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01/10 20:13
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals strong financial performance with revenue and net income growth, improved gross margin, and cash flow. The company is optimistic about product launches and market strategy, especially targeting Gen Z. While there are challenges like tariffs and Middle East performance, the optimistic guidance, shareholder returns, and Q&A insights suggest a positive sentiment. The market strategy and shareholder return plan are particularly strong, indicating a likely positive stock price movement.
Revenue $186.1 million, a 3.1% increase year-over-year. Excluding the Middle East, growth was 5.9%. The increase was attributed to strong performances in the U.S., Europe, and Latin America, partially offset by weaker performance in the Middle East.
Gross Margin 54.3%, an improvement of 80 basis points from 53.5% last year. The improvement was driven by favorable channel and product mix, increased leverage from reduced costs, and higher sales, partially offset by increased tariffs.
Adjusted Operating Income $12.6 million, a 43.5% increase from $8.8 million in the prior year. The increase was due to higher revenue and gross profit, which offset a small increase in operating expenses.
Operating Cash Flow $1.3 million for the first 9 months, compared to a use of $40.6 million last year. The improvement reflects better cash management and operational efficiency.
Net Income $10.2 million or $0.45 per diluted share, compared to $8.5 million or $0.37 per diluted share last year. The increase was driven by higher operating income and gross profit.
Inventory $20.8 million increase (11.8%) year-over-year, with $5.4 million due to foreign currency and $6.4 million related to EPA reciprocal tariffs. The company is comfortable with the inventory composition and balance.
Cash Balance $183.9 million, compared to $181.5 million last year. The increase was attributed to improved cash flow management.
Movado Museum Collection: Performed well, particularly the new Bangle collection. Introducing a new style set with lab-grown diamonds for the holiday season.
Automatic Museum Imperio: Launched as a new hero collection inspired by a 1970s design. Holiday marketing features Christian McCaffrey.
BOLD Collaboration with Ludacris: Limited edition celebrating the 25th anniversary of Ludacris' debut album. MVP collection sold out.
Movado Heritage 1917 Collection: Inspired by a vintage design from 1917. Supported by a digital campaign featuring Tyrese Halliburton.
Licensed Brands: Strong performance in jewelry and watches with 6.4% growth. Examples include Coach's Sammy collection, Hugo Boss' Sky Traveler, and Calvin Klein's Mini Pulse.
U.S. Market: Returned to 6.9% growth, led by fashion brand business and direct-to-consumer channels. Movado company stores grew 11.9%, and movado.com grew 12.4%.
International Markets: Strong performance in Europe and Latin America. Middle East underperformed but is being rebuilt with plans for growth next year.
Gross Margin Improvement: Improved by 80 basis points to 54.3% despite U.S. tariffs. Expected tariff reduction on Swiss watches will further benefit margins.
Operating Income Growth: Adjusted operating income grew over 40% to $12.6 million.
Cash Flow and Balance Sheet: Generated $1.3 million in positive operating cash flow. Ended the quarter with $183.9 million in cash and no debt.
Focus on Younger Consumers: Renewed interest among younger consumers in analog watches due to design, innovation, and value.
Holiday Campaigns: Designed to deepen engagement with products and ambassadors, featuring enhanced displays and retail support.
Licensed Brand Expansion: Expanding offerings in jewelry and watches, targeting Gen-Z and men with new collections.
Middle East Market Performance: Weaker performance in the Middle East market, despite efforts to rebuild the team and refine strategy. This poses a challenge to achieving consistent international growth.
U.S. Tariffs on Swiss Watches: Incremental U.S. tariffs on Swiss watches had a $4.5 million and 230 basis point impact on gross margin. Although a new framework agreement is expected to lower tariffs, the current impact remains a challenge.
Economic and Political Uncertainty: Ongoing global economic and political uncertainty could adversely impact consumer demand and operational planning.
Inventory Management: Inventory increased by $20.8 million or 11.8% compared to the same period last year, including $6.4 million of EPA reciprocal tariffs. This could lead to potential overstocking or financial strain if not managed effectively.
Marketing Expense Reduction: Planned reduction in marketing expenses may limit brand visibility and consumer engagement, potentially affecting sales growth.
Foreign Currency Impact: Unfavorable foreign currency exchange rates negatively impacted gross margin and international net sales.
Revenue Growth: The company plans to return to growth in the Middle East region next year after rebuilding its team and refining its strategy.
Tariff Impact: The U.S. and Switzerland announced a framework agreement expected to lower the overall U.S. tariff rate on Swiss watches to 15%, which will allow the company to plan effectively for next year and reduce price-based mitigation.
Market Trends: The company is optimistic about improving dynamics in the fashion and accessible luxury watch categories, driven by innovation in new shapes and sizes and growing interest from women and younger consumers. Additionally, there is strong momentum in fashion jewelry, supported by the growing adoption of jewelry for men.
Brand and Product Development: The company plans to introduce a new style set with lab-grown diamonds for the holiday season and continue its focus on product innovation, including new collections inspired by vintage designs and collaborations with brand ambassadors.
Profitability Focus: The company aims to drive improved profitability across all aspects of the business and is looking forward to a strong holiday season while planning for the next year.
Quarterly Dividend: The Board has approved a quarterly dividend of $0.35 per share.
Share Repurchase Program: Approximately 100,000 shares were repurchased under the share repurchase program in the first 9 months of fiscal 2026. As of October 31, 2025, $48.4 million remained under the authorized share repurchase program. The company plans to utilize the program to offset dilution, subject to prevailing market conditions and the business environment.
The earnings call reveals strong financial performance with revenue and net income growth, improved gross margin, and cash flow. The company is optimistic about product launches and market strategy, especially targeting Gen Z. While there are challenges like tariffs and Middle East performance, the optimistic guidance, shareholder returns, and Q&A insights suggest a positive sentiment. The market strategy and shareholder return plan are particularly strong, indicating a likely positive stock price movement.
Despite macroeconomic uncertainties and a slight decline in gross margins, the company reported a 3% increase in sales and a significant rise in adjusted operating profit. The strong international performance, strategic inventory management, and a share repurchase program further contribute to a positive outlook. The Q&A section highlighted effective management strategies and a focus on market trends, with no unclear responses. These factors suggest a positive stock price movement over the next two weeks.
The earnings call summary reveals several concerns: missed earnings expectations, declining sales, and lack of fiscal outlook due to economic uncertainties. Despite cost-saving measures and strong cash position, the negative impact of currency fluctuations and tariffs, coupled with declining margins, overshadow positive developments like new partnerships and product launches. The Q&A section highlights uncertainties, particularly regarding tariffs and foreign exchange losses. The lack of share repurchases and unclear management responses further contribute to a negative sentiment, leading to a predicted stock price movement of -2% to -8%.
The earnings call reveals several concerns: declining sales and operating income, currency fluctuations, and tariff uncertainties. The lack of fiscal guidance further adds to investor uncertainty. Although there are positive aspects like a strong cash position and a dividend, these are overshadowed by the negative financial performance and unclear future outlook. The Q&A session didn't alleviate concerns, as management failed to provide a clear strategy to address challenges. These factors are likely to lead to a negative stock price reaction in the short term.
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