Movado Group Inc. Slashes Its Full-Year Outlook

Image source: Movado.com.

Movado Group (MOV 0.55%) reported fiscal 2017 first-quarter earnings on May 26. The luxury watchmaker is seeing its results dented as more jewelry sales take place online, prompting the company to cut its sales and profit forecast for the year ahead.

Movado Group results: The raw numbers

Data source: Movado Group Q1 2017 earnings press release.

What happened with Movado Group this quarter?

Net sales fell 5.3% year over year to $114.1 million, with management naming the struggles of traditional retailers as a major cause of the decline.

"The first quarter has been especially difficult for the U.S. department store channel in brick-and-mortar stores and for the fashion watch category in particular," said Chairman and CEO Efraim Grinberg during a conference call with investors.

To meet this challenge, the watchmaker is investing in its Movado.com site and other online platforms, which are enjoying notable growth. However, Movado's online sales initiatives are not yet large enough to offset the declines in brick-and-mortar retail channels.

As a result, Movado saw a significant decline in profitability during the quarter. Operating income -- adjusted to exclude certain non-recurring costs -- dropped 24% to $7.2 million. Adjusted net income plummeted 29%, and adjusted earnings per share, which was helped somewhat by share buybacks, fell 24%.

Looking forward

Citing weak sales trends and retailers' increased focus on maintaining lean inventory levels, management lowered its outlook for fiscal 2017, which now includes:

• Net sales of $565 million to $580 million, down from previous expectations of $585 million to $600 million

• Operating income of $55 million to $60 million, down from $65 million to $70 million

• Net income of $36.5 million to $40 million, versus $43.3 million to $46.7 million

• Earnings per share of $1.55 to $1.70, versus $1.85 to $2.00

"While we delivered results which were in line with our first quarter expectations, given the current retail trends, particularly in the fashion watch category in the United States, we feel it is prudent to lower our annual outlook," added Grinberg. "As we look to the balance of the year, we expect our brands to continue to increase market share, and we remain encouraged by our innovation pipeline as evidenced by the early success of the Movado Edge collection, as well as our beautifully designed connected Movado watches. Our strong balance sheet allows us to continue to invest in our global brand building efforts while maintaining a high level of flexibility in this volatile environment."