Movado Group Announces Fourth Quarter and Fiscal Year 2019 Results

3/28/19

PARAMUS, N.J.--(BUSINESS WIRE)--Movado Group, Inc. (NYSE:MOV) today announced fourth quarter and fiscal year 2019 results for the periods ended January 31, 2019.

  • Fourth quarter net sales increased 33.6% to $199.4 million, or 35.4% on a constant dollar basis, and 10.3% excluding MVMT;
  • Fourth quarter operating income of $17.1 million versus $13.3 million in the prior period;
  • Adjusted operating income grew to $19.9 million compared to $14.4 million in the prior year period;
  • Fourth quarter diluted EPS of $0.74 versus a loss per share of $1.47 in the prior period; and
  • Adjusted diluted EPS of $0.67 compared to adjusted diluted EPS of $0.52 in the prior year period.

Efraim Grinberg, Chairman and Chief Executive Officer, stated, “Our positive momentum continued in the fourth quarter, representing a strong end to a robust year of sales and profit growth for Movado Group. We experienced significant gross margin expansion in the fourth quarter, both with and without MVMT. Fiscal 2019 marked another year of progress on our strategies – to deliver innovation across our portfolio of powerful brands in an omni channel market, capitalize on our strong balance sheet and cash flow to acquire new brands and develop our digital presence. These activities fueled topline growth of nearly 20% with strong growth in operating income and net income for the year while we continued to invest for the long term. During the year, we acquired MVMT, which together with Olivia Burton, which we acquired last year, allows us to increase our presence in the global fashion watch market and will help to fuel our ecommerce expansion as well as leverage our global distribution capabilities. While we continue to operate in an evolving and challenging global marketplace for both retail and the watch category, we expect to continue to deliver growth on both the top line and bottom line in fiscal 2020 through continued product innovation, effective marketing and disciplined execution of our strategies and growth priorities.”

Non-GAAP Items (See attached table for GAAP and Non-GAAP measures)
Fourth quarter Fiscal 2019 results of operations included the following charges and benefits:

  • $4.4 million tax benefit, or $0.18 per diluted share, related to the Tax Cuts and Jobs Act (“2017 Tax Act”) as well as certain discrete foreign tax items;
  • $2.4 million pre-tax charge, or $2.5 million after tax, representing $0.10 per diluted share, associated with the integration and acquisition of MVMT;
  • $0.7 million pre-tax charge, or $0.6 million after tax, representing $0.02 per diluted share, associated with the amortization of acquired intangible assets related to Olivia Burton; and
  • a favorable $0.3 million pre-tax change in estimate, or $0.2 million after tax, representing $0.01 per diluted share, associated with the Company’s cost savings initiatives.

Fourth quarter Fiscal 2018 results of operations included the following charges and benefits:

  • $45.0 million, or $1.95 per diluted share, provisional tax expense related to the 2017 Tax Act;
  • $0.9 million in pre-tax expenses with a related tax benefit of $0.2 million, or $0.03 per diluted share, in association with the acquisition of Olivia Burton; and
  • $0.2 million pre-tax charge with a related tax impact of $0.1 million, or $0.01 per diluted share, associated with the Company’s cost savings initiatives.

Fourth Quarter Fiscal 2019 Results (See attached table for GAAP and non-GAAP measures)

  • Net sales increased 33.6% to $199.4 million compared to $149.2 million in the fourth quarter of fiscal 2018. Net sales on a constant dollar basis increased 35.4% compared to net sales in the fourth quarter of fiscal 2018.
  • Gross profit was $110.6 million, or 55.5% of net sales, compared to $78.7 million, or 52.8% of net sales in the same period last year. Adjusted gross profit for the fourth quarter of fiscal 2019, which excludes a $0.4 million adjustment associated with the amortization of acquisition accounting adjustments related to the MVMT acquisition, was $111.1 million, or 55.7% of net sales. Adjusted gross profit for the fourth quarter of fiscal 2018, which excludes a $0.2 million adjustment in expenses related to the Company’s cost savings initiatives, was $78.6 million, or 52.7% of net sales. The increase in adjusted gross margin percentage was primarily the result of favorable changes in channel and product mix as well as increased leverage on fixed costs due to increased sales, partially offset by unfavorable foreign currency exchange rates.
  • Operating expenses increased to $93.5 million in the fourth quarter of fiscal 2019 from $65.4 million in the fourth quarter last year. Adjusted operating expenses for the fourth quarter of fiscal 2019 were $91.1 million excluding $2.0 million of expenses related to the integration and acquisition of MVMT and $0.7 million of expenses associated with the amortization of acquired intangible assets related to Olivia Burton, partially offset by a $0.3 million change in estimate associated with the Company’s cost savings initiatives. For the fourth quarter of fiscal 2018, adjusted operating expenses were $64.2 million, which excludes $0.9 million of expenses and amortization related to the Olivia Burton acquisition and $0.3 million of expenses related to the Company’s cost savings initiatives. The increase in adjusted operating expenses was primarily due to higher marketing expenses including expenses related to MVMT since the date of the acquisition and an increase in payroll and performance based compensation.
  • Operating income in the fourth quarter increased 28.1% to $17.1 million compared to operating income of $13.3 million in the prior year period. Adjusted operating income for the fourth quarter of fiscal 2019, which excludes $2.4 million of expenses related to the integration and acquisition of MVMT and $0.7 million of expenses associated with the amortization of acquired intangible assets related to Olivia Burton, partially offset by a $0.3 million change in estimate associated with the Company’s cost savings initiatives, increased 38.5% to $19.9 million. Adjusted operating income for the fourth quarter of fiscal 2018, which excludes $0.9 million of expenses and amortization related to the acquisition of Olivia Burton and a $0.2 million charge related to the Company’s cost savings initiatives, was $14.4 million.
  • The tax benefit was $0.5 million in the fourth quarter of fiscal 2019 compared to a tax provision of $47.0 million in the fourth quarter of fiscal 2018. Based on adjusted pre-tax income, the adjusted tax provision was $3.9 million or an adjusted tax rate of 19.9% as compared to an adjusted tax provision of $2.1 million or an adjusted tax rate of 15.1% in the fourth quarter of fiscal 2018.
  • Net income was $17.4 million, or $0.74 per diluted share, compared to net loss of $33.9 million, or ($1.47) per diluted share, for the same period in the prior year. Adjusted net income in the fourth quarter of fiscal 2019 was $15.9 million, or $0.67 per diluted share which excludes a $4.4 million benefit related to the 2017 Tax Act and certain discrete foreign tax items and a $0.2 million change in estimate related to the Company’s cost savings initiatives, net of tax, partially offset by $2.5 million related to the MVMT acquisition, net of tax, and $0.6 million of amortization related to the acquisition of Olivia Burton, net of tax. This compares to adjusted net income in the fourth quarter of fiscal 2018 of $12.0 million, or $0.52 per diluted share which excludes $45.0 million of provisional tax expense related to the 2017 Tax Act, $0.7 million of expenses and amortization related to the acquisition of Olivia Burton, net of tax, and $0.2 million of expenses related to the Company’s cost savings initiatives, net of tax.

Full Year Fiscal 2019 Results (See attached table for GAAP and Non-GAAP measures)

  • Net sales increased 19.7% to $679.6 million compared to net sales of $568.0 million in fiscal 2018. Net sales on a constant dollar basis increased 18.9% compared to net sales in fiscal 2018.
  • Gross profit was $369.4 million, or 54.4% of net sales, compared to gross profit of $298.1 million, or 52.5% of net sales, in the prior year. Adjusted gross profit for fiscal 2019 was $369.9 million, or 54.4% of net sales, excluding $0.6 million in amortization of acquisition accounting adjustments related to the MVMT acquisition. Adjusted gross profit for fiscal 2018, which excludes $1.3 million in charges related to the Company’s cost savings initiatives and $0.8 million in amortization of acquisition accounting adjustments related to the Olivia Burton acquisition, was $300.2 million, or 52.9% of net sales. The increase in the adjusted gross margin percentage from last year was primarily the result of changes in channel and product mix, increased leverage on fixed costs due to increased sales and favorable changes in foreign currency exchange rates.
  • Operating expenses were $307.2 million in fiscal 2019 compared to operating expenses of $254.9 million in the prior year. For fiscal 2019, adjusted operating expenses were $290.7 million, which excludes $13.8 million in expenses related to the integration and acquisition of MVMT and $2.9 million of amortization related to the acquisition of Olivia Burton, partially offset by a $0.3 million change in estimate related to the Company’s cost savings initiatives. For fiscal 2018, adjusted operating expenses were $236.6 million, which excludes $12.3 million of expenses related to the Company’s cost savings initiatives and $6.0 million of expenses and amortization related to the acquisition of Olivia Burton. The increase in adjusted operating expenses was primarily the result of higher marketing expenses including expenses related to MVMT since the date of the acquisition, increased payroll and occupancy costs associated with the opening of new retail locations, higher distribution costs and an increase in payroll and performance based compensation.
  • Operating income for fiscal 2019 was $62.2 million as compared to operating income of $43.2 million for fiscal 2018. Adjusted operating income for fiscal 2019 was $79.2 million, which excludes $14.4 million in expenses related to the integration and acquisition of MVMT and $2.9 million of amortization related to the acquisition of Olivia Burton, partially offset by a $0.3 million change in estimate related to the Company’s cost savings initiatives. This compares to adjusted operating income for fiscal 2018 of $63.6 million, which excludes $13.6 million of expenses related to the Company’s cost savings initiatives and $6.8 million of expenses and amortization related to the acquisition of Olivia Burton.
  • The tax provision was $0.2 million in fiscal 2019 compared to $57.4 million in fiscal 2018. Based upon adjusted pre-tax income, the adjusted effective tax rate for fiscal 2019 was 19.9% as compared to the adjusted effective tax rate of 25.7% in fiscal 2018. The decrease in the adjusted effective tax rate is primarily due to a reduction in the U.S. federal statutory income tax rate from 35% to 21% as part of the 2017 Tax Act.
  • Net income was $61.6 million, or $2.61 per diluted share, for fiscal 2019 compared to net loss of $15.2 million, or ($0.66) per diluted share, for the prior year. Adjusted net income in fiscal 2019, which excludes the $12.0 million tax benefit related to the 2017 Tax Act and certain discrete foreign tax items, $11.4 million in expenses related to the integration and acquisition of MVMT, net of tax, and $2.4 million of amortization related to the acquisition of Olivia Burton, net of tax, partially offset by a $0.2 million change in estimate related to the Company’s cost savings initiatives, net of tax, was $63.1 million or $2.67 per diluted share. This compares to adjusted net income in fiscal 2018 of $46.5 million or $2.00 per diluted share, which excludes the $45.0 million provisional tax expense related to the 2017 Tax Act, $10.5 million of expenses related to the Company’s cost savings initiatives, net of tax, and $6.2 million of expenses and amortization related to the acquisition of Olivia Burton, net of tax.

Fiscal 2020 Outlook
During fiscal 2020, the Company will focus on the continued integration of MVMT into the Company’s systems and distribution, while also making significant brand building investments across its portfolio. The Company’s outlook includes these investments, partially offset by approximately six months of infrastructure and supply chain synergies. As such, for fiscal 2020, the Company anticipates that net sales will be in a range of $750.0 million to $765.0 million and operating income will be in a range of $82.0 million to $85.0 million. The Company anticipates net income in fiscal 2020 to be in a range of $64.0 million to $66.4 million, or $2.70 to $2.80 per diluted share, reflecting a 21% effective tax rate. The outlook excludes approximately $9.0 million of amortization of the acquired intangible assets and other expenses for fiscal 2020 related to the acquisition of MVMT and Olivia Burton. The Company's outlook assumes no significant fluctuations from prevailing foreign currency exchange rates.

Quarterly Dividend and Share Repurchase Program
The Company also announced that on March 28, 2019, the Board of Directors approved the payment on April 24, 2019 of a cash dividend in the amount of $0.20 for each share of the Company’s outstanding common stock and class A common stock held by shareholders of record as of the close of business on April 10, 2019.

During the fourth quarter of fiscal 2019, the Company repurchased approximately 101,000 shares under its share repurchase program. As of January 31, 2019, the Company had $40.6 million remaining under the $50.0 million share repurchase authorization.

Movado Group, Inc. designs, sources, and distributes MOVADO®, MVMT®, OLIVIA BURTON®, EBEL®, CONCORD®, COACH®, TOMMY HILFIGER®, HUGO BOSS®, LACOSTE®, SCUDERIA FERRARI®, REBECCA MINKOFF® and URI MINKOFF® watches worldwide, and operates Movado company stores in the United States and Canada.