Tear Sheet: Movado Group, Inc. (NYSE: MOV)

Stock Info

Ticker: MOV
Exchange: NYSE
Market Cap: $670Mil (Sept. 29, 2022)
Industry: Luxury Goods

Movado Group, Inc. (NYSE: MOV) is a leading manufacturer and distributor of luxury watches and jewelry, mainly servings the North America, Western Europe, and Far East markets. The Watch and Accessory segment offers watchers under the Movado, Concord, Ebel, Olivia Burton, and MVMT brands. It also provides licensed brands like Tommy Hilfiger, HUGO BOSS, Lacoste, Calvin Klein, and Coach. The Company Stores division includes physical retail outlets in the U.S. and Canada.

The Business

Formerly known as North American Watch Corporation, the company was rechristened Movado Group in1996. It has a full-fledged eCommerce platform and sells both to direct customers and business customers like jewelry store chains, department stores, independent regional jewelers, independent distributors, online marketplaces, licensors’ retail stores, and third-party e-commerce retailers.

The management’s key strategic priorities are: realizing the brands’ potential, capturing the significant opportunities within the company’s regions, driving innovation in everything the company does, and connecting directly with consumers in the digital world. Headquartered in Paramus, New Jersey, Movado is currently led by chief executive officer Efraim Grinberg.

Financials

In fiscal 2022, Movado’s net sales increased by 45% annually to $732.4 million. Full-year operating profit, adjusted for special items, nearly tripled to $119.7 million. In the second quarter of 2023, adjusted profit increased to $24.6 million or $1.07 per share from $20.1 million or $0.85 per share in the corresponding period of the prior year. Net sales grew 5% year-over-year to $182.8 million in Q2.

During the quarter, the company delivered against its strategy of introducing new designs in watches and jewelry and enhancing its digital marketing initiatives further. In the remainder of the year, its financial performance is expected to be negatively impacted by elevated inflation, rising interest rates, and the elimination of domestic stimulus programs.

Strengths

As a consumer discretionary company, there are certain factors that give the company an edge over peers, such as its strong financial position, brand value, and continued product innovation. A key aspect of the Movado brand is its innovative designs and effective use of technology, most of which have been patented. The company has licensing agreements with several popular brands, which add value to the business while allowing partners to benefit from its store network. 

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Movado Group Inc. Q2 2023 Earnings Call Transcript

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Weaknesses

There are certain areas of the business that needs improvement so that the company can compete with others more effectively. Movado might need additional promotional activities to achieve better brand recall and establish itself as a brand that customers instantly remember. Also, expanding the business into emerging markets would help in boosting sales.

Opportunities

Of late, the demand for luxury watches and jewelry has been growing in developing economies, and Movado has what it takes to tap into that opportunity. The market for the kind of products the company offers has expanded steadily in recent years, a trend that is expected to continue. It is estimated that the U.S. luxury watch industry would reach $5.91 billion in revenues by 2027.

Courtesy: Movado Group

Risks

Like all businesses, there are factors that can negatively impact Movado, ranging from competition and shifts in market trends to changes in government policies and the macroeconomic environment. In the short term, sales might come under pressure from rising inflation and its impact on consumers’ spending power. Also, the lingering effects of the pandemic could remain a drag on the demand for consumer discretionary products.

There are chances of the company losing market share to competitors with better brand recognition. Swiss-based Swatch Group is the main rival that directly competes with Movado across all of its brands. Also, the luxury goods segment is highly demanding, which would require companies to constantly innovate.