Movado Group(MOV 1.83%) reported second quarter fiscal 2026 results on September 4, 2025, posting a 3.1% sales increase to $161.8 million compared to the prior-year period and more than doubling adjusted operating profit to $7 million compared to the prior-year period, despite a $2.2 million tariff headwind. Management highlighted advances in licensed brand performance and operating expense reductions, while navigating elevated U.S. tariffs on Swiss imports and continued uncertainty in key markets. The following analysis unpacks strategic inventory moves, brand performance dynamics, and cost-saving execution affecting the long-term investment thesis.

Inventory buildup mitigates supply chain and tariff risks

Inventory at quarter-end was up $28.3 million, or 15.5%, over the same period last year, with $16 million of this positioned in the U.S. at quarter-end, as the company proactively shifted Swiss-made watches stateside ahead of new 39% tariffs on Swiss imports. This move followed a period of low inventory at year-end and enables the company to fulfill a substantial portion of this year's needs with reduced tariff exposure on existing stock, even as the company anticipates continuing uncertainty in tariff policy.

"During the second quarter, we have built a strong position in inventory of Swiss-made watches in the United States and would expect a substantial portion of the year's needs are covered. We are hopeful that over the next several months, the United States and Switzerland will agree to lower tariff rates."
-- Efraim Grinberg, Chairman and Chief Executive Officer

This inventory strategy helps offset some of the tariff impact and provides flexibility to respond to further changes in trade policy.

Licensed brands drive sales growth for MOV

Licensed brands grew sales 9.5% year-over-year as reported (6.5% in constant currency). This surge was driven by Gen Z engagement via digital platforms, product innovation in women’s and men’s collections, and strong cross-regional results, particularly in Europe and Latin America.

"In our licensed brands, we grew by 6.5% on a constant currency basis or 9.5% on a reported basis. Overall, we reported gross margins of $54.1 million versus 54.1% versus 54.3% in Q2 of last year despite the 130 basis point impact of additional tariffs in the U.S."
-- Efraim Grinberg, Chairman and Chief Executive Officer

The licensed portfolio is showing momentum with new collections and effective digital channel execution, supporting overall top-line growth despite margin pressures from tariffs.

Cost savings improve MOV profitability

Operating expenses fell by $2 million year-over-year to $80.6 million, primarily through strategic reductions in marketing, despite higher performance-based compensation. These expense controls, alongside revenue growth, resulted in a $4.4 million increase in adjusted operating income to $7 million compared to the prior-year period, with annualized savings from restructuring actions expected to deliver approximately $10 million, spread evenly throughout the year.

"We would expect to see approximately $10 million of annualized savings spread evenly throughout this year as a result of the actions we took late last year to reduce operating expenses."
-- Efraim Grinberg, Chairman and Chief Executive Officer

These ongoing cost reductions are expected to support margin expansion and provide a buffer against external headwinds such as tariffs and currency fluctuations.

Looking Ahead

Management declined to provide fiscal 2026 outlook due to continuing macroeconomic uncertainty and the unpredictable impact of tariffs, but confirmed that inventory levels are expected to be in line by year-end and a substantial portion of this year's U.S. Swiss-made watch needs is covered. Share repurchases will be selectively deployed to offset dilution, with $48.4 million remaining under the authorized program.