PARAMUS, N.J.--(BUSINESS WIRE)--Movado Group, Inc. (NYSE: MOV) today announced second quarter and six-month results for the period ended July 31, 2020.

Efraim Grinberg, Chairman and Chief Executive Officer, stated, “We remain focused on ensuring the safety and health of our employees, customers and the communities where we operate. In a quarter that was significantly impacted globally by the COVID-19 pandemic, I am proud of our team’s ability to build on our multi-year investments in our digital center of excellence and adapt to support our ongoing mission to put consumers first, allowing them to connect with our great brands, designs and platforms wherever and whenever they choose to shop. These efforts allowed us to capture strong online demand where our Movado brand generated a 130% increase in our own and third party ecommerce sales. In North America, we reopened our outlet stores in June and were encouraged by the improved sequential performance in July, despite reduced stores hours. We are also seeing encouraging demand in our domestic department store channel. In China, we had a 16% increase in sales for the quarter with trends continuing to accelerate and we had positive top line growth in France and Germany, despite our customers being closed for nearly half of the quarter.”

Mr. Grinberg continued, “The aggressive actions we took at the height of the pandemic have positioned us well to continue to navigate the current environment. We have implemented initiatives that are expected to generate $90 million in cost savings in this fiscal year and have strengthened our financial health as evidenced by our cash balance of $170 million after repaying $37 million on our revolver at quarter end. As we look to the remainder of the year, we continue to expect improving sales trends in the second half relative to the first half with improved profitability and we will continue to be disciplined and agile in managing the business given the continued uncertainty. The actions we have taken, combined with our strong liquidity, enable us to leverage our powerful portfolio of brands which will be further strengthened by the exciting new licensing partnership announced today to design and develop Calvin Klein timepieces and jewelry. As a result, we have confidence that we will emerge from this extraordinary period a stronger company that is even better positioned to deliver long-term shareholder value.”

Non-GAAP Items (See attached table for GAAP and Non-GAAP measures)

Second quarter fiscal 2021 results of operations included the following items:

• Operating expenses include a $0.7 million pre-tax charge, or $0.5 million after tax, representing $0.02 per diluted share, associated with the amortization of acquired intangible assets related to the acquisition of Olivia Burton;
• $0.3 million pre-tax charge, or $0.2 million after tax, representing $0.01 per diluted share, associated with the amortization of acquired intangible assets and deferred compensation related to the acquisition of MVMT;
• $7.4 million pre-tax charge, or $5.0 million after tax, representing $0.22 per diluted share, related to corporate initiatives primarily in response to the COVID-19 pandemic; and
• Other non-operating income includes a $1.3 million pre-tax gain, or $0.8 million after tax, representing $0.04 per diluted share, associated with the sale of a non-operating asset in Switzerland.

Second quarter Fiscal 2020 results of operations included the following items:

• Operating expenses include a $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;
• $1.1 million pre-tax charge, or $0.9 million after tax, representing $0.04 per diluted share, associated with the amortization of acquired intangible assets and deferred compensation related to the acquisition of MVMT;
• $0.3 million pre-tax gain, or $0.2 million after tax, representing $0.01 per diluted share, associated with the change in estimate of the remaining accrual for the fiscal 2018 cost saving initiatives; and
• Other non-operating income includes a $13.6 million pre-tax benefit, or $10.4 million after tax, representing $0.44 per diluted share, associated with the remeasurement of the contingent consideration liability associated with the MVMT acquisition.

Second Quarter Fiscal 2021 (See attached table for GAAP and Non-GAAP measures)

• Net sales decreased 43.9% to $88.5 million compared to $157.8 million in the second quarter of fiscal 2020 primarily due to the impact of the COVID-19 pandemic. Net sales on a constant dollar basis also decreased 43.9%.
• Gross profit was $45.4 million, or 51.2% of sales, compared to $85.3 million, or 54.1% of sales, in the second quarter last year. The decrease in gross margin percentage was primarily the result of unfavorable changes in channel and product mix, decreased leverage on fixed costs due to decreased sales, and U.S. special tariff headwinds.
• Operating expenses were $54.3 million compared to $76.6 million in the prior year period. For the second quarter of fiscal 2021, adjusted operating expenses were $45.9 million, which excludes the operating expense charges mentioned above in the Non-GAAP Items section. For the second quarter of fiscal 2020, adjusted operating expenses were $75.1 million, which excludes the operating expense charges mentioned above in the Non-GAAP Items section. The decrease in adjusted operating expenses was primarily due to the Company’s initiative to minimize all non-essential operating expenses such as certain marketing, selling and payroll related expenses.
• Operating loss was $8.9 million compared to operating income of $8.8 million in the second quarter of fiscal 2020. Adjusted operating loss for the second quarter of fiscal 2021 was $0.6 million, which excludes the fiscal 2021 charges listed above in the Non-GAAP Items section, compared to adjusted operating income for the second quarter of fiscal 2020 of $10.3 million, which excludes the fiscal 2020 charges listed above in the Non-GAAP Items section.
• The Company recorded a tax benefit of $1.6 million compared to a tax provision of $4.7 million in the second quarter of fiscal 2020. The Company recorded an adjusted tax provision in the second quarter of fiscal 2021 of $0.6 million compared to an adjusted tax provision of $1.8 million for the second quarter of fiscal 2020.
• Net loss was $6.6 million, or $0.28 per diluted share, compared to net income of $17.5 million, or $0.75 per diluted share, in the second quarter of fiscal 2020 . Adjusted net loss for the fiscal 2021 period was $1.7 million, or $0.07 per diluted share, which excludes the second quarter fiscal 2021 net charges listed above in the Non-GAAP Items section after the associated tax effects. This compares to adjusted net income in the second quarter of fiscal 2020 of $8.3 million, or $0.36 per diluted share, which excludes the second quarter fiscal 2020 net charges listed above in the Non-GAAP Items section after the associated tax effects.

First Half Fiscal 2021 (See attached table for GAAP and Non-GAAP measures)

• Net sales were $158.2 million compared to $304.4 million in the first six months of fiscal 2020, a decrease of 48.0% primarily due to the COVID-19 pandemic. Net sales on a constant dollar basis decreased 47.8%.
• Gross profit was $77.2 million, or 48.8% of sales, compared to $164.2 million, or 54.0% of sales in the same period last year. Adjusted gross profit for the first six months of fiscal 2021, which excludes $3.5 million in corporate initiative charges related to the impact to the business of the COVID-19 pandemic, was $80.8 million, or 51.0% of net sales. Adjusted gross profit for the first six months of fiscal 2020, which excludes $0.1 million in adjustments associated with the amortization of acquisition accounting adjustments related to the MVMT acquisition, was $164.4 million, or 54.0% of net sales. The decrease in adjusted gross margin percentage was primarily the result of decreased leverage on fixed costs due to decreased sales, unfavorable changes in channel and product mix, unfavorable foreign currency exchange rates and U.S. special tariff headwinds.
• Operating expenses were $268.3 million as compared to $150.5 million in the first six months of last fiscal year. For the first six months of fiscal 2021, adjusted operating expenses were $99.0 million, which excludes $155.9 million in adjustments related to the impairment of goodwill and certain intangible assets, $11.1 million in corporate initiative charges related to the impact to the business from the COVID-19 pandemic, $1.4 million of expenses associated with the amortization of acquired intangible assets related to Olivia Burton and $1.0 million in adjustments associated with the amortization of acquired intangible assets and deferred compensation related to the MVMT acquisition. For the first six months of fiscal 2020, adjusted operating expenses were $146.9 million, which excludes $1.4 million of expenses associated with the amortization of acquired intangible assets related to Olivia Burton and $2.5 million in adjustments associated with the amortization of acquired intangible assets, accounting adjustments and deferred compensation related to the MVMT acquisition, partially offset by $0.3 million in adjustments associated with the change in estimate of the remaining accrual for the fiscal 2018 cost saving initiatives. The decrease in adjusted operating expenses was primarily due to the Company’s initiative to minimize all non-essential operating expenses such as certain marketing, selling and payroll related expenses.
• Operating loss was $191.1 million compared to operating income of $13.8 million in the first six months of fiscal 2020. Adjusted operating loss for the first six months of fiscal 2021 was $18.2 million, which excludes the fiscal 2021 charges listed in the immediately preceding bullet, compared to adjusted operating income of $17.4 million in the first six months of fiscal 2020 which excludes the fiscal 2020 net charges listed in the immediately preceding bullet.
• The Company recorded a tax benefit in the first six months of fiscal 2021 of $33.9 million as compared to a tax provision of $5.6 million in the first six months of last year. Based upon adjusted pre-tax income, the adjusted tax benefit was $4.3 million in the first half of fiscal 2021 compared to an adjusted tax provision of $3.1 million in the first half of fiscal 2020.
• Net loss was $156.6 million, or $6.75 per diluted share, compared to net income of $21.4 million, or $0.92 per diluted share, in the first six months of fiscal 2020. Adjusted net loss for the first half of fiscal 2021 was $14.7 million, or $0.63 per diluted shares, which excludes $131.1 million, net of $24.9 million of tax, in adjustments related to the impairment of goodwill and certain intangible assets, $10.0 million, net of $4.6 million of tax, in corporate initiative charges related to the impact to the business from the COVID-19 pandemic, $1.1 million, net of $0.3 million of tax, of expenses associated with the amortization of acquired intangible assets related to Olivia Burton and $0.6 million, net of $0.4 million of tax, in adjustments associated with the amortization of acquired intangible assets and deferred compensation related to the MVMT acquisition, and $0.8 million, net of $0.5 million of tax, associated with a gain on the sale of a non-operating asset in Switzerland. This compares to adjusted net income for the first half of fiscal 2020 of $13.9 million, or $0.60 per diluted share, which excludes $1.1 million, net of $0.3 million of tax, of expenses associated with the amortization of acquired intangible assets related to Olivia Burton; $2.0 million, net of $0.6 million of tax, of expenses related to the amortization of acquired intangible assets, accounting adjustments and deferred compensation related to MVMT; $10.4 million, net of $3.3 million of tax, of gains associated with the remeasurement of the contingent consideration liability associated with the MVMT acquisition; and $0.2 million, net of $0.1 million of tax, of gains associated with the change in estimate of the remaining accrual for the fiscal 2018 cost saving initiatives.

Fiscal 2021 Outlook

Given the dynamic nature of the COVID-19 crisis and lack of visibility, the potential financial impact to the business cannot be reasonably estimated. The Company is not providing fiscal 2021 guidance.

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.