Earnings call transcript: Movado Group misses EPS forecast, stock dips after Q2 2025 results

Movado Group Inc. reported its financial results for the second quarter of fiscal year 2025, revealing a mixed performance. The company posted earnings per share (EPS) of $0.23, falling short of the anticipated $0.31, representing a negative surprise of 25.81%. However, revenue came in at $161.8 million, surpassing expectations of $156.84 million. Despite the revenue beat, Movado’s stock declined 3.14% in pre-market trading, reflecting investor concerns over the earnings miss. According to InvestingPro data, the company maintains strong financial health with a current ratio of 4.07, indicating robust liquidity and operational efficiency.

Key Takeaways

• Movado’s Q2 EPS of $0.23 missed the forecast by 25.81%.
• Revenue increased by 3.1% year-over-year to $161.8 million, exceeding expectations.
• The company’s stock fell 3.14% pre-market after the earnings release.
• Movado’s focus on mini and micro watches is gaining traction among younger consumers.
• The company is not providing fiscal 2026 guidance due to tariff uncertainties.

Company Performance

Movado Group showed resilience in its overall performance, with a 3.1% increase in sales compared to the same quarter last year. The company’s net income rose to $5.3 million, or $0.23 per diluted share, up from $3.5 million, or $0.15 per share, the previous year. Despite the EPS miss, Movado’s adjusted operating profit more than doubled to $7 million, highlighting operational improvements.

Financial Highlights

• Revenue: $161.8 million, up 3.1% YoY
• Earnings per share: $0.23, up from $0.15 YoY
• Gross Margin: 54.1%, slightly down from 54.3% last year
• Cash Position: $180.5 million, with no debt

Earnings vs. Forecast

Movado reported an EPS of $0.23, below the forecast of $0.31, resulting in a 25.81% negative surprise. In contrast, revenue exceeded the forecast by 3.16%, coming in at $161.8 million against expectations of $156.84 million. The earnings miss is significant compared to previous quarters, where the company had generally met or exceeded expectations.

Market Reaction

Following the earnings announcement, Movado’s stock experienced a pre-market decline of 4.05%, with shares trading at $16.81. This drop reflects investor disappointment over the EPS miss, despite the positive revenue surprise. The stock remains within its 52-week range, having peaked at $24.67 and a low of $12.85. InvestingPro analysis suggests the stock is currently undervalued, with additional analysis available on the Most Undervalued Stocks list. The company offers an attractive dividend yield of 7.99%, significantly above its 5-year average of 6%.

Outlook & Guidance

Movado refrained from providing specific fiscal 2026 guidance due to ongoing tariff uncertainties. The company is focusing on profitability and consistent growth, while monitoring U.S. tariffs on Swiss imports, which currently stand at 39%. Movado hopes for lower tariff rates in the coming months. InvestingPro data reveals the company holds more cash than debt on its balance sheet, with strong cash flows sufficiently covering interest payments. For deeper insights into Movado’s financial health and future prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Executive Commentary

CEO Efraim Grinberg expressed optimism about new product introductions and the resurgence in the fashion watch market, stating, "We’re excited by the new products we have introduced and encouraged by the resurgence we are seeing in the fashion watch market." CFO Sally DeMarcellus highlighted the challenges posed by tariffs, noting, "Given the current macroeconomic environment and the ongoing uncertainty of the impact of tariffs on our business, the company is not providing fiscal twenty twenty six outlook."

Risks and Challenges

• Tariff Uncertainty: Ongoing U.S. tariffs on Swiss imports could impact costs and pricing strategies.
• Market Competition: Intense competition in the fashion watch sector may pressure margins.
• Inventory Management: Increased inventory levels to prepare for tariffs could affect cash flow.
• Currency Fluctuations: International sales growth may be affected by currency exchange rates.
• Economic Factors: Broader economic conditions and consumer spending trends could influence sales.

Q&A

During the earnings call, analysts inquired about the mini watch trend, driven by younger consumers, and Movado’s inventory build-up strategy for tariff mitigation. The company confirmed that restructuring charges are mostly complete, providing clarity on future financial planning.

Full transcript - Movado Group Inc (MOV) Q2 2026:

Conference Operator: Good day, everybody, and welcome to the Movado Group Second Quarter Fiscal twenty twenty six Earnings Call. As a reminder, today’s call is being recorded and may not be reproduced in full or in part without permission from the company. At this time, I would like to turn the conference over to Alison Malkin of ICR. Please go ahead.

Alison Malkin, Investor Relations Representative, ICR: Thank you. Good morning, everyone. With me on the call today are Efraim Grinberg, Chairman and Chief Executive Officer and Sally DeMarcellus, Executive Vice President and Chief Financial Officer. Before we get started, I would like to remind you of the company’s Safe Harbor language, which I’m sure you’re all familiar with. The statements contained in this conference call, which are not historical facts, may be deemed to constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Actual future results may differ materially from those suggested in such statements due to a number of risks and uncertainties, all of which are described in the company’s filings with the SEC, which include today’s press release. If any non GAAP financial measure is used on this call, a presentation of the most directly comparable GAAP financial measure to this non GAAP financial measure will be provided as supplemental financial information in our press release. Now, I would like to turn the call over to Efrain Grinberg, Chairman and Chief Executive Officer of Movado Group.

Efraim Grinberg, Chairman and Chief Executive Officer, Movado Group: Thank you, Alison. Good morning and welcome to Movado Group’s second quarter conference call. With me today is our Executive Vice President and Chief Financial Officer, Sallie DeMarzales. After I review the highlights of the quarter and share our progress on key strategic initiatives, Sally will take you through the financial results in more detail. We will then be happy to answer questions.

We are pleased with our overall results this quarter as we returned to growth in both sales and profitability. Sales grew by 3% to $161,800,000 and adjusted operating profit more than doubled to $7,000,000 from 2,600,000 last year despite a $2,200,000 impact from unmitigated U. S. Tariff expenses. Although we’ve taken certain actions to partially offset tariffs, those actions will predominantly impact future periods.

After the quarter ended, The United States implemented a tariff rate of 39 on Swiss imports. During the second quarter, we have built a strong position in inventory of Swiss made watches in The United States and would expect a substantial portion of the year’s needs are covered. We are hopeful that over the next several months, The United States and Switzerland will agree to lower tariff rates. Of course, we continue to monitor the situation closely and to develop mitigation plans. We continue to operate with a strong balance sheet with over $180,000,000 in cash and no debt.

Overall, we are pleased with the progress that we have made on our strategic initiatives with a focus on returning the company to growth and profitability. We would expect to see approximately $10,000,000 of annualized savings spread evenly throughout this year as a result of the actions we took late last year to reduce operating expenses. Although we experienced a 5.6% sales decline in our brand, we continue to make progress on our Movado strategy, which I will discuss later in my remarks. In our Licensed Brands, we grew by 6.5% on a constant currency basis or 9.5 on a reported basis. Overall, we reported gross margins of $54,100,000 versus 5454.1% versus 54.3% in Q2 of last year despite the 130 basis point impact of additional tariffs in The U.

S. Most of our strategic pricing actions to partially offset the impact of tariffs became effective July 1. Our international business grew by 6.9% or 3.9% on a constant currency basis led by a strong performance in Europe, Latin America and India with Europe seeing particularly strong trends. As expected, this performance was offset somewhat by The Middle East where we are in the process of rebuilding our team. Our U.

S. Business declined by 1.6% as we focus on rebalancing our chain jewelry store distribution, although we had an improved performance in our domestic department store and e commerce channels. Our outlet stores segment grew 2.4% for the quarter and we’re excited by the recent initiatives and accelerating trends in that channel. As we look at the progress that we’re making in our brands, we’re particularly pleased by the success that we are seeing in the overall performance of trend right products across our brand portfolio. In Movado, we’re making significant progress in returning the brand to growth in our wholesale distribution.

We have seen strong performance in our own e commerce site with 6% growth and strong trends in our digital partners. In brick and mortar, Movado brand sell through has returned to growth in the second quarter in our department store channel, where we have implemented and expanded our coverage as a point of sale and installed our new point of sale display. We will continue to execute behind these initiatives as the year progresses. On the product front, Movado has seen increased penetration and success in women’s watches, including our new iconic BANGL watches and our new Mini Quest in Bold, which along with our Bold Tank watch is a best seller. On the men’s side, we’re seeing strong performance in the Movado Bold collections, including Verso automatic and Quest automatic.

Our Heritage collection, inspired by Movado’s rich heritage, continues to do particularly well while in a limited distribution across the country. The Movado brand marketing campaign for the second half will include new creative featuring our Movado icons, Ludacris, Jessica Alba, Julianne Moore, Christian McCaffrey and Tyrese Halliburton. We’re very excited by the digital first content that our team has executed with a greater focus on products associated with each of the icons. We have exciting new products debuting this fall, like the new Museum Imperial with Christian McCaffrey and Our Heritage 1917 with Tyrese Halliburton. On the women’s side, Jessica Alba and Julianne Moore will be featured with different shapes of our Museum BANGL collection and a women’s version of the Museum Imperial and Heritage 1917.

Turning to our Licensed Brands, we’re seeing a return to the fashion watch and jewelry category with interest by Gen Z consumers across digital platforms like TikTok, Reels and YouTube. Sales in our licensed brands grew by 9.5% for the quarter or 6.5% in constant currency. In Hugo Boss, we have experienced strong growth in our iconic families, Time Traveler and Candor. Our new updated Grand Prix is quickly becoming a best seller. We’re also excited by our new women’s watches led by the May family with a petite square shape.

In Tommy Hilfiger, we’re very excited to be refocused on the women’s watch category. Our Mia family is already showing signs of strong sell through and will be featured in our fall campaign. Complementing Mia is Moira, a new mini East West Oval that has gotten a strong reception. On the men’s front, we’re excited by our new ’70s inspired Chronograph Hudson collection, which will be featured in our holiday campaign, as well as by Regatta TH, a new sports watch collection in exciting colors opening at $139 In Lacoste, we’re introducing a new black and gold version of our iconic LC33 collection and will complement our Tank Parisien with a new oval version. Our Lacoste jewelry business continues to exceed expectations and we’re very excited to introduce the Arthur and Crocodile families to complement our best selling Metropole bracelet collection.

In Calvin Klein, we’re launching a new mini version of our best selling PULSE collection as well as a new 18 millimeter contemporary collection that has really peaked our retailers’ attention. Coach continues to perform extremely well, particularly in The United States and is now showing momentum in Europe as well. For the second half, we have several new introductions in our best selling Sammy Oval collection with a strong new 20 millimeter Reiss tank. We’ll also be expanding our best selling Charter collection for him. As we enter for the second half of the year, we recognize that uncertainty remains around tariffs and the broader retail environment.

At the same time, we’re excited by the new products we have introduced and encouraged by the resurgence we are seeing in the fashion watch market. As a leadership team, our focus remains on driving profitability and delivering consistent growth in both sales and operating margin, while maintaining the strength of our balance sheet and executing against our strategic plans across all of our businesses. While some of our initiatives have longer time horizons, we’re confident that we’re taking the right actions for the long term and positioning Movado Group for sustainable success. I’m happy about the plans that we’re building for the year ahead, and I would now like to turn the call over to Sally.

Sally DeMarcellus, Executive Vice President and Chief Financial Officer, Movado Group: Thank you, Efraim, and good morning, everyone. For today’s call, I will review our financial results for the second quarter and year to date period of fiscal twenty twenty six. My comments today will focus on adjusted results. Please refer to the description of the special items included in our results for the second quarter and 2026 in our press release issued earlier today, which also includes a reconciliation table of GAAP and non GAAP measures. Turning to a review of the quarter.

Overall, we were pleased with our performance for the 2026. Sales were $161,800,000 as compared to $157,000,000 last year, an increase of 3.1. In constant dollars, the increase in net sales was 1.4%. Net sales increased across licensed brands and company stores, partially offset by a decrease in net sales in owned brands. By geography, U.

S. Net sales decreased 1.6% as compared to the second quarter of last year. International net sales increased by 6.9%. On a constant currency basis, international net sales increased 3.9% with strong performances in certain markets such as Latin America and Europe. Gross profit as a percent of sales was 54.1 compared to 54.3% in the second quarter of last year.

The decrease in gross margin rate as compared to the same period of last year was primarily driven by increased tariffs and unfavorable foreign exchange, partially offset by favorable channel and product mix. Operating expenses were $80,600,000 as compared to $82,600,000 for the second quarter of last year. The $2,000,000 decrease was driven by a strategic reduction in marketing expenses, partially offset by an increase in performance based compensation. The combination of higher revenue and gross profit and a decline in operating expenses drove operating income to $7,000,000 a $4,400,000 improvement from $2,600,000 in the 2025. We recorded approximately $1,100,000 of other non operating income in the 2026 as compared to $1,800,000 in the same period of last year.

Other non operating income is primarily comprised of interest earned on our global cash position. We recorded income tax expense of $2,700,000 in the 2026 as compared to $843,000 in the 2025. Net income in the second quarter was $5,300,000 or $0.23 per diluted share as compared to $3,500,000 or $0.15 per diluted share in the year ago period. Now turning to our year to date results. Sales for the six month period ended 07/31/2025 were $293,600,000 as compared to $291,400,000 last year.

Total net sales increased 0.8% as compared to the six month period of fiscal twenty twenty five. In constant dollars, the increase in net sales for the year to date period was 0.3%. U. S. Net sales declined by 1.6% and international sales increased by 2.6%.

Gross profit was $158,900,000 or 54.1% of sales as compared to $158,200,000 or 54.3% of sales last year. The decrease in gross margin rate for the first six months was primarily due to unfavorable foreign exchange and increased tariff costs, partially offset by favorable channel and product mix. Operating expenses were 151,000,000 as compared to $153,400,000 for the same period of last year. The decrease was driven by a strategic reduction in marketing expenses, partially offset by an increase in performance based compensation. For the six months ended 07/31/2025, operating income was $7,900,000 compared to $4,800,000 in fiscal twenty twenty five.

We recorded approximately $2,700,000 of other non operating income in the six month period of fiscal twenty twenty six, which is primarily comprised of interest earned on our global cash position as compared to $3,800,000 in the same period of last year. Net income was $7,200,000 or $0.32 per diluted share as compared to $5,500,000 or $0.24 per diluted share in the year ago period. Now turning to our balance sheet. Cash at the end of the second quarter was $180,500,000 as compared to $198,300,000 of the same period last year. Accounts receivable was $94,400,000 up $7,700,000 from the same period of last year, primarily due to timing and mix of business.

Inventory at the end of the quarter was up $28,300,000 or 15.5% above the same period of last year. Dollars 5,100,000.0 of the increase was due to foreign currency and $4,600,000 of reciprocal tariffs is included in inventory on hand at the end of the second quarter. As Efraim mentioned, as of July 31, we have built a strong position of inventory a strong position in inventory of Swiss made watches in The United States and would expect that a substantial portion of this year’s needs are covered. We are comfortable with the composition and balance of our inventory at year end. In the first six months of fiscal twenty twenty six, capital expenditures were $2,800,000 and we repurchased approximately 100,000 shares under our share repurchase program.

As of 07/31/2025, we had $48,400,000 remaining under our authorized share repurchase program. Subject to prevailing market conditions and the business environment, we plan to utilize our share repurchase program to offset dilution in fiscal twenty twenty six. As Efraim mentioned, we closely monitor the changing tariff landscape, and we will continue to develop mitigation plans. Given the current macroeconomic environment and the ongoing uncertainty of the impact of tariffs on our business, the company is not providing fiscal twenty twenty six outlook. I would now like to open the call up for questions.

Conference Operator: Thank you. We will now be conducting a question and answer session. Our first question comes from the line of Hamed Khorsand with BWS Financial. Please proceed with your question.

Hamed Khorsand, Analyst, BWS Financial: Hi. Good morning. So there was lots of commentary, about mini, watches, and I just wanted to understand what you’re seeing from consumer habits or purchasing that you think that the mini is the route that you’re taking?

Efraim Grinberg, Chairman and Chief Executive Officer, Movado Group: So so I think and and, you know, we we we have both what we call mini watches, and we have micro watches, though, which are smaller. Mini watches for us are watches from like 23 to 28 millimeters. And what what had happened is that that for a period of time, watches had gotten bigger both for men and for for women. So and over the last few years, they’ve gotten smaller again. And with that aspect, it’s actually brought young women back into the category.

And there’s a lot of social media around that and layering of women’s watches with jewelry. And so we believe it represents a significant opportunity across our brand portfolio. And that trend has as many trends do, begins in luxury and then moves into into more accessible products as well.

Hamed Khorsand, Analyst, BWS Financial: Okay. And during Prime Day, I know you guys were participating. Was there anything stood out of that event that has continued since? Or was it purely the consumer responding to price?

Efraim Grinberg, Chairman and Chief Executive Officer, Movado Group: So we’re probably a bigger participant in the prime events in Europe than we are in The United States. And but we’ve seen our overall digital business with those retailers that are completely focused on digital environment, whether it be Zalando’s or the Amazons of the world, really doing very well on a global basis. And that’s really, really good to see and that’s really across our brand portfolio. And so we believe that that’s an increased opportunity as we continue to progress down our strategic plan.

Hamed Khorsand, Analyst, BWS Financial: Okay. And then I know you’ve talked about you raised inventory because of the Swiss watches, but earlier this year, you had also raised inventory because of what’s going on with tariffs. How much of your increase overall year to date, now I’m speaking on calendar, so

Conference Operator: excuse

Hamed Khorsand, Analyst, BWS Financial: me, year to date on the calendar, can you just digest through the channel by the holiday shopping season?

Efraim Grinberg, Chairman and Chief Executive Officer, Movado Group: Sure. So I’ll start and then I’ll turn it over to Sally. Our inventories got very low at year end. So we began to rebuild inventory in Q1 of this year and now into Q2. We would expect our inventories to be in line by year end since and what that’s allowed us to do at the same time is to offset some of the tariff impact by having inventory move to The United States prior to the implementation of certain tariffs.

Obviously, we can’t offset all of it, and then we have taken other actions, whether it be pricing or negotiations with suppliers to to help mitigate some of the effect as well. But I’ll turn it back to Sally as well.

Sally DeMarcellus, Executive Vice President and Chief Financial Officer, Movado Group: The only detail I will add to that, and thank you, Efraim, that was very thorough, is we have, as I mentioned, about $28,000,000 of additional inventory at this time. We do expect to work it down by the end of the year to something more reasonable. But of that $18,000,000 about 16,000,000 of it is in The U. S. So we did pull it forward into The U.

S. So that we can manage through these tariffs and kind of get ahead of some uncertainty with that. And as we also mentioned, just to reiterate, we do think that a substantial portion of what we need in The U. S. Is probably already here.

We will add in what might be new styles or something that is an advertisement or maybe something that is just selling faster than we had anticipated and bring it in. We should be in relatively good shape.

Conference Operator: Okay.

Hamed Khorsand, Analyst, BWS Financial: Can I ask one more question?

Sally DeMarcellus, Executive Vice President and Chief Financial Officer, Movado Group: Certainly. Absolutely.

Hamed Khorsand, Analyst, BWS Financial: You’ve taken a lot of these restructuring charges in the last few quarters. When do they stop? And when do us investors see it show up in quarterly results?

Efraim Grinberg, Chairman and Chief Executive Officer, Movado Group: Well, I think it’s a combination both of charges dealing with our event that occurred in The Middle East last year as well as some charges on the restructuring side. I would think on the restructuring side, they’re predominantly done. And there could be some laggard still expenses on the other charges. But I would expect overall that they will be reduced significantly.

Sally DeMarcellus, Executive Vice President and Chief Financial Officer, Movado Group: And just to remind you that we did mention when we were talking about the savings and the initiatives we were putting in place, those are offset by some increases this year in our costs. So you will see they offset kind of some of the increases that we would have for regular year over year increases for Merit, adding back performance based compensation and of course, currency. Correct.

Hamed Khorsand, Analyst, BWS Financial: Okay. Very good. Thank you.

Conference Operator: Thank you. We have reached the end of the question and answer session. I’d like to turn the floor back to Efraim Ginberg for closing remarks.

Efraim Grinberg, Chairman and Chief Executive Officer, Movado Group: Okay. Thank you all for participating with us today, and we look forward to joining you again for our third quarter conference call where we’ll hopefully, we’ll be able to share with you the progress that we continue to make on our strategic initiatives. Thank you.

Conference Operator: Thank you. And this concludes today’s conference. And you may disconnect your lines at this time. We thank you for your participation.

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