Mov Museum

Source: Movado.

Movado Group (NYSE:MOV) reported financial results for its second quarter before the market open on Thursday. The luxury watchmaker delivered revenue and earnings that exceeded Wall Street's expectations and reaffirmed its guidance for fiscal 2016. It also announced that it would be entering the smartwatch market later this year. Investors cheered the news, and Movado's shares were up 21% as of 12:40 p.m. ET.

Sales increased 1.4% (and 6.1% on a constant-dollar basis) to $145.6 million. That was above the $142.1 million analysts expected, as per S&P Capital IQ.

Gross profit rose 1.8% to $79 million -- with gross margin increasing to 54.3% from 54% in the year-ago period -- as price increases, supply chain sourcing improvements, and favorable changes in channel and product mix more than offset the negative impact of foreign currency exchange rate fluctuations.

Operating expenses increased only 0.6% to $60.8 million, primarily due to higher compensation and marketing expenses. That helped operating income rise 5.8% to $18.2 million, with operating margin expanding 50 basis points to 12.5% compared to the year-ago quarter.

All told, net income declined less than 1% to $12.1 million, mainly due to a higher effective tax rate compared to the second quarter of 2015. However, earnings per share, boosted by share buybacks, rose 6.4% to $0.50 per share. That was well ahead of the $0.42 in EPS that Wall Street had forecast.

"We are pleased with our second quarter results which included increased sales, expansion in gross margin and operating income above last year, despite a challenging retail environment and significant currency headwinds," said Movado Chairman and CEO Efraim Grinberg in a press release. "Our Movado and licensed brands continue to outperform the overall watch category." 

Capital return program
During the second quarter, Movado repurchased approximately 613,000 of its shares. As of July 31, 2015, the company had $24 million remaining under a $100 million share repurchase authorization.

The company also announced that its board of directors approved the payment of a cash dividend in the amount of $0.11 for each share held by shareholders of record as of the close of business on Sept. 8, 2015.

Looking ahead
Management reaffirmed its fiscal 2016 full-year outlook, including sales in the range of $590 million to $600 million, gross margin of approximately 53.5%, and operating income between $72 million and $75 million. The company also expects full-year net income to be in the range of $48.5 million to $51 million, or $2.00 to $2.10 per share. Both the revenue and earnings guidance were in line with Wall Street's expectations. 

Management also hinted at an exciting potential growth driver as it prepares to enter the smartwatch market. "We believe we are well positioned for the second half of the year," said Grinberg. "We have a number of exciting new product introductions planned for the holiday season as we continue to drive innovation across our brand portfolio. We are expecting to deliver our first connected Movado timepiece during the fourth quarter and believe wearable technology represents a great opportunity for Movado Group."

Joe Tenebruso has no position in any stocks mentioned. The Motley Fool recommends Movado Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.