What happened
Movado Group (MOV -0.42%) shareholders enjoyed a well-timed surprise on Thursday morning as the stock jumped 13% immediately following the company's quarterly earnings announcement. It settled down to a more modest gain of 7.6% as of 3 p.m. ET, but that still trounced the S&P 500, which was up by about 1%.
Real investor returns, though, are not measured in hours, but in years and decades. With that in mind, let's take a look at why Movado might now be on a brighter long-term path.
So what
In the company's fiscal fourth quarter, sales jumped by 17% to put annual revenue at $732 million. That result easily beat the upgraded outlook that management issued back in late November calling for sales of between $715 million and $720 million in Movado's fiscal 2022, which ended Jan. 31.
The earnings picture was just as bright, as gross profit margin surpassed management's forecast to land at 57.2% of sales. These wins came despite supply chain challenges, surging costs, and the disruption caused by the steep spike in COVID-19 cases in December and January due to the rapid spread of the omicron variant.
Now what
The pricing categories for Movado's watches range from around $100 to nearly $10,000, with owned brands like Concord and Movado, and licensed brands like Coach and Hugo Boss. This allows it to capitalize on demand for innovative premium products without having to compete against mass-market rivals.
Image source: Getty Images.
Demand in these niches has been strong in recent years, and that's likely to continue even if economic growth slows slightly. Movado should be able to pass along rising costs, too; management expects profitability to hold steady in the current fiscal year.
If the company can keep winning market share while protecting margins, shareholders should see solid returns from this growth stock. That potential relies on the company designing, distributing, and marketing a steady stream of on-trend products in markets across Europe, Asia, and North America.
Movado did a great job on that score last year. Investors should be rewarded with more gains if it can repeat that performance.
