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

Efraim Grinberg, Chairman and Chief Executive Officer, stated, “Our third quarter results were ahead of our expectations and included strength across key operating metrics, including a sequential improvement in sales, expansion in gross margin; and operating expenses below the prior year, which combined led to adjusted operating income above last year. We are encouraged by the strengthening in demand for our products and brands despite the global environment. The quarter saw strong sales in Europe, a key market for our brands, and across our ecommerce sites, with Movado brand ecommerce sales increasing 159% on our own and our partners’ digital platforms. Looking to the fourth quarter, while there remains uncertainty around the duration and trajectory of the COVID resurgence, we are confident that our powerful portfolio of brands combined with a continued focus on innovation and support of our marketing campaigns, position us well for the all-important holiday season.”

Mr. Grinberg continued, “Our strong balance sheet is a testament to the disciplined execution in operating our business by our teams around the world. We tightly managed operating expenses and inventories, and ended the third quarter with $163.2 million in cash and lower debt. Importantly, we believe that the operational and financial actions that we’ve taken will enable us to emerge even stronger and well positioned to deliver long-term, sustainable growth.”

Fiscal Third Quarter Highlights (See attached table for GAAP and Non-GAAP measures)

• Delivered topline results ahead of expectations with sequential improvement from the second quarter fiscal 2021
• Drove adjusted gross margin expansion of 100 bps to 54.5%
• Decreased adjusted operating expenses as a percent of sales 200 bps to 39.7%
• Generated adjusted operating income of $25.1 million as compared to $24.3 million in the prior year period, despite pandemic impacts
• Tightly managed inventories, which declined 12% from prior year and are well positioned heading into the holiday selling season
• Ended third quarter with cash of $163.2 million

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

Third quarter fiscal 2021 included the following charges:

• $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;
• $0.6 million pre-tax charge, or $0.3 million after tax, representing $0.02 per diluted share, associated with the amortization of acquired intangible assets and deferred compensation related to the acquisition of MVMT; and
• $0.8 million pre-tax charge, or $0.6 million after tax, representing $0.03 per diluted share, related to corporate initiatives primarily in response to the COVID-19 pandemic.

Third quarter fiscal 2020 included the following charges:

• $0.7 million pre-tax charge, or $0.5 million after tax, representing $0.03 per diluted share, associated with the amortization of acquired intangible assets related to the acquisition of Olivia Burton; and
• $0.9 million pre-tax charge, or $0.7 million after tax, representing $0.03 per diluted share, associated with the amortization of acquired intangible assets and deferred compensation related to the acquisition of MVMT.

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

• Net sales decreased 17.4% to $169.9 million as compared to $205.6 million in the third quarter of fiscal 2020. Net sales on a constant dollar basis decreased 19.4% as compared to net sales in the third quarter of fiscal 2020.
• Gross profit was $92.5 million, or 54.4% of net sales, as compared to $110.1 million, or 53.5% of net sales, in the third quarter last year. Adjusted gross profit in the third quarter of fiscal 2021 was $92.5 million, or 54.5% of net sales, which excludes $0.1 million associated with corporate initiatives related to the impact on the business of the COVID-19 pandemic. There were no adjustments to gross profit in the third quarter of fiscal 2020. The increase in adjusted gross margin percentage was primarily the result of favorable changes in channel and product mix and favorable foreign currency exchange rates.
• Operating expenses decreased $18.0 million to $69.4 million, as compared to $87.4 million in the third quarter last year. Adjusted operating expenses, which excludes the operating expense charges mentioned above in the Non-GAAP Items section, were $67.4 million and $85.8 million for the third quarter of fiscal 2021 and fiscal 2020, respectively. The decrease in adjusted operating expenses was primarily due to the Company’s initiative to minimize all operating expenses, including non-essential operating expenses, such as certain marketing, selling and payroll related expenses.
• Operating income was $23.1 million compared to operating income of $22.6 million in the third quarter of fiscal 2020. Adjusted operating income, which excludes the fiscal 2021 charges listed above in the Non-GAAP Items section, was $25.1 million and $24.3 million for the third quarter of fiscal 2021 and fiscal 2020, respectively.
• The Company recorded a tax provision of $7.5 million, as compared to $5.0 million in the third quarter of fiscal 2020. Based upon adjusted pre-tax income, the adjusted tax provision was $8.0 million or an adjusted tax rate of 32.7% as compared to an adjusted tax provision of $5.3 million or an adjusted tax rate of 22.1% in the third quarter of fiscal 2020. The increase in the adjusted tax rate is due to the impact of the U.S. tax on GILTI as a result of the mix of jurisdictional earnings, partially offset by the NOL carryback provision of the CARES Act.
• Net income was $14.8 million, or $0.63 per diluted share, as compared to net income of $17.8 million, or $0.76 per diluted share, in the third quarter of fiscal 2020. Adjusted net income for the fiscal 2021 period was $16.4 million, or $0.70 per diluted share, which excludes the third quarter fiscal 2021 net charges listed above in the Non-GAAP Items section after the associated tax effects. This compares to adjusted net income for the third quarter of fiscal 2020 of $19.0 million or $0.82 per diluted share, which excludes the third quarter fiscal 2020 net charges listed above in the Non-GAAP Items section after the associated tax effects.

Nine Month Results Fiscal 2021 (See attached table for GAAP and Non-GAAP measures)

• Net sales decreased 35.7% to $328.1 million as compared to $510.0 million in the same period of fiscal 2020. Net sales on a constant dollar basis decreased 36.4% as compared to net sales in the first nine months of fiscal 2020.
• Gross profit was $169.7 million, or 51.7% of net sales, as compared to $274.3 million, or 53.8% of net sales, in the same period last year. Adjusted gross profit for the first nine months of fiscal 2021 was $173.3 million, or 52.8% of net sales, which excludes $3.6 million in corporate initiative charges related to the impact on the business of the COVID-19 pandemic. This compares to adjusted gross profit of $274.4 million, or 53.8% of net sales for the first nine months of fiscal 2020, which excludes $0.1 million in adjustments associated with the amortization of acquisition accounting adjustments related to the MVMT acquisition. The decrease in adjusted gross margin percentage was primarily the result of unfavorable changes in channel and product mix and U.S. special tariff headwinds, partially offset by favorable foreign currency exchange rates.
• Operating expenses were $337.7 million as compared to $237.9 million in the same period last year. For the first nine months of fiscal 2021, adjusted operating expenses were $166.4 million, which excludes $155.9 million in adjustments related to the impairment of goodwill and certain intangible assets, $11.8 million in corporate initiative charges related to the impact to the business from the COVID-19 pandemic, $2.0 million of expenses associated with the amortization of acquired intangible assets related to Olivia Burton and $1.5 million in adjustments associated with the amortization of acquired intangible assets and deferred compensation related to the MVMT acquisition. For the first nine months of fiscal 2020, adjusted operating expenses were $232.7 million, which excludes $2.1 million of expenses associated with the amortization of acquired intangible assets related to Olivia Burton and $3.4 million in adjustments associated with the amortization of acquired intangible assets 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 operating expense, including non-essential operating expenses, such as certain marketing, selling and payroll related expenses.
• Operating loss was $168.0 million as compared to operating income of $36.4 million in the same period last year. Adjusted operating income for the first nine months of fiscal 2021 was $6.9 million, which excludes the fiscal 2021 charges listed in the immediately preceding bullet, compared to adjusted operating income of $41.7 million for the first nine months of fiscal 2020, which excludes the fiscal 2020 net charges listed in the immediately preceding bullet.
• The Company recorded a tax benefit of $26.4 million as compared to a tax provision of $10.5 million for the first nine months of fiscal 2020. Based upon adjusted pre-tax income, the adjusted tax provision was $3.7 million in the first nine months of fiscal 2021 as compared $8.4 million in the first nine months of fiscal 2020.
• Net loss was $141.8 million, or a loss of $6.11 per diluted share, as compared to net income for the first nine months of fiscal 2020 of $39.2 million, or $1.68 per diluted share. Adjusted net income for the first nine months of fiscal 2021 was $1.7 million, or $0.07 per diluted share, which excludes $131.1 million, net of $24.9 million of tax, in adjustments related to the impairment of goodwill and certain intangible assets, $10.7 million, net of $4.7 million of tax, in corporate initiative charges related to the impact on the business from the COVID-19 pandemic including restructuring, $1.6 million, net of $0.4 million of tax, of expenses associated with the amortization of acquired intangible assets related to Olivia Burton and $1.0 million, net of $0.6 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 nine months of fiscal 2020 of $33.0 million, or $1.41 per diluted share. This amount excludes expenses of $1.7 million, net of $0.4 million of tax, associated with the amortization of acquired intangible assets related to Olivia Burton; expenses of $2.7 million, net of $0.8 million of tax, related to the amortization of acquired intangible assets, accounting adjustments and deferred compensation related to MVMT; a gain of $10.4 million, net of $3.3 million of tax, associated with the remeasurement of the contingent consideration liability associated with the MVMT acquisition; and a gain of $0.2 million, net of $0.1 million of tax, in adjustments 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 Company is not providing fiscal 2021 outlook.

Movado Group, Inc. designs, sources, and globally distributes MOVADO®, MVMT®, OLIVIA BURTON®, EBEL®, CONCORD®, COACH®, TOMMY HILFIGER®, HUGO BOSS®, LACOSTE®, SCUDERIA FERRARI®, REBECCA MINKOFF® and URI MINKOFF® watches, and for certain of these brands jewelry and other accessories, and operates Movado Company Stores in the United States and Canada.