Tuesday, January 13, 1998

Movado Group Inc.
(Nasdaq: MOVA)
Phone: 201-460-4800
Website: http://www.movado.com
Price (1/12/98): $21 1/4

HOW DID IT DOUBLE?

Last year was a great time to be a Movado shareholder. With strong demand for its Movado and Concord lines of premium watches, sales rose and earnings rose even higher.

Thanks to improving margins, while sales rose 11% over the first nine months of 1997, earnings shot up 33%. In an industry where precision matters, the strong operations quickly drew investors in for some timely capital appreciation. Like clockwork, shares of the upscale watchmaker ticked higher.

BUSINESS DESCRIPTION

Time is money to the New Jersey-based Movado Group. The company designs, manufactures, and distributes Movado, Concord, and ESQ watches. The company also serves as the exclusive distributor of Swiss-manufactured Piaget in North and South America.

FINANCIAL FACTS

Income Statement
12-month sales: $232.9 million
12-month income: $14.9 million*
12-month EPS: $1.27*
Profit Margin: 6.4%
Market Cap: $282.6 million*
(*Excludes charges. Market cap based on 13.3 million shares)

Balance Sheet
Cash: $2.9 million
Current Assets: $248.3 million
Current Liabilities: $82.5 million
Long-term Debt: $40 million

Ratios
Price-to-earnings: 16.7
Price-to-sales: 1.2

HOW COULD YOU HAVE FOUND THIS DOUBLE?

Back in the spring when the company had reported a small and seasonal loss for the quarter, representatives of the company had just come back from an international trade show, naturally, in Switzerland.

President Efraim Grinberg commented on the favorable reaction the company's new watch lines had received. "We see tremendous opportunities for our company and expect the coming year to be extremely exciting for Movado Group," Grinberg said.

While the company was phasing out its emphasis on its Piaget distribution sales, the proprietary brands were taking off both here and abroad. In the September quarter, stateside sales of Concord and Movado rose 15%. Exports improved even more, as international sales were more than 20% higher than the year before.

The shares had split a meager 5-for-4 back in April, and six months later the company had to split the shares again -- this time a more daring 3-for-2 split.

WHERE TO FROM HERE?

This spring the company plans to unveil a new line of Coach watches and will also open some retail boutiques. While the Coach brand carries marketable weight in fashion circles and may turn out to be a solid contributor later this year, the store debut will probably be the best gauge of future success.

The argument can be made that retailers presently carrying Movado may feel slighted by the company's transition from supplier to competitor, but it will obviously take some time before Movado has any kind of national presence as a retailer.

Yet, the stores could ultimately aid sales for the watches everywhere simply by giving some storefront visibility to the Movado brand name. At a time when the company is expanding its offerings, rather than battling for jewel case space, they will be able to create it.

So, while the shares might seem fairly priced at 15 times this year's projected earnings of $1.46 a share, the company now seems set on shedding its conservative slow growth ways in favor of taking on risk for the chance at a higher return. That could mean the best of times, or the worst of times, but with the company on a recent roll, it seems time is clearly on Movado's side.

-Rick Aristotle Munarriz
(tmfedible@aol.com)

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