholders together with this Proxy Statement, are hereby incorporated
herein by reference.

BY ORDER OF THE BOARD OF DIRECTORS

Timothy F. Michno
Secretary and General Counsel

Lyndhurst, New Jersey
May 20, 1997

IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT
EXPECT TO ATTEND THE ANNUAL MEETING AND WISH THEIR STOCK TO BE VOTED ARE URGED
TO DATE, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED SELF-ADDRESSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.

16
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Exhibit A

CERTIFICATE OF AMENDMENT

OF THE CERTIFICATE OF INCORPORATION

MOVADO GROUP, INC.

UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW

Movado Group, Inc., a corporation organized and existing under the
Business Corporation Law of the State of New York (the "Corporation"), hereby
certifies as follows:

FIRST: The name of the Corporation is Movado Group, Inc. The name under
which the Corporation was formed was North American Watch Corporation.

SECOND: The Certificate of Incorporation of the Corporation was filed
by the Department of State on November 2, 1967. A Restated Certificate of
Incorporation was filed by the Department of State on May 5, 1969. A Certificate
of Amendment of the Restated Certificate of Incorporation was filed by the
Department of State on July 24, 1979. A Restated Certificate of Incorporation
was filed by the Department of State on September 27, 1993. A Certificate of
Amendment to the Certificate of Incorporation was filed by the Department of
State on April 26, 1996.

THIRD: The Certificate of Incorporation of the Corporation is hereby amended by
adding to Paragraph 4.1(d) (i), which restricts the transferability of shares of
Class A Common Stock only to those defined as "Permitted Transferees", the
following two categories of Permitted Transferees under Paragraph 4.1(d) (i) (A)
as new sub-clauses (6) and (7):
20
"(6) a corporation, every beneficial owner of which is, or was at the
time of such owner's transfer of Class A Common Stock to such corporation, a
Class A Holder, any of such Class A Holder's family members or any Permitted
Transferee of any of the foregoing; and

(7) a partnership or limited partnership, every partner and limited
partner of which is, or was at the time of such partner's or limited partner's
transfer of Class A Common Stock to such partnership or limited partnership, a
Class A Holder, any of such Class A Holder's family members or any Permitted
Transferee of any of the foregoing".

FOURTH: Resolutions setting forth the proposed amendment to the
Certificate of Incorporation of the Corporation were duly adopted by the
unanimous written consent of the Board of Directors of the Corporation dated May
6, 1997. Thereafter, pursuant to the Certificate of Incorporation and By-laws of
the Corporation, at the annual meeting of shareholders of the Corporation which
was duly held on June 10, 1997, at least sixty-six and two-thirds percent (66
2/3) of the voting power of all the outstanding shares of stock of the
Corporation entitled to vote in the election of Directors of the Corporation
were voted in favor of said amendment.

IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this certificate to be subscribed by its President and its
Secretary and affirmed by them as true under the penalties of perjury this _____
day of June, 1997.

----------------------------------
Efraim Grinberg
President

----------------------------------
Timothy F. Michno
Secretary
21
PROXY

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
MOVADO GROUP, INC.

The undersigned hereby appoints Timothy F. Michno and Howard Regenbogen proxies,
each with power to act without the other and with power of substitution, and
hereby authorizes them to represent and vote, as designated on the other side,
all the shares of stock of Movado Group, Inc. standing in the name of the
undersigned with all powers which the undersigned would possess if present at
the Annual Meeting of Shareholders of the Company to be held June 10, 1997 or
any adjournment thereof.

(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)

- --------------------------------------------------------------------------------

(up arrow)FOLD AND DETACH(up arrow)
22
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1,2 AND 3

PLEASE MARK
YOUR VOTES AS /X/
INDICATED IN
THIS EXAMPLE

1. ELECTION OF DIRECTORS

FOR ALL NOMINEES WITHHOLD
LISTED TO THE RIGHT AUTHORITY
(EXCEPT AS MARKED TO VOTE FOR ALL NOMINEES
TO THE CONTRARY) LISTED TO THE RIGHT

/ / / /

NOMINEES: GEDALIO GRINBERG, EFRAIM GRINBERG, MARGARET HAYES ADAME, MICHAEL BUSH,
DONALD ORESMAN AND LEONARD L. SILVERSTEIN

INSTRUCTION: TO WITHHOLD TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT
NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.

- --------------------------------------------------------------------------------

2. Ratification of Price Waterhouse as the independent certified public
accountants of the corporation.

FOR AGAINST ABSTAIN

/ / / / / /

3. Proposal to approve the amendment to the corporation's Certificate of
Incorporation modifying the definition of "Permitted Transferee" in
Paragraph 4.1(d)(i) with respect to the Class A Common Stock

FOR AGAINST ABSTAIN

/ / / / / /

Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.

DATE:_______________________________,1997

-----------------------------------------
(SIGNATURE)

-----------------------------------------
(SIGNATURE IF HELD JOINTLY)

PLEASE SIGN, DATE, AND RETURN THE
PROXY CARD PROMPTLY USING THE ENCLOSED
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23
Management's Discussion and Analysis of Financial Condition and Results
of Operations

Forward Looking Statements

Statements included under Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations, in this annual report
as well as statements in future filings by the Company with the Securities
and Exchange Commission ("SEC"), in the Company's press releases and oral
statements made by or with the approval of an authorized executive officer of
the Company, which are not historical in nature, are intended to be, and are
hereby identified as, "FORWARD LOOKING STATEMENTS" for purposes of the safe
harbor provided by Section 21E of the Securities Exchange Act of 1934. The
Company cautions readers that FORWARD LOOKING STATEMENTS, include without
limitation, those relating to the Company's future business prospects, revenues,
working capital, liquidity, capital needs, plans for future operations,
effective tax rates, margins, interest costs, and income, as well as assumptions
relating to the foregoing. FORWARD LOOKING STATEMENTS are subject to certain
risks and uncertainties, some of which cannot be predicted or quantified. Actual
results and future events could differ materially from those indicated in the
FORWARD LOOKING STATEMENTS, due to several important factors herein identified,
among others, and other risks and factors identified from time to time in the
Company's reports filed with the SEC including, without limitation, the
following: general economic and business conditions which may impact disposable
income of consumers, competitive products and pricing, ability to enforce
intellectual property rights, and success of hedging strategies in respect of
currency exchange rate fluctuations.

GENERAL

Net Sales. Among the more significant factors which influence annual sales are
general economic conditions in the Company's domestic and international markets,
new product introductions, the level of advertising expenditures, the
effectiveness of marketing and distribution programs and product pricing
decisions.

Reported sales are also affected by foreign exchange rates, primarily the U.S.
dollar/Swiss franc rate, because significant portions of the Company's
international sales are billed in Swiss francs and translated to U.S. dollars at
average exchange rates for financial reporting purposes.

The Company's business is very seasonal. There are two major selling seasons in
most of the Company's markets: the spring season which includes graduations and
several holidays and, most importantly, the Christmas and holiday season. Major
selling seasons in certain international markets center around significant local
holidays that occur in late winter or early spring; however, because these
markets are a less significant portion of the Company's business, their impact
is far less than that of the selling seasons in North America.

The Company is continuing its efforts, begun in fiscal 1995, to expand sales in
key international markets. These efforts have included the recruitment of a
number of key personnel with management level sales and marketing
responsibilities, the addition and replacement of selected independent
distributors, an increase in the number of sales representatives, retargeted and
increased advertising and coordinated marketing programs designed to build brand
awareness and consumer demand for the Company's watches at point of sale.

Gross Margins. The Company's overall gross margins are primarily affected by
four major factors: sales mix, product pricing strategy, component and labor
costs and the U.S. dollar/Swiss franc exchange rate. The Company's gross margins
on its manufactured brands are higher than those on its distributed brands and,
therefore, any shift in overall sales mix toward the Company's manufactured
brands will generally have a favorable impact on margins. In addition, margins
on sales of a particular brand vary from model to model and, therefore, changes
in the model sales mix within a brand will impact margins.

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All of the Company's brands compete with a number of other brands on the basis
of not only styling but also wholesale and retail price. The Company's ability
to improve margins through price increases is, therefore, to some extent
constrained by competitor actions. The overall level of liquidation sales of
discontinued models in a particular fiscal year can also impact the Company's
gross margins.

Manufacturing costs of the Company's Movado and Concord brands consist primarily
of component costs, Company and subcontract assembly costs and unit overhead
costs.

The Company seeks to control and reduce component and subcontract labor costs
through a combination of negotiation with existing suppliers and alternative
sourcing. Overall wage and salary costs at the Company's manufacturing
operations in Switzerland are a function of production levels and local
inflation. These costs have remained fairly stable over the three previous
fiscal years.

Since a substantial amount of the Company's product costs are incurred in Swiss
francs, fluctuations in the U.S. dollar/Swiss franc exchange rate can impact the
Company's production costs and therefore its gross margins. The Company,
therefore, hedges its Swiss franc purchases using a combination of forward
contracts, purchased currency options and spot purchases. The Company's hedging
program has, in the recent past, been reasonably successful in stabilizing
product costs despite exchange rate fluctuations.

Operating Expenses. The Company's operating expenses consist primarily of
advertising, selling, distribution and general and administrative expenses.
Annual advertising expenditures are based principally on overall strategic
considerations relative to maintaining or increasing market share in markets
that management considers to be crucial to the Company's continued success as
well as on general economic conditions in the various marketplaces around the
world in which the Company sells its products.

Selling expenses consist primarily of sales commissions, salesforce travel costs
and operating costs incurred in connection with the Company's retail business.
Sales commissions vary proportionally with overall sales levels. Retail
operating expenses consist primarily of salaries and store rent.

Distribution expenses consist primarily of salaries of distribution staff, the
cost of part-time help to meet seasonal needs, and shipping costs and supplies.

General and administrative expenses consist primarily of salaries, employee
benefit plan costs, office rent, management information systems costs and
various other corporate expenses such as insurance, legal, internal audit and
credit and collection costs.

Operating expenses over the last three fiscal years reflect the effect of the
implementation of the Company's growth strategy. The more significant expenses
associated with this strategy include advertising and marketing expenses
designed to increase market share for the Piaget, Corum, Concord and Movado
brands, advertising and marketing costs for the continuing expansion of the
Company's ESQ line which was introduced in 1993, additions to the Company's
domestic salesforce, salaries and rents associated with additional outlet stores
and the addition of staff to support distribution and inventory management
requirements coincident with growth of the Company's domestic business.

Income taxes. The Company's income tax provision for both fiscal 1997 and 1996
amounted to $3.9 million or 24.8% and 28.5% of pretax income, respectively. A
portion of the Company's consolidated operations are located in non-U.S.
jurisdictions and therefore the Company's effective rate differs from U.S.
statutory rates. The majority of the Company's non-U.S. operations are located
in jurisdictions with statutory rates below U.S. rates. The Company believes
that the future effective tax rate will range from 24% to 30%; however, there
can be no assurance of this as it is dependent on a number of factors including:
mix of foreign

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to domestic earnings, local statutory tax rates and the Company's
ability to utilize carryforward net operating losses in certain jurisdictions.

RESULTS OF OPERATIONS

Net Sales. Comparative net sales by product class are as follows (in thousands):

1997 1996 1995
-------- -------- --------

Piaget and Corum $ 22,386 $ 25,963 $ 22,296

Concord and Movado
Domestic 109,314 91,105 83,342
International 30,185 28,504 27,437

ESQ 29,496 19,350 11,293

Other 23,726 20,945 16,485
-------- -------- --------
$215,107 $185,867 $160,853
======== ======== ========

Net sales increased 15.7% in fiscal 1997. The increase resulted primarily from
growth in unit sales in the U.S. and, to a lesser extent, unit sales gains in
the Company's international business.

Increases in unit sales in the U.S. were attributable primarily to the Concord,
Movado and ESQ brands offset somewhat by a decline in unit sales of Piaget. The
increase in international unit sales was offset somewhat by the negative impact
of a change in translation rates.

Net sales increased 15.6% in fiscal 1996. The increase resulted primarily from
growth in unit sales volumes in the U.S., Canada, the Caribbean and certain Far
East markets offset somewhat by decreased unit sales in the Company's other
international markets. Increases in unit sales in North America were
attributable primarily to the Movado and ESQ brands and, to a lesser extent,
increases in unit sales of Piaget in the United States, Canada and the
Caribbean.

The increase in net sales in fiscal 1996 also includes the effect of price
increases which were implemented in response to a significant decline in the
value of the dollar against the Swiss franc which increases the Company's
product costs. Net sales were also favorably impacted by changes in average
translation rates.

Gross Margins. The Company's gross margins increased from 55.1% to 55.8% in
fiscal 1997. Fiscal 1997 margins were favorably impacted by sales mix,
particularly an increase in the proportion of Concord, Movado and ESQ sales to
total sales as well as reduced per unit overhead costs due to higher unit
production levels in Switzerland. The Company's margin was also benefited by
increases in the U.S. dollar against the Swiss franc which occurred late in the
fiscal year.

The Company's gross margins increased from 52.8% to 55.1% in fiscal 1996. The
Company continued to experience a shift in its overall sales mix toward its
higher margin Concord, Movado and ESQ brands. Margins also benefited from
reduced levels of lower margin liquidation sales due to the success of the
Company's outlet stores and improved production planning. The Company was able
to offset the otherwise negative impact on gross margins of a significant
decline in the U.S. dollar against the Swiss franc with price increases on all
of its lines implemented at various points throughout the year.

Operating Expenses. Operating expenses in fiscal 1997 increased 18.2% to 46.3%
of sales from 45.4% of sales in 1996. The increase in fiscal 1997 operating
expenses occurred primarily in the advertising and selling, general and
administrative expense categories. Although increasing slightly in absolute
terms, product distribution costs declined as a percentage of sales.

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The increase in advertising and marketing expenditures occurred primarily in
the U.S. This increase was planned and relates to the Company's ongoing efforts
to build identity and image for its brands. Fiscal 1997 advertising and
marketing costs were affected by higher levels of media spending for Concord,
Movado and, in particular, ESQ in the U.S., production costs for a new
advertising campaign for Concord and increased marketing and promotional
activities in the U.S. for all of the Company's brands including the
introduction of the new Vizio line.

The growth in consolidated advertising costs also included increased media
spending in certain international markets, primarily the Far East and Middle
East.

Selling expenses included an increase in sales commissions commensurate with
sales growth as well as the costs associated with an increase in the number of
employees involved in the Company's domestic sales function, particularly in the
ESQ brand and the growth of its retail division.

Fiscal 1997 general and administrative expenses included the cost of management
additions and increased employee benefit costs. Fiscal 1997 operating expenses
also included a non-recurring charge of $450,000 in connection with
restructuring the Company's German business.

Operating expenses increased 21.8% in fiscal 1996 to 45.4% of net sales as
compared to 43.0% of net sales in the prior year. The increase in overall
operating expenses was attributable primarily to a planned 36% increase in
advertising costs, and increases in variable selling and distribution expenses.

The increase in fiscal 1996 advertising expenses related to domestic media costs
primarily for Movado and ESQ, targeted international campaigns, cooperative
advertising programs and domestic and international advertising production
costs. Fiscal 1996 advertising expenses also included a one time $600,000 charge
in connection with a change in the accounting standards for advertising
production costs. Non-advertising operating expenses as a percentage of sales
were consistent with the prior year.

Interest Expense. Net interest expense, which consists primarily of interest on
the Company's $40,000,000 of 6.56% senior notes and borrowings against its
working capital and revolving lines of credit, was $4.9 million, $4.5 million
and $4.3 million for fiscal 1997, 1996 and 1995, respectively. The effect of
higher average outstanding borrowings against working capital lines in 1997 and
1996 was offset somewhat by lower average interest rates on these borrowings.

Income Taxes. The Company's income tax provision for both fiscal 1997 and 1996
amounted to $3.9 million or 24.8% and 28.5% of pretax income, respectively. A
portion of the Company's consolidated operations are located in non-U.S.
jurisdictions and therefore the Company's effective rate differs from U.S.
statutory rates. The majority of the Company's non-U.S. operations are located
in jurisdictions with statutory rates below U.S. rates. The Company believes
that the future effective tax rate will range from 24% to 30%; however, there
can be no assurance of this as it is dependent on a number of factors including:
mix of foreign to domestic earnings, possible changes in local statutory tax
rates and utilization of net operating losses.

In fiscal 1995, the Company recorded a tax benefit of $2.5 million. The benefit
resulted primarily from the reversal of valuation allowances on domestic
deferred tax assets related to net operating loss carryforwards, cumulative
temporary differences and alternative minimum tax credits.

LIQUIDITY AND CAPITAL RESOURCES

The Company's liquidity needs historically have been primarily a function of
its seasonal working capital requirements which have increased due to
significant growth in domestic sales over the two previous years. The Company's
business is not capital intensive and liquidity needs for capital investments
have not been significant in relation to the Company's overall financing
requirements.

The Company has met its liquidity needs primarily through funds from operations
and bank borrowings under working capital lines of credit with domestic and
Swiss banks. The Company

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has also entered into a revolving credit agreement with
its domestic banks. Funds available under this agreement are in addition to the
Company's working capital lines. (See Note 3 to the Consolidated Financial
Statements for details of the Company's borrowing arrangements with its banks).

The Company expects that its future requirements for capital will relate not
only to working capital requirements for the expected continued growth of its
existing brands, but also funding new lines of business including the Spring
1998 launch of the Company's new Coach watch line and possible product line
extensions and retail boutiques for the Movado brand. In addition, the Company
is required to make a $5 million sinking fund payment on February 2, 1998 in
connection with its $40 million 6.56% senior notes. The Company's existing bank
credit lines and planned operating cash flows will not be sufficient to fund the
combined capital commitments associated with internal growth, new business and
sinking fund requirements; however, management believes the Company's positive
operating performance of recent years and current financial position will afford
it sufficient access to capital to meet all existing financial commitments and
fully implement its business plans.

At January 31, 1997, the Company's debt to total capitalization ratio had been
increased to 33.7% from 31.8% at January 31, 1996. The major factor in this
increase was a $12.2 million decline in the Company's cumulative translation
adjustment due to strengthening of the U.S. dollar. Excluding the cumulative
translation adjustment, the Company's debt to total capitalization ratio
declined from 34.0% to 33.3%.

The Company's working capital consisting primarily of trade receivables and
inventories amounted to $126.7 and $132.7 million at January 31, 1997 and 1996,
respectively. The decline in the Company's working capital in 1997 is primarily
attributable to the reclassification of $5.0 million of the Company's long-term
senior debt which is payable on January 31, 1998.

Accounts receivable at January 31, 1997 were $75.7 million compared to $75.3
million at January 31, 1996. Most of this increase related to growth in domestic
sales in the second half of fiscal 1997 as compared to the prior year period
partially offset by the translation effect due to strengthening of the U.S.
dollar. On a constant dollar basis the Company reduced its days sales
outstanding from 137 at January 31, 1996 to 130 at January 31, 1997.

Inventories at January 31, 1997 and 1996 were $87.2 million and $89.1 million,
respectively, a decrease of $1.9 million or 2.2%. On a constant dollar basis,
the Company's inventories increased approximately 5.0% in 1997; however,
consolidated inventory turns increased from 1.0 to 1.1 times on a constant
dollar basis.

The Company's capital expenditures amounted to $6,626,000, $2,025,000 and
$4,397,000 in fiscal 1997, 1996 and 1995, respectively. Fiscal 1997 expenditures
are principally related to the Company's Piaget Boutique, upgrades of the
Company's domestic distribution operations, the relocation of the Company's
Swiss operations and computer hardware and software investments to automate the
Company's domestic salesforce. Fiscal 1996 and 1995 expenditures were primarily
related to improvements in the Company's management information systems,
expansion and upgrades of the Company's domestic distribution operations and
leasehold improvements related to the expansion of the Company's Movado Company
Store network.

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MOVADO GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

FISCAL YEAR ENDED JANUARY 31,
-------------------------------------
1997 1996 1995
--------- --------- ---------

Net sales $ 215,107 $ 185,867 $ 160,853

Costs and expenses:
Cost of sales 95,031 83,502 75,871
Selling, general and administrative 99,657 84,315 69,243
--------- --------- ---------
194,688 167,817 145,114
--------- --------- ---------

Operating income 20,419 18,050 15,739

Net interest expense 4,874 4,450 4,307
--------- --------- ---------

Income before income taxes 15,545 13,600 11,432

Provision for (benefit from) income taxes 3,853 3,876 (2,512)
--------- --------- ---------

Net income $ 11,692 $ 9,724 $ 13,944
========= ========= =========

Earnings per share $ 1.94 $ 1.62 $ 2.32
========= ========= =========

Shares used in per share computations 6,012 6,007 6,000
========= ========= =========

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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MOVADO GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

JANUARY 31,
------------------------
1997 1996
--------- ---------

ASSETS
Current assets:
Cash $ 4,885 $ 3,829
Trade receivables, net 75,688 75,335
Inventories 87,177 89,101
Other 16,914 12,521
--------- ---------
Total current assets 184,664 180,786

Plant, property and equipment, net 15,066 11,794
Other assets 8,713 7,800
--------- ---------

$ 208,443 $ 200,380
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Loans payable to banks $ 7,778 $ 8,782
Current portion of long-term debt 5,000 --
Accounts payable 25,297 22,042
Accrued liabilities 13,188 9,289
Deferred and current taxes payable 6,711 7,994
--------- ---------
Total current liabilities 57,974 48,107
--------- ---------

Long-term debt 40,000 40,000
Deferred and noncurrent foreign income taxes 3,477 3,860
Other liabilities 3,122 3,572

Shareholders' equity
Preferred Stock, $0.01 par value,
5,000,000 shares authorized; no shares issued -- --
Common Stock, $0.01 par value,
20,000,000 shares authorized; 3,445,206 and 3,426,610
shares issued, respectively 34 34
Class A Common Stock, $0.01 par value,
shares authorized; 2,585,322 and 2,588,891
shares issued and outstanding, respectively 26 26
Capital in excess of par value 34,503 34,252
Retained earnings 71,291 60,319
Cumulative translation adjustment (1,856) 10,338
Treasury stock, 9,201 shares, at cost (128) (128)
--------- ---------
103,870 104,841
--------- ---------
Commitments and contingencies (Note 11)
--------- ---------
$ 208,443 $ 200,380
========= =========

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

30
MOVADO GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

FISCAL YEAR ENDED JANUARY 31,
-----------------------------
1997 1996 1995
-------- -------- --------

Cash flows from operating activities:
Net income $ 11,692 $ 9,724 $ 13,944
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 3,946 2,949 3,109
Deferred and noncurrent foreign income taxes 221 (373) (4,831)
Provision for losses on accounts receivable 1,917 1,115 867
Changes in current assets and liabilities:
Trade receivables (4,096) (10,607) (9,982)
Inventories (3,828) (2,836) (4,450)
Other current assets (14,163) (453) (4,484)
Accounts payable 5,174 1,318 10,392
Accrued liabilities 4,301 481 (601)
Deferred and current taxes payable (377) 2,299 4,174
Increase in other noncurrent assets (1,285) (153) (1,337)
Increase in other noncurrent liabilities 253 414 23
-------- -------- --------
Net cash provided by operating activities 3,755 3,878 6,824
-------- -------- --------

Cash flows from investing activities:
Capital expenditures (6,626) (2,025) (4,397)
Goodwill, trademarks and other intangibles (294) (278) (717)
-------- -------- --------
Net cash used in investing activities (6,920) (2,303) (5,114)
-------- -------- --------

Cash flows from financing activities:
Net proceeds from (payment of) current borrowings under lines of credit 5,335 (1,194) 1,235
Principal payments under capital leases (389) (996) (869)
Exercise of stock options 212 214 --
Dividends paid (720) (599) (480)
Purchase of treasury stock -- (128) --
-------- -------- --------
Net cash provided by (used in) financing activities 4,438 (2,703) (114)
-------- -------- --------

Effect of exchange rate changes on cash (217) 61 147

Net increase (decrease) in cash 1,056 (1,067) 1,743

Cash at beginning of year 3,829 4,896 3,153
-------- -------- --------
Cash at end of year $ 4,885 $ 3,829 $ 4,896
======== ======== ========

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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MOVADO GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

CLASS A CAPITAL IN CUMULATIVE
PREFERRED COMMON COMMON EXCESS OF RETAINED TRANSLATION TREASURY
STOCK STOCK STOCK PAR VALUE EARNINGS ADJUSTMENT STOCK
----- ----- ----- --------- -------- ---------- -----

Balance, January 31, 1994 $ -- $ 32 $ 28 $ 34,009 $ 37,730 $ 659 $ --
Net income 13,944
Dividends ($0.08 per share) (480)
Translation adjustment 7,008
Issuance of Common Stock
Conversion of 239,196 shares of
Class A Common Stock to 239,187
shares of Common Stock 2 (2)

-------- ------- ------ --------- --------- --------- ---------
Balance, January 31, 1995 -- 34 26 34,009 51,194 7,667 --
Net income 9,724
Dividends ($0.10 per share) (599)
Stock options exercised 214
Tax benefit from employees
exercising stock options 29
Purchase of Treasury stock (128)
Translation adjustment 2,671

-------- ------- ------ --------- --------- --------- ---------
Balance, January 31, 1996 -- 34 26 34,252 60,319 10,338 (128)
Net income 11,692
Dividends ($0.12 per share) (720)
Stock options exercised 212
Tax benefit from employees
exercising stock options 39
Translation adjustment (12,194)
-------- ------- ------ --------- --------- --------- ---------
Balance, January 31, 1997 $ -- $ 34 $ 26 $ 34,503 $ 71,291 $ (1,856) $ (128)
======== ======= ====== ========= ========= ========= =========

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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MOVADO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

Organization and Business

Movado Group, Inc. (the "Company"), is a designer, manufacturer and distributor
of quality watches with prominent brands in almost every price category
comprising the watch industry. The Company markets five distinctive brands of
watches: Movado, Concord, ESQ, Piaget and Corum, which compete in most segments
of the watch market.

The Company designs and manufactures Concord and Movado watches primarily
through its subsidiaries in Switzerland and the United States. ESQ watches are
manufactured to the Company's specifications using Swiss movements by
independent contractors located in the Far East. The Company is also the
exclusive distributor of Swiss-manufactured Piaget and Corum watches in the
United States, Canada, Central America and the Caribbean Islands. The Company
distributes its watch brands through its United States operations as well as
through sales subsidiaries in Canada, Hong Kong, Singapore and Switzerland and
through a number of independent distributors located in various countries
throughout the world.

In addition to its sales to trade customers and independent distributors, Movado
Group, Inc. sells Movado watches and Piaget products directly to consumers in
its Company-operated Movado Design Store and its Piaget Boutique, respectively,
both of which are located on Fifth Avenue in New York City. Movado Group, Inc.
also operates a number of Movado Company Stores throughout the United States,
through which the Company sells discontinued and sample merchandise.

Principles of consolidation

The consolidated financial statements include the accounts of the Company and
its subsidiaries. Intercompany transactions and balances have been eliminated.

Translation of foreign currency financial statements and foreign currency
transactions

The financial statements of the Company's international subsidiaries have been
translated into United States dollars by translating balance sheet accounts at
year end exchange rates and statement of operations accounts at average exchange
rates for the year. Foreign currency transaction gains and losses are charged or
credited to income as incurred. Foreign currency translation gains and losses
are reflected in the equity section of the Company's consolidated balance sheet
as cumulative translation adjustments.

Sales and trade receivables

The Company's trade customers include department stores, jewelry store chains
and independent jewelers. Movado and Concord watches are also marketed through a
network of independent distributors. Sales are recognized upon shipment of
products to trade customers. Accounts receivable are stated net of allowances
for doubtful accounts of $3,876,000 and $3,323,000 at January 31, 1997 and 1996,
respectively. No individual trade customer, including trade customers under
common control, or international distributor accounts for 10% or more of the
Company's consolidated net sales.

The Company's concentrations of credit risk arise primarily from accounts
receivable related to trade customers during the peak selling seasons. The
Company has significant accounts receivable balances due from major department
store chains. The Company's results of operations could be materially adversely
affected in the event any of these customers or a group of these customers
defaulted on all or a significant portion of their obligation to the Company as
a result of financial difficulties.

Inventories

Inventories are valued at the lower of cost or market. The cost of domestic
finished goods inventories is determined using the first-in, first-out (FIFO)
method. The costs of finished goods

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inventories held by overseas subsidiaries and all component parts inventories
are determined using average cost.

Plant, property and equipment

Plant, property and equipment at January 31, at cost, consists of the following
(in thousands):

1997 1996
-------- --------

Furniture and equipment $ 26,288 $ 23,195
Leasehold improvements 8,662 6,306
-------- --------
34,950 29,501

Less: accumulated depreciation and amortization (19,884) (17,707)
======== ========
$ 15,066 $ 11,794
======== ========

Depreciation of furniture and equipment is provided using the straight-line
method based on the estimated useful lives of assets which range from three to
ten years. Leasehold improvements are amortized using the straight-line method
over the lesser of the term of the lease or the estimated useful life of the
leasehold improvement.

Goodwill and other intangibles

Other intangible assets consist primarily of trademarks and are recorded at
cost. Trademarks are amortized over ten years, except in the case of costs
associated with the Piaget and Corum trademarks, which are amortized over the
remaining terms of the Piaget and Corum distribution agreements. Goodwill is
amortized over 40 years. At January 31, 1997 and 1996, goodwill and other
intangible assets at cost were $5,065,000 and $5,043,000, respectively, and
related accumulated amortization of goodwill and other intangibles were
$2,385,000 and $2,188,000, respectively.

Advertising production costs

In fiscal 1996, the Company adopted a newly prescribed accounting guideline
which requires that production costs of an advertising campaign be expensed at
the commencement date of the advertising campaign. As a result of adopting this
new accounting pronouncement, the Company recorded at February 1, 1995 a one
time pre-tax charge of approximately $600,000 ($0.07 per share after tax) which
is included in selling, general and administrative expenses. Advertising
expenses for fiscal 1997, 1996 and 1995, amounted to $38.7 million, $33.0
million and $24.4 million, respectively.

Income taxes

The Company and its domestic subsidiaries file a consolidated federal income tax
return. Foreign income taxes have been provided based on the applicable tax
rates in each of the foreign countries in which the Company operates. Certain
Swiss income taxes are payable over several years; the portion of these taxes
not payable within one year is classified as noncurrent. Noncurrent foreign
income taxes included in the consolidated balance sheets at January 31, 1997 and
1996 were $724,000 and $637,000, respectively.

Earnings per share

Earnings per share are based on the weighted average total number of shares of
Common Stock and Class A Common Stock outstanding during the periods presented.

Stock-based compensation

Stock-based compensation is recognized using the intrinsic value method. For
disclosure purposes, pro forma net income and earnings per share are provided
as if the fair value method had been applied.

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Use of estimates in the preparation of financial statements

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

NOTE 2 - INVENTORIES

Inventories consist of the following (in thousands):

JANUARY 31,
---------------------
1997 1996
------- -------

Finished goods $53,497 $51,034
Work-in-process and component parts 33,680 38,067
------- -------
$87,177 $89,101
======= =======

NOTE 3 - BANK CREDIT ARRANGEMENTS AND LINES OF CREDIT

In fiscal 1997, the Company entered into revised agreements with certain
domestic banks providing for $35,000,000 of unsecured demand borrowings, to be
used primarily for seasonal working capital requirements. Borrowings under these
lines bear interest at the prime commercial lending rate or LIBOR plus 1% or the
certificate of deposit rate plus 1.25%. Borrowings may be made in either U.S.
dollars or Swiss francs. These lines expire in the third quarter of fiscal
1998.

The Company's Swiss subsidiaries maintain secured and unsecured lines of credit
with Swiss banks, a majority of which have an unspecified duration. Available
credit under these lines totaled 20,500,000 Swiss francs, with dollar
equivalents of approximately $14,437,000 and $16,635,000 at January 31, 1997 and
1996, respectively. The Swiss franc credit lines included a line of 1,500,000
Swiss francs for the purchase of gold, borrowings which are secured by gold
inventory. As of January 31, 1997 and 1996, gold inventory valued at $0 and
$827,000, respectively, was pledged as collateral for borrowings under this line
of credit. One subsidiary's credit line contains a covenant requiring
maintenance of retained earnings above a specified minimum level. This
subsidiary was in compliance with this covenant at January 31, 1997 and 1996.
There are no other restrictions on transfers in the form of dividends, loans or
advances to the Company by its foreign subsidiaries.

Outstanding borrowings against the Company's aggregate demand lines of credit
were $7,746,000 and $8,782,000 at January 31, 1997 and 1996, respectively.
Aggregate maximum and average monthly outstanding borrowings against the
Company's lines of credit and related weighted average interest rates during
fiscal 1997, 1996 and 1995 were as follows (in thousands):

FISCAL YEAR ENDED JANUARY 31,
-------------------------------------
1997 1996 1995
------- ------- -------

Maximum borrowings $56,143 $41,032 $31,300
Average monthly borrowings $34,302 $28,940 $22,139
Weighted average interest rate 5.9% 6.0% 6.2%

Weighted average interest rates were computed based on average month-end
outstanding borrowings and applicable average month-end interest rates.

On January 31, 1996, the Company entered into a three year revolving credit
agreement with its domestic banks which provides the Company with a $20.0
million unsecured revolving line of credit. The agreement provides for various
rate options including the federal funds rate plus a fixed rate, the prime rate
or a fixed rate plus the LIBOR rate. The Company pays a facility

30
35
fee on the unused portion of the credit facility. The agreement also contains
certain financial covenants based on fixed coverage ratios, leverage ratios and
restrictions which limit the Company on the sale, transfer or distribution of
corporate assets, including dividends. The Company was in compliance with these
restrictions and covenants at January 31, 1997. The amount of $5.0 million
outstanding at January 31, 1997 is included in long-term debt. There were no
amounts outstanding at January 31, 1996.

NOTE 4 - LONG-TERM DEBT

Long-term senior debt outstanding at January 31, 1997 and 1996 consisted of
$35,000,000 and $40,000,000, respectively, of Senior Notes due January 31, 2005
(the "Senior Notes") which were issued in a private placement completed in
fiscal 1994. The Senior Notes bear interest at 6.56% per annum, payable
semiannually on July 31 and January 31, and are subject to mandatory annual
prepayments of $5,000,000 commencing January 31, 1998 and accordingly such
amount has been classified as a current liability in fiscal 1997. The Company
has the option to prepay amounts due to holders of the Senior Notes at 100% of
the principal plus a "make-whole" premium and accrued interest. The Senior Note
agreement contains certain restrictions and covenants which generally require
the maintenance of a minimum net worth, limit the amount of additional secured
debt the Company can incur and limit the sale, transfer or distribution of
corporate assets including dividends. The Company was in compliance with these
restrictions and covenants at January 31, 1997.

Included in long-term debt at January 31, 1997 was $5.0 million related to the
Company's revolving credit agreement as described in Note 3.

NOTE 5 - FOREIGN CURRENCY MANAGEMENT

A substantial portion of the Company's watches and watch components are sourced
from affiliated and nonaffiliated suppliers in Switzerland. A significant
strengthening of the Swiss franc against currencies of other countries in which
the Company conducts sales activities increases the Company's product cost. This
may adversely impact gross margins to the extent the Company is unsuccessful in
hedging against changes in the currency exchange rates or higher product costs
cannot be recovered through price increases in local markets. Significant
fluctuations in the Swiss franc - U.S. dollar exchange rate can also have a
material impact on the U.S. dollar value of the net assets of the Company's
wholly-owned Swiss subsidiaries.

The Company hedges against foreign currency exposure using only forward exchange
contracts, purchased foreign currency options and open market purchases to cover
identifiable inventory purchase commitments and equity invested in its
international subsidiaries. Due to production lead times, the Company hedges
identified inventory purchase commitments generally over a period of up to
eighteen months.

The Company has established strict counterparty credit guidelines and only
enters into foreign currency transactions with financial institutions of
investment grade or better. At January 31, 1997 and 1996, the Company had
foreign currency trading lines totaling $200,000,000 with various banks. To
minimize the concentration of credit risk, the Company enters into hedging
transactions with each of these banks. As a result, the Company considers the
risk of counterparty default to be minimal.

The following table presents the aggregate contract amounts and fair values,
based on dealer quoted prices, of the Company's financial instruments
outstanding at January 31, 1997 and 1996. All financial instruments included
below mature within one year and were held for hedging purposes only. Foreign
currency forward amounts (in thousands) consist primarily of U.S. dollar - Swiss
franc contracts.

AS OF JANUARY 31,
------------------------------------------------
1997 1996
-------------------- ---------------------
CONTRACT FAIR CONTRACT FAIR
AMOUNTS VALUES AMOUNTS VALUES

Foreign Currency Forward Amounts $56,176 $50,041 $78,528 $77,065

Purchased Options $ 7,450 $ 0 $40,751 $ 310

The contract amounts of these foreign currency forward amounts and purchased
options do not necessarily represent amounts exchanged by the parties and,
therefore, are not a direct measure of the exposure of the Company through its
use of these financial instruments. The amounts exchanged are calculated on the
basis of the contract amounts and the other terms of the financial instruments,
which relate to exchange rates. As of January 31, 1997 and 1996, the receivable
from and payable to banks recorded in current assets and other current
liabilities, respectively, associated with closed contract positions was
$247,000 and $289,000, respectively.

The estimated fair values of these foreign currency forward amounts and
purchased options used to hedge the Company's risks will fluctuate over time.
These fair value amounts should not be viewed in isolation, but rather in
relation to the fair values of the underlying hedged transactions and
investments and the Company's overall exposure to fluctuations in foreign
exchange rates.

Gains and losses from and premiums paid for forward or option transactions that
hedge inventory purchase commitments are included in the carrying cost of
inventory and are recognized in cost of sales upon sale of the inventory. Net
deferred charges from hedging amounted to $640,000 and $403,000 at January 31,
1997 and 1996, respectively, and were included in other current assets on the
accompanying balance sheet.

Gains and losses on financial instruments that are designated and effective as
hedges of net investments in international operations are included in
shareholders' equity in the cumulative translation adjustment account.

NOTE 6 - FAIR VALUE OF OTHER FINANCIAL INSTRUMENTS

The estimated fair value of the Company's Senior Notes at January 31, 1997
approximated the carrying value of the notes as the difference between
market-based interest rates at the balance sheet date and the 6.56% fixed rate
of the notes was minimal. The fair value of the Company's other monetary assets
and liabilities approximate carrying value due to the relatively short-term
nature of these items.

32
37
NOTE 7 - INCOME TAXES

The provision for (benefit from) income taxes for the fiscal years ended January
31, 1997, 1996 and 1995 consist of the following components (in thousands):

1997 1996 1995
------- ------- -------

Current:
U.S. Federal $ 1,667 $ 1,609 $ 270
U.S. State and Local 477 460 195
Non-U.S 860 1,430 (601)
------- ------- -------
3,004 3,499 (136)
------- ------- -------

Noncurrent:
U.S. Federal -- -- --
U.S. State and Local -- -- --
Non-U.S 845 800 64
------- ------- -------
845 800 64
------- ------- -------

Deferred:
U.S. Federal -- 450 (2,400)
U.S. State and Local -- (350) --
Non-U.S 4 (523) (40)
------- ------- -------
4 (423) (2,440)
------- ------- -------

Provision for (benefit from) income taxes $ 3,853 $ 3,876 ($2,512)
======= ======= =======

During fiscal 1997, there were no material changes in the Company's deferred tax
asset and liability accounts. Taxes were provided for at a rate of 24.8% and
28.5% for fiscal 1997 and 1996, respectively. The reduction in the consolidated
tax rate is predominantly due to higher earnings in lower tax jurisdictions.

The Company's deferred federal U.S. tax charge for the year ended January 31,
1996, principally resulted from the utilization of federal domestic net
operating loss and Alternative Minimum Tax (AMT) credit carryforwards. The
Company's state and local deferred tax benefit results from the realization of
deferred state and local tax benefits. The Company's deferred U.S. federal tax
benefit for the year ended January 31, 1995 principally results from the
reversal of valuation allowances related to deferred tax assets for domestic net
operating loss carryforwards, AMT credit carryforwards and future domestic
income tax deductions. As required under Statement of Financial Accounting
Standards No. 109, these allowances are to be reversed when the Company believes
that the related tax benefits are more likely than not to be realized. The
reversal of the valuation allowances coincided with the return of U.S.
operations to profitability due not only to growth in the domestic business but
also to a substantial reduction in interest expense as a result of the Company's
refinancing completed in fiscal 1994. The Company's current benefit for foreign
taxes in fiscal 1995 was primarily attributable to a favorable impact from Swiss
Cantonal tax law changes.

The deferred U.S. federal tax benefit for the year ended January 31, 1995
represents a portion of the tax effect of U.S. net operating loss carryforwards
and future tax deductions which mainly arose in prior years and for which a 100%
valuation allowance had been recorded. The reduction in the valuation allowance
was primarily due to the fiscal 1995 refinancing which management believed would
result in the realization of at least a portion of its accumulated deferred tax
benefits due to expected interest savings in the U.S.

33
38
Deferred income taxes reflect the tax effect of temporary differences between
the amount of assets and liabilities recognized for financial reporting purposes
and such amounts recognized for tax purposes. Deferred income taxes have been
classified as current or noncurrent on the consolidated balance sheets based
on the underlying temporary differences and the expected due dates of taxes
payable upon reversal. Significant components of the Company's deferred income
tax assets and liabilities for the fiscal year ended January 31, 1997 consist
of the following (in thousands):

DEFERRED TAX
----------------------
ASSETS LIABILITIES
------- -----------

Operating loss carryforwards $ 2,357 $ --
Rent accrual 650 --
Inventory reserve 631 5,091
Receivable allowance 1,022 551
Depreciation/amortization 797 53
Other 523 308
------- -------
5,980 6,003
Valuation allowance (2,580) --
------- -------
Total $ 3,400 $ 6,003
======= =======

As of January 31, 1997, the Company had foreign net operating loss carryforwards
of approximately $5,500,000 which are available to offset taxable income in
future years. Additionally, the Company has domestic capital loss carryforwards
of approximately $260,000 which expire in fiscal 1998. As of January 31, 1997,
the Company continued to maintain a 100% valuation allowance with respect to the
tax benefit of foreign net operating loss carryforwards. The Company has not
recorded a deferred tax asset related to its capital loss carryforwards due to
uncertainty as to its realization. Management is continuing to evaluate the
appropriate level of allowance based on future operating results and changes in
circumstances.

The provision for (benefit from) income taxes differs from the amount determined
by applying the U.S. federal statutory rate as follows (in thousands):

FISCAL YEAR ENDED JANUARY 31,
---------------------------------
1997 1996 1995
------- ------- -------

Provision for income taxes at the U.S. statutory rate $ 5,441 $ 4,760 $ 3,887
Realization of capital and operating loss carryforwards -- (177) (1,561)
Recognition of deferred tax asset -- -- (2,400)
Lower effective foreign income tax rate (2,369) (1,215) (3,003)
Tax provided on repatriated earnings of foreign
subsidiaries 308 328 300
State and local taxes, net of federal benefit 315 73 195
Other 158 107 70
------- ------- -------
$ 3,853 $ 3,876 ($2,512)
======= ======= =======

No provision has been made for taxes on foreign subsidiaries' undistributed
earnings of approximately $84,000,000 at January 31, 1997, as those earnings are
intended to be reinvested. As a result of various tax planning alternatives
available to the Company, it is not practical to estimate the amount of tax, if
any, that might be payable on the eventual remittance of such earnings. On
remittance, certain withholding taxes would be imposed which might be available
to offset a U.S. tax liability, if any. In the event all undistributed earnings
as of January 31, 1997 were remitted, approximately $4,170,000 of withholding
taxes would be imposed.

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39
NOTE 8 - OTHER ASSETS

In fiscal 1996, the Company entered into an agreement with a trust which owns an
insurance policy issued on the lives of the Company's Chairman and Chief
Executive Officer and his spouse. Under that agreement the trust has assigned
the insurance policy to the Company as collateral to secure repayment by the
trust of interest free loans to be made by the Company in amounts sufficient for
the trust to pay the premiums on said insurance policy ($740,000 per annum).
Under the agreement, the trust will repay the loans from the proceeds of the
policy. The Company had loaned approximately $879,000 and $199,000 under this
agreement at January 31, 1997 and 1996, respectively.

NOTE 9 - OTHER LIABILITIES

Other liabilities include notes payable to employees of $414,000 as of January
31, 1997 and 1996, respectively, issued in connection with redemption of all
4,664 outstanding shares of the Company's former Class B (Non-Voting) Common
Stock. The redemption was effective July 31, 1993.

NOTE 10 - RESTRUCTURING CHARGE

During fiscal 1997, the Company signed a distribution agreement with Junghans
Uhren GmbH to distribute Movado watches in Germany. As a result of this
agreement, the Company closed its German sales office and recorded a charge of
approximately $450,000, included in selling, general and administrative
expenses, to cover severance and other costs to close the operation. Most of
these costs will be paid in the first quarter of fiscal 1998.

NOTE 11 - LEASES, COMMITMENTS AND CONTINGENCIES

Rent expense for equipment and distribution, factory and office facilities held
under operating leases was approximately $4,270,000, $3,274,000 and $3,384,000
in fiscal 1997, 1996 and 1995, respectively. Minimum annual rentals at January
31, 1997 under noncancelable operating leases which do not include escalations
that will be based on increases in real estate taxes and operating costs are as
follows:

Year ending January 31,
(in thousands):

1998 $ 4,807
1999 4,610
2000 4,177
2001 4,065
2002 3,925
2003 and thereafter 9,259
-------
$30,843
=======

The Company has entered into capital leases to finance the cost of enhancing its
management information systems in the United States and Switzerland. The gross
value of computer equipment recorded under capital leases was $3,848,000 and
$3,631,000 as of January 31, 1997 and 1996, respectively. Accumulated
depreciation of computer equipment recorded under capital leases was $2,421,000
and $1,959,000 as of January 31, 1997 and 1996, respectively.

35
40
Future minimum lease payments for equipment under capital leases at January 31,
1997 are as follows:

Year ending January 31,
(in thousands):
1998 $ 183
1999 230
-------
Total minimum lease obligations 413
Less interest (41)
-------
Present value of minimum lease obligations 372
Less current portion (156)
-------
Net amount due after one year $ 216
=======

Due to the nature of its business as a luxury consumer goods distributor, the
Company is exposed to various commercial losses. The Company believes it is
adequately insured against such losses.

NOTE 12 - EMPLOYEE BENEFIT PLANS

Prior to fiscal 1995, the Company maintained two primary benefit plans for its
domestic employees; a noncontributory Profit Sharing Plan and an Employee
Savings Plan under Section 401(k) of the Internal Revenue Code. Company
contributions to the Profit Sharing Plan were at the discretion of the Board of
Directors and no such contributions were made in fiscal 1997, 1996 and 1995.
Company contributions and expenses of administering the Employee Savings Plan
amounted to $127,000, $106,000 and $84,000 in fiscal 1997, 1996 and 1995,
respectively.

During fiscal 1995, the Company merged its Profit Sharing Plan with and into the
Employee Savings Plan and transferred participants' assets accumulated under the
Profit Sharing Plan to the Employee Savings Plan. The merged Plan retains the
characteristics of the former Employee Savings Plan.

Effective June 1, 1995, the Company adopted a defined contribution supplemental
executive retirement plan ("SERP"). The SERP provides eligible executives with
supplemental pension benefits in addition to amounts received under the
Company's other retirement plan. The Company makes a matching contribution which
vests equally over five years. During fiscal 1997 and 1996, the Company recorded
expenses related to the SERP of approximately $138,000 and $42,000,
respectively.

On September 23, 1994, the Company entered into a Death and Disability Benefit
Plan agreement with the Company's Chairman and Chief Executive Officer. Under
the terms of the agreement, in the event of the Chairman's death or disability,
the Company is required to make an annual benefit payment of approximately
$300,000 to his spouse for the lesser of ten years or her remaining lifetime.
Neither the agreement nor the benefits payable thereunder are assignable and no
benefits are payable to the estates or heirs of the Chairman or his spouse.
Results of operations include an actuarially determined charge related to this
plan of approximately $85,000 and $78,000 for fiscal 1997 and 1996,
respectively.

Effective concurrently with the consummation of the Company's public offering in
the fourth quarter of fiscal 1994, the Board of Directors and the shareholders
of the Company approved the adoption of the Movado Group, Inc. 1993 Employee
Stock Option Plan (the "Employee Stock Option Plan") for the benefit of certain
officers, directors and key employees of the Company. The Employee Stock Option
Plan was amended in fiscal 1997 and restated as the Movado Group, Inc. 1996
Stock Incentive Plan (the "Plan"). Under the Plan the Compensation Committee of
the Board of Directors, which is comprised of the Company's three outside
directors, has the authority to grant incentive stock options and nonqualified
stock options

36
41
to purchase, as well as stock appreciation rights and stock award, up to
800,000 shares of Common Stock. Options granted to participants under the Plan
become exercisable in equal installments on the first through fifth
anniversaries of the date of grant and remain exercisable until the tenth
anniversary of the date of grant. The option price may not be less than the
fair market value of the stock at the time the options are granted.

Transactions in stock options under the Plan since fiscal 1995 are summarized as
follows:

WEIGHTED
OUTSTANDING AVERAGE PRICE EXERCISABLE
OPTIONS PER SHARE OPTIONS
----------- ------------- -----------

January 31, 1994 266,000 $14.00
Options granted 15,000 12.79
Options that became exercisable 14.00 41,100
Options terminated (60,500) 14.00
----------- ------------- -----------
January 31, 1995 220,500 13.90 41,100
Options granted 107,000 13.99
Options that became exercisable 36,000
Options exercised (15,200) 14.00
Options terminated (4,000) 14.00
----------- ------------- -----------
January 31, 1996 308,300 13.93 77,100
Options granted 229,000 20.59
Options that became exercisable 62,020
Options exercised (19,600) 14.00
Options terminated (7,900) 14.00
----------- ------------- -----------
January 31, 1997 509,800 $16.92 139,120

At January 31, 1997 and 1996, 273,798 and 176,500 options to purchase shares of
Common Stock were available for additional grants, respectively. Options
exercisable at January 31, 1997 had a weighted average price of $13.95 per
share.

The weighted-average fair value of each option grant estimated on the date of
grant using the Black-Scholes option-pricing model is $6.51 and $4.71 per share
in fiscal 1997 and 1996, respectively. The following weighted-average
assumptions were used for grants in both 1997 and 1996: dividend yield of 2% for
all years; expected volatility of 26%, risk-free interest rates of 5.6% and 6.3%
for fiscal 1997 and 1996, respectively, and expected lives of 7 years.

The Company applies APB Opinion 25 and related interpretations in accounting for
its plans. Accordingly, no compensation cost has been recognized for the Plan.

Had compensation cost for the Company's fiscal 1997 and 1996 grants for
stock-based compensation plans been determined based on the fair value at the
grant dates and recognized ratably over the vesting period, the Company's net
income and net income per common share for fiscal 1997 and 1996 would
approximate the pro forma amounts below (in thousands except per share data):

1997 1996
AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- --------- ----------- ---------

Net income $ 11,692 $ 11,392 $ 9,724 $ 9,651
========= ========= ========= =========

Net income per common share $ 1.94 $ 1.89 $ 1.62 $ 1.61
========= ========= ========= =========

The pro forma impact takes into account options granted since February 1, 1995
and is likely to increase in future years as additional options are granted and
amortized ratably over the vesting period.

37
42
NOTE 13 - GEOGRAPHIC AREAS

The table below provides information pertaining to the Company's operations in
different geographic areas. For purposes of discussion, the Company divides its
business into two major geographic segments; "domestic", which includes the
results of the Company's United States and Canadian operations and
"international", which includes the results of all other Company operations. The
Company's international operations are principally conducted in Europe. The
Company's international assets are substantially located in Europe. Other
international operations contributed less than 10% of consolidated net sales and
constituted less than 10% of consolidated total assets for all periods presented
(in thousands).

DOMESTIC INTERNATIONAL ELIMINATIONS CONSOLIDATED

FISCAL YEAR 1997:
Revenue from sales to unaffiliated customers $175,404 $ 39,703 $ -- $215,107
Intercompany sales 1,635 84,103 (85,738)
-------- -------- --------- --------
Net sales $177,039 $123,806 $ (85,738) $215,107
======== ======== ========= ========

Income from continuing operations before
income taxes $ 3,102 $ 12,825 $ (382) $ 15,545
======== ======== ========= ========

Identifiable assets $108,606 $115,007 $ (15,170) $208,443
======== ======== ========= ========

FISCAL YEAR 1996:
Revenue from sales to unaffiliated customers $146,749 $ 39,118 $ -- $185,867
Intercompany sales 2,830 71,656 (74,486) --
-------- -------- --------- --------
Net sales $149,579 $110,774 $ (74,486) $185,867
======== ======== ========= ========

Income from continuing operations before
income taxes $ 5,103 $ 9,244 $ (747) $ 13,600
======== ======== ========= ========

Identifiable assets $104,770 $121,246 $ (25,636) $200,380
======== ======== ========= ========

FISCAL YEAR 1995:
Revenue from sales to unaffiliated customers $125,639 $ 35,214 $ -- $160,853
Intercompany sales 2,164 74,658 (76,822) --
-------- -------- --------- --------
Net sales $127,803 $109,872 $ (76,822) $160,853
======== ======== ========= ========

Income from continuing operations before
income taxes $ 4,728 $ 7,273 $ (569) $ 11,432
======== ======== ========= ========

Identifiable assets $ 99,566 $111,074 $ (23,691) $186,949
======== ======== ========= ========

43
NOTE 14 - QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table presents unaudited selected interim operating results of the
Company for fiscal 1997 and 1996 (in thousands, except per share amounts):

QUARTER ENDED

OCTOBER JANUARY
APRIL 30 JULY 31 31 31
------------------------------------------------------

1997
Net sales $ 31,014 $50,751 $76,864 $56,478
Gross profit $ 17,351 $27,630 $42,967 $32,128
Net (loss) income $ (474) $ 1,684 $ 7,350 $ 3,132

Per share:
Net (loss) income $ (0.08) $ 0.28 $ 1.22 $ 0.52

1996
Net sales $ 28,204 $43,986 $68,079 $45,598
Gross profit $ 14,917 $23,311 $36,132 $28,005
Net (loss) income $ (1,058) $ 1,444 $ 6,507 $ 2,831

Per share:
Net (loss) income $ (0.18) $ 0.24 $ 1.08 $ 0.47

Net income for the quarter ended January 31, 1997 includes the effect of a
one-time, pre-tax charge of approximately $450,000 in connection with
restructuring the Company's German operation. (See Note 10 to Consolidated
Financial Statements).

NOTE 15 - SUPPLEMENTAL CASH FLOW INFORMATION

The following is provided as supplemental information to the consolidated
statements of cash flows (in thousands):

FISCAL YEAR ENDED JANUARY 31,
----------------------------------
1997 1996 1995
----------------------------------

Cash paid during the year for:
Interest $5,141 $4,887 $4,464
Income taxes $4,321 $2,395 $1,217
Non-cash investing and financial activities:
Equipment acquired under capital lease $ 217 $ 422 $ 51

NOTE 16 - SUBSEQUENT EVENT

On April 3, 1997 the Company's Board of Directors approved a five-for-four stock
split of the Company's common stock. The stock split will become effective April
21, 1997. Financial information contained in this report has not been adjusted
to reflect the impact of the common stock split.

44
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
and Shareholders of Movado Group, Inc.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, cash flows and changes in shareholders'
equity present fairly, in all material respects, the financial position of
Movado Group, Inc. and its subsidiaries at January 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended January 31, 1997, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

/s/PRICE WATERHOUSE LLP
New York, New York
March 24, 1997, except as to Note 16, which is as of April 3, 1997.