Earnings call transcript: Movado’s Q1 FY2026 results miss expectations, stock drops

Movado Group Inc. (MOV) reported its financial results for the first quarter of fiscal year 2026, revealing a significant earnings miss that led to a notable decline in its stock price. The company posted an earnings per share (EPS) of $0.08, falling short of the forecasted $0.38. Revenue also missed expectations, coming in at $131.8 million compared to the projected $141.92 million. Following the announcement, Movado’s stock price fell by 5.83% in pre-market trading, closing at $17.42. According to InvestingPro analysis, the company appears undervalued based on its Fair Value metrics, with a solid financial health score of 2.1 out of 3.

Key Takeaways

• Movado’s Q1 FY2026 EPS of $0.08 missed the forecast of $0.38.
• Revenue declined to $131.8 million, below the anticipated $141.92 million.
• The stock price dropped by 5.83% after the earnings announcement.
• The company is focusing on innovation and targeting younger consumers.
• Movado is navigating economic uncertainties with cost-saving measures.

Company Performance

Movado’s performance this quarter was marked by a decline in both earnings and revenue compared to expectations. The company’s sales decreased by 1.9% year-over-year, and its adjusted operating income dropped to $870,000 from $2.1 million in the previous year. Despite these challenges, Movado continues to innovate with new product launches and is targeting younger demographics through strategic brand partnerships and social media engagement.

Financial Highlights

• Revenue: $131.8 million, down 1.9% year-over-year
• Earnings per share: $0.08, down from $0.09 last year
• Gross profit margin: 54.1%
• Cash position: $203.1 million
• Dividend: $0.35 per share

Earnings vs. Forecast

Movado’s actual EPS of $0.08 was significantly below the forecasted $0.38, representing a miss of approximately 78.9%. Revenue also fell short of expectations by about 7.2%. This performance contrasts with previous quarters where the company had managed to meet or exceed market expectations.

Market Reaction

Following the earnings release, Movado’s stock experienced a 5.83% decline in pre-market trading, reflecting investor disappointment in the company’s performance. The stock’s current price of $17.42 is closer to its 52-week low of $12.85, indicating a challenging period for the company amidst broader market uncertainties. InvestingPro data shows the stock’s RSI is in overbought territory, suggesting potential price consolidation ahead. Despite recent volatility, the stock has demonstrated strong returns over the past five years.

Outlook & Guidance

Movado refrained from providing a specific fiscal year outlook due to ongoing economic uncertainties. The company emphasized its focus on managing controllable factors, operating with flexibility, and delivering value through innovative products. Future revenue and EPS projections for FY2026 and FY2027 indicate potential growth, with analysts maintaining a moderate buy consensus and a target price suggesting significant upside potential. The company remains cautious about the economic environment. Get exclusive access to Movado’s comprehensive Pro Research Report and real-time analysis through InvestingPro.

Executive Commentary

CEO Efraim Grinberg stated, "We never expected the journey that we implemented to be a short term strategy, but a longer term." He emphasized the company’s commitment to delivering value to consumers. CFO Sally DeMarcellus highlighted the importance of monitoring the changing tariff landscape, which could impact future financial results.

Risks and Challenges

• Economic Uncertainty: Continued economic volatility could impact consumer spending and sales.
• Discretionary Spending: Challenges in consumer discretionary purchases may affect revenue.
• Tariff Changes: Potential changes in tariffs could influence costs and pricing strategies.
• Competition: Intense competition in the luxury watch market may pressure margins.
• Currency Fluctuations: Foreign exchange losses could affect profitability.

Q&A

During the earnings call, analysts inquired about the company’s sales momentum and the impact of foreign exchange losses. Movado’s management reiterated their long-term brand-building strategy and highlighted their strong cash position and plans for potential inventory reduction.

Full transcript - Movado Group Inc (MOV) Q1 2026:

Conference Operator: Good day, everybody, and welcome to Movado First Quarter and Fiscal Year 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 Mackin of ICR. Please go ahead.

Alison Mackin, Investor Relations (ICR), ICR: Everyone, with me on the call are Efraim Grinberg, Chairman and Chief Executive Officer and Sally DeMarcellus, Executive Vice President and Chief Operating Officer 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 includes 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 Efraim Grinberg, Chairman and Chief Executive Officer of Movado Group.

Efraim Grinberg, Chairman and Chief Executive Officer, Movado Group: Thank you, Allison. Good morning, and welcome to Movado Group’s first quarter earnings call. I am joined today by Sally DeMarcelles, our Executive Vice President and CFO. I will first review our first quarter results and our progress against our strategic initiatives. Sally will then review our financial results in greater detail.

We would then be glad to take questions. We are pleased by our performance in the first quarter, especially as it involved navigating through an increasingly uncertain global economic environment. For the quarter, we delivered sales of $131,800,000 versus $134,400,000 last year, down 1.9% or 1% on a constant currency basis. Our adjusted operating income for the first quarter of fiscal twenty twenty six was $870,000 versus operating income of $2,100,000 last year. We made good progress on reducing our operating expenses through our cost savings initiatives, although some of the benefits were offset by unrealized losses due to significant currency fluctuations.

Our adjusted earnings per share for the quarter were $08 down slightly from $09 last year on a lower tax rate. We ended the quarter with $2.00 $3,000,000 in cash and no debt. We are pleased that our Board approved a dividend of $0.35 per share for the first quarter. Despite an uncertain retail environment, we continue to execute on our strategic priorities, introducing product innovation and delivering compelling value for our consumers worldwide. For the first quarter, our U.

S. Sales were down 1.6%, while international sales were down 2.2% or 0.7% on a constant currency basis. We continue to make meaningful progress on our Movado brand refresh, even as we navigate a challenged retail environment. We’re particularly pleased with the recent introduction of our new Mini BANGL collections and the Bold Mini Quest, which have received a strong consumer response. These new styles opening at $750 and $595 respectively, are helping to elevate the brand positioning and broaden our reach.

Additionally, the amplification of our partnership with Movado brand ambassador and NBA star Tyrese Halliburton, who is currently making a standout playoff run has further enhanced our visibility. We have been utilizing social media campaigns, leveraging both influencers and dynamic content across Instagram and TikTok to connect with our target consumers and strengthen engagement with more to come this year. In our licensed brands, we have seen particularly strong growth with sales improving by high single digits. Coach continues to connect with Gen Z and Millennials, particularly through our Sammy and Cass collections. Our Charter Chronograph collection is expanding the penetration of our men’s offerings.

In Hugo Boss, we continue to drive improving performance with the success of the Sky Traveler family for him and the Lucy collection for her, while continuing to grow our BOSS jewelry business. Lacoste continues to grow with the continued success of LC33, the Lacoste Boston family and our best selling Metropole bracelet from our jewelry collection. In Calvin Klein, we’re focusing on driving our women’s business with our iconic Pulse collection and the newly launched Meridian family, a new mini rectangular shaped watch. We’re also seeing a strong response to our new elongated drop collection in CK Jewelry. In Tommy Hilfiger, we have seen success in our skeleton watch product families led by the Baker watch, while our Bang Chronograph, an iconic Tommy Hilfiger colors, is also performing well.

And for women, we have seen a strong response to the new TS Square watch and will be expanding introductions throughout the year. In Olivia Burton, we have seen strong trends in The U. S. And The UK with consumers responding to our shape cases like our iconic Grosvenor now available in a mini execution and our Grove family. For the quarter, we saw an improved trend in our outlet division with sales only down 1.7% and that improvement has continued into the second quarter with trends improving throughout the month of May.

As we progress through the current quarter and position ourselves for the second half, we are seeing some positive signs while continuing to navigate a retail and economic environment affected by tariff related uncertainties. At the current temporary U. S. Tariff rates, we believe we can partially mitigate the associated cost increases through available levers, including selective price increases. However, we recognize that the current tariff rates are subject to change based upon pending trade negotiations and legal challenges.

Given the global uncertainty, we are focused on managing the controllables and operating with a high level of flexibility and agility, while staying focused on delivering innovation, quality and value for our consumers. Due to the macroeconomic and tariff related uncertainty, we’re not providing outlook at this time. Still, we see resilience in the category with young consumers embracing trend forward watches and jewelry. Across our portfolio, we have seen strong momentum in women’s watch collections and men’s jewelry offerings, both of which are helping to drive engagement and growth. I would now like to turn the call over to Sally to walk you through the financials in greater detail.

We would then be glad to answer any of the questions you might have.

Sally DeMarcellus, Executive Vice President, Chief Operating Officer 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 first quarter of fiscal twenty twenty six. My comments today will focus on adjusted results. Please refer to the description of the special item included in our results for the first quarter of fiscal twenty twenty six in our press release issued earlier today, which also includes a reconciliation table of GAAP and non GAAP measures. Overall, we are pleased with our performance for the first quarter of fiscal twenty twenty six, although results continue to be negatively impacted by an uncertain economic environment.

Despite net sales being down low single digits year over year, we continued to make good progress on our strategic initiatives and maintained an extremely strong balance sheet. Turning to a review of the quarter. Sales were $131,800,000 as compared to $134,400,000 last year, a decrease of 1.9%. In constant dollars, the decrease in sales was 1%. Net sales decreased across owned brands and, to a lesser extent, company stores, partially offset by an increase in licensed brands.

By geography, U. S. Net sales decreased 1.6 as compared to the first quarter of last year. International net sales decreased 2.2%, and on a constant currency basis, international net sales decreased 0.7%. Gross profit as a percent of sales was 54.1% compared to 54.3 in the first quarter of last year.

The year over year decrease in the gross margin rate was primarily driven by a negative impact fluctuations in foreign currency exchange rates, increased shipping costs and the deleverage of certain fixed costs over lower sales. This was mostly offset by favorable channel and product mix. Operating expenses were $70,500,000 as compared to $70,800,000 for the same period of last year. During the quarter, we made progress on our cost savings initiatives, such as reducing our investment and marketing expenditures and payroll related costs. These savings, however, were partially offset by unrealized currency losses resulting from highly volatile exchange rates towards the end of the quarter, impacting our outstanding intercompany balances and an increase in performance based compensation.

Operating income decreased to $900,000 as compared to 2,100,000 in the first quarter of fiscal twenty twenty five. We recorded approximately $1,600,000 of other non operating income in the first quarter of fiscal twenty twenty six, which was primarily comprised of interest earned on our global cash position, as compared to $2,100,000 during the same period of last year. We recorded income tax expense of $800,000 in the first quarter of fiscal twenty twenty six, as compared to $2,000,000 in the first quarter of fiscal twenty twenty five. Net income in the first quarter was $1,900,000 or $08 per diluted share, as compared to $2,000,000 or $09 per diluted share in the year ago period. Now turning to our balance sheet.

Cash at the end of the first quarter was $203,100,000 as compared to $225,400,000 at the same period of last year. Accounts receivable was $87,300,000 as compared to $81,000,000 for the same period of last year due to timing and mix of business. Inventory at the end of the quarter was up $24,100,000 from the same period of last year due to the timing of receipts. In the first three months of fiscal twenty twenty six, capital expenditures were 1,500,000 We did not repurchase shares under our $50,000,000 share repurchase program during the quarter. As a global company with over 40% of our net sales in The U.

S, we continue to closely monitor the changing tariff landscape and evaluate various strategies to mitigate impending cost increases for U. S. Imports. Although we remain focused on maintaining the quality and value consumers expect, we will be implementing select price increases while actively engaging with our supply chain partners and customers to respond effectively. Given the current macroeconomic environment and the ongoing uncertainty of the impact of tariffs on our business, the company has elected to not provide fiscal twenty twenty six outlook at this time.

I would now like to open the call up for questions.

Conference Operator: You may press 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question is from Hamed Khorsand with BWS Financial. Please proceed.

Hamed Khorsand, Analyst, BWS Financial: Hi. Good morning. Just firstly, if we could just talk about the sales momentum. Could you just provide a little bit more insight as to the momentum you were talking about last quarter and the trends you’re seeing now and how that isn’t really showing up in the actual numbers you’re reporting and what’s driving that?

Efraim Grinberg, Chairman and Chief Executive Officer, Movado Group: Well, think we’ve been clear that the sales vary by market and by brand, and we’re seeing pockets of growth and then pockets of more challenged marketplaces. So I think overall, given the uncertainty in the marketplace and the retail environment, I think we’re satisfied right now with where our sales are, but we’re focused on improving the trends over the balance of the year. And the uncertainties that have been injected into the marketplace over the last several months certainly have taken some toll on consumers, especially in The United States and Europe.

Hamed Khorsand, Analyst, BWS Financial: I guess what I’m trying to get to is like you implemented this marketing strategy last year to increase sales momentum. It seemed like things were going great. Is tariffs that much of an impact on the consumer as far as your markets are concerned?

Efraim Grinberg, Chairman and Chief Executive Officer, Movado Group: Well, think that we never expected the journey that we implemented to be a short term strategy, but a longer term. And I think we’re seeing a lot of interest from consumers in newness, in innovation, in smaller watches. We’re seeing a renewed interest from younger consumers. So I think those are positive things. I think the challenges are that discretionary purchases are challenged and value still continues to be really important.

So we are focused on delivering value for our consumers. And I would say that this journey that we’re on from brand building perspective, that doesn’t happen overnight. And what we are doing this year is rationalizing our expense infrastructure to deliver better financial performance over the year.

Hamed Khorsand, Analyst, BWS Financial: And that was going to be my segue there. When will there be a lining up between earnings per share and the cash dividend? I mean, earnings are still lagging the dividend right now.

Efraim Grinberg, Chairman and Chief Executive Officer, Movado Group: I think the benefit that we have is that we obviously have a very strong balance sheet and a really strong cash position. We’ve built inventory over the quarter. I would expect that to come down by the end of the year, which produces more cash. We’re also in very focused and always have been on delivering strong operating cash flow. I would think that as we go towards the second half of the year, we’ll see improved operating cash flow and that should ultimately continue to strengthen our balance sheet.

I think the more difficult part right now is that it’s difficult to predict the current economic environment we saw last night, even that the current tariffs were ruled illegal by trade court, which is a federal court. So that in itself, although that’s probably a positive from a business perspective, if it holds, creates even more uncertainty.

Hamed Khorsand, Analyst, BWS Financial: Okay, and then lastly, you were talking about this unrealized loss in the foreign exchange. Will that be realized as a loss or will that eventually be neutralized in some way?

Sally DeMarcellus, Executive Vice President, Chief Operating Officer and Chief Financial Officer, Movado Group: Yes. So that resulted from a sharp decline really in the value of the U. S. Dollar at the end of the quarter due to headlines that hit really out of Washington. So it was unrealized.

It will be we will make sure that we mitigate that risk going forward and take advantage of any other maybe offsetting increases in future quarters. So it will only be realized when paid basically. It’s because we are such a multinational company and have currency situations and interactions between all of our entities around the globe.

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

Conference Operator: That will conclude our question and answer session. I would like to turn the conference back over to Efraim for closing remarks.

Efraim Grinberg, Chairman and Chief Executive Officer, Movado Group: Thank you all for participating with us today and we look forward to talking with you after our second quarter. Thank you again.

Conference Operator: Thank you. This will conclude today’s conference. You may disconnect your lines at this time and thank you for your participation.

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