Movado Group (NYSE:MOV) reported fiscal 2018 second-quarter earnings on Aug. 29. The watchmaker is enjoying renewed growth as it works to integrate a high-potential acquisition. 

Movado Group results: The raw numbers

Metric

Q2 2018

Q2 2017

Year-Over-Year Change

Net sales

$128.781 million

$128.086 million

1%

Adjusted pre-tax income

$12.656 million

$9.796 million

29%

Adjusted EPS

$0.43

$0.27

59%

Data source: Movado Group Q2 2018 earnings press release.

What happened with Movado Group this quarter?

Net sales inched up 0.5% year over year to $128.8 million, and 1.2% on a constant dollar basis.

"Despite a challenging U.S. retail environment, our global team's strong execution of our strategy and our increasing presence around the world led to growth in net sales, with particular strength in Latin America, Europe, and Asia," Chairman and CEO Efraim Grinberg said in a press release.

Movado also continued to make progress with its cost-savings initiatives. Adjusted operating expenses -- which exclude charges related to Movado's recent purchase of U.K.-based Olivia Burton -- decreased 11% to $53.5 million. That helped adjusted operating income jump 28% to $12.9 million and adjusted net income surge 58% to $9.9 million, or $0.43 per share.

An Olivia Burton watch on a woman's wrist

Image source: Olivia Burton. 

Acquisition update

Grinberg shared some insights into Movado's strategy for its new acquisition during a conference call with analysts:

The fast growth of the Olivia Burton brand in the United Kingdom over the last few years has confirmed our hypothesis that beautiful design with a true brand identity and an excellent value will attract a millennial consumer, as well as their parents, into the watch and now jewelry category. The Olivia Burton brand built its presence in the U.K. by maintaining a very select distribution and building a significant online business. We believe this strategy will also prove to be successful globally.

Olivia Burton will continue to operate independently in London but with the ability to leverage Movado's global distribution system to expand internationally. Movado also plans to help Olivia Burton build brand awareness and a "significant" direct-to-consumer business in new international markets. In return, Movado expects its new subsidiary to help it better resonate with millennials and broaden its product lineup.

"Through the Olivia Burton brand, we'll expand our relationship with younger consumers and increase our presence in jewelry, which represents significant opportunity for the company," added Grinberg.

Capital returns

Movado also announced that its board of directors approved a new $50 million stock buyback program.

"The company's strong balance sheet with $162 million in cash affords us the opportunity to both invest in support of our growth and return value to our shareholders," Grinberg said.

Looking forward

Movado updated its fiscal 2018 full-year financial outlook to reflect the expected impact of its Olivia Burton acquisition, including the following:

  • Net sales of $530 million to $545 million, up from a prior forecast of $515 million to $530 million
  • Adjusted operating income of $53 million to $58 million, up from $50 million to $55 million
  • Adjusted net income of $35.5 million to $38.8 million, versus $33 million to $36.3 million
  • Adjusted EPS of $1.50 to $1.65, up from $1.40 to $1.55

"Looking ahead, we are excited about the opportunities we have in front of us to grow our recently acquired Olivia Burton brand globally, expand new business initiatives including Rebecca Minkoff and Movado Connect watches, and increase our direct-to-consumer business," added Grinberg. "This, combined with our unique and compelling product offerings across the entire portfolio, supported by our traditional and digital advertising campaigns, positions us well for the upcoming holiday season."

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends Movado Group. The Motley Fool has a disclosure policy.